Ontario and Quebec are forging a common strategy on TransCanada Corp.'s $12-billion Energy East pipeline project to address its impact on greenhouse gas emissions and to ensure that their natural gas customers will not be disadvantaged.

Kathleen Wynne and Philippe Couillard are meeting in Toronto on Friday for a joint cabinet session. Officials confirmed that Energy East will be on the agenda, and the premiers plan to release a joint statement on the project.

The two Liberals are allies in pushing the climate agenda to the forefront in provincial/territorial talks, arguing there needs to be a national energy strategy that focuses on both pipelines and emissions. Prime Minister Stephen Harper has rejected the idea, and endorsed Energy East as an important link to bring western oil to eastern refiners and export terminals.

Story continues below advertisement

TransCanada is facing major hurdles in Quebec. This week Quebec Environment Minister David Heurtel sent a letter to chief executive officer Russ Girling laying down seven conditions TransCanada must meet to win the province's support for the project.

With his letter, Mr. Heurtel established conditions similar to those adopted by British Columbia Premier Christy Clark for Enbridge Inc.'s controversial Northern Gateway pipeline that would deliver oil sands bitumen to Kitimat for export to Asia, though his tone was somewhat more agreeable than Ms. Clark's has been. Mr. Heurtel's conditions include the need for public acceptance of the project, for proper consultations with First Nations, and for clear economic and fiscal benefits for Quebec, as well as assurances to gas customers.

Mr. Heurtel also cited a National Assembly resolution demanding the government assess the impacts of "upstream" GHG emissions – those produced by extracting the oil – for the pipeline that would carry 1.1 million barrels a day of western crude to market. But he was vague on whether the government will assert the right to block the pipeline. TransCanada would face huge risks of political backlash if it proceeded in the face of provincial opposition.

Company spokesman Tim Duboyce said TransCanada had no comment on Mr. Heurtel's letter which is "complex in nature."

The company's case took another blow this week with the leak of a public relations strategy that advocated controversial tactics for blunting opposition and winning government support in the province.

With Energy East, TransCanada would convert capacity on its west-to-east natural gas system to carry oil from Alberta to the Quebec-Ontario border, and then build a new pipeline and export terminals in Quebec and New Brunswick.

The project "faces a huge uphill battle in Quebec," said Erick Lachapelle, a political scientist at the University of Montreal who released his own polling Thursday suggesting the project has the support of only 33 per cent of Quebeckers. "The public doesn't see any benefits from the project and the public sees all the risks of Alberta exporting its oil through Quebec."

Story continues below advertisement

TransCanada says the central Canadian provinces will reap billions of dollars in tax revenues and see thousands of construction jobs – as well as manufacturing jobs from the supply of components for the project. As well, Energy East will bring Canadian crude to refineries in Quebec and New Brunswick that now mostly rely on imports or rail transport.

For its part, Ontario has asked its provincial energy board to conduct its own assessment of the project, and provide a report to the government, which will intervene in National Energy Board hearings to be held on Energy East. The province is also expected to take into account climate impacts.

The federal energy board does not assess the upstream GHG impacts in its pipeline applications, on the grounds that it is not clear whether any one project results in more oil production and hence higher emissions. But Ontario and Quebec want a national plan to address GHG emissions in exchange for their support for Alberta's oil transportation needs.

Meanwhile, natural gas utilities in Ontario and Quebec have asked the National Energy Board to order TransCanada to do a new assessment of gas needs in the two provinces, saying the analysis in its Energy East filing made last month is "seriously deficient." The local gas utilities say the conversion of gas capacity to allow oil exports will leave their customers vulnerable to winter shortages and price spikes.

TransCanada rejects that argument.

"From our perspective, I think it will become exceedingly clear as time goes on that there are no issues whatsoever with gas supply for Quebec or Ontario consumers," company president Alex Pourbais said Wednesday on a conference call. "And in fact we've committed to lower [gas transmission] costs than there would have been without [Energy East]."

Story continues below advertisement

With a report from Jeff Lewis in Calgary

With a report from Jeff Lewis in Calgary