The Ontario Energy Board says the environmental risks of the $12 billion Energy East pipeline project outweigh the

potential benefits, and warns it will drive up natural gas prices.

"What we have found is there is an imbalance between the economic and environmental risks of the project and the expected benefits for Ontarians," said OEB vice-president Peter Fraser as he released a report on Energy East.

TransCanada Corp. (TSX:TRP) is planning to build the pipeline to bring Alberta crude to refineries in Quebec and to a refinery and marine terminal in Saint John, N.B. For two-thirds of the way, it plans to convert a natural gas pipeline for oil and then build all new pipe throughout Quebec and New Brunswick.

After 15 months of consultations with people in communities along the route of the pipeline in Ontario, the energy board found people are worried about possible polluting of lakes, rivers and drinking water supplies.

"The top concern expressed was the risk of an oil spill as the pipeline runs new or across many waterways," said Fraser. "Our advice is that for the existing pipeline, when it is too close to environmentally sensitive areas, it should be rerouted unless it can be justified by TransCanada as necessary."

The OEB report also said residents are rightly concerned the project could drive up natural gas prices when existing pipeline is converted to carry oil. The OEB's technical experts found there will be higher natural gas prices as a result of Energy East because there will be less supply.

"They estimated that on average, over a 20-year period, in the winter time, natural gas prices in eastern Ontario will be 11.9 per cent higher than if Energy East did not go ahead," said Fraser.

Union Gas Limited said the OEB's conclusions were the same as its own: Energy East will drive up the price of natural gas in Ontario.

"We want assurance that Ontario natural gas customers will not bear the costs and risks related to the Energy East oil pipeline, and we continue to be open to finding a satisfactory resolution of these issues with TransCanada," said Union Gas president Steve Baker.

The energy board said the benefits of construction of the Energy East project to Ontario would include a $12 billion to $19 billion impact on gross domestic product and a full-time equivalent job impact of up to 114,000 positions.