TransCanada Corp. (NYSE: TRP) agreed to submit to a Quebec environmental review of its Energy East Pipeline on April 22, avoiding a potential legal battle with the province by putting the controversial project through an extra round of scrutiny.
The resolution removes a potential hurdle but also introduces another approval process for the nearly 2,860-mile (4,600 km) cross-Canadian pipeline, which will carry 1.1 million barrels per day of crude from Alberta's oil sands to the country's Atlantic coast.
TransCanada is pushing to build Energy East after U.S. President Barack Obama last year blocked the cross-border Keystone XL crude pipeline. His decision was a victory for environmentalists and a blow to TransCanada after a seven-year battle for approval.
In a statement, Quebec Environment Minister David Heurtel said TransCanada had filed a project notice agreeing to an environmental impact study, prompting the province to suspend its efforts to get a permanent injunction against the company.
Quebec will completely withdraw its injunction application once the study is approved, the minister said.
TransCanada spokesman Tim Duboyce said the company had initially been "quite perplexed" by Quebec's request in early March to submit to provincial environmental law because Energy East is subject to federal regulations.
"We will provide the environmental impact assessment in the form they are looking for in addition to a comprehensive one that has already been filed with the federal regulator the National Energy Board," Duboyce said.
Quebec filed a motion seeking an injunction against the pipeline in early March to ensure the project complied with provincial environmental law, saying it acted after TransCanada ignored two letters in 2014 requesting an evaluation.
Greenpeace campaigner Keith Stewart said the pipeline would now undergo a much more detailed review process.
"The odds of this getting built just went down a couple of notches and the scrutiny that it's going to be subject to went up several notches," Stewart said.
However, FirstEnergy Capital analyst Martin King said because Energy East is an inter-provincial pipeline only the NEB can approve or reject it, meaning Quebec should not be able block the project on environmental grounds.
"It's basically a trade-off, they [TransCanada] are saying 'Drop the injunction and we will allow the environmental assessment to go ahead, even though it's not legally required,'" King said.