OTTAWA—A senior Quebec lawmaker is calling on Canadian energy authorities to start a new environmental review of TransCanada Corp.'s proposed Energy East pipeline after conflict-of-interest allegations forced hearings to be adjourned last week.

"I think it's time to perhaps to take a bit of a break and relaunch this in a way so we can follow due process and make sure we look all the issues," Carlos Leitao, Finance Minister for Canada's second-largest province, said in an interview from New York City.

The call to hit the reset button on the Energy East regulatory review comes against the backdrop of a divisive debate about pipelines and how the economy is at risk without new corridors to carry landlocked crude oil to non-U.S. markets.

On one side of the debate are environmentalists and aboriginals, who warn that projects such as Energy East pose a risk to habitats and make it impossible for the Canadian Liberal government to meet aggressive carbon-reduction goals. Energy-sector analysts, meanwhile, warn the lack of pipeline infrastructure means prices for Canadian crude oil and natural gas will continue to trade at a discount to U.S. benchmarks—making it difficult to attract investment in the commodity sector.

The latest setback for Energy East emerged after Canada's National Energy Board said late last week it would adjourn hearings into the 15.7 billion Canadian dollar ($11.9 billion) project after members recused themselves "to preserve the integrity" of the review. Media reports suggested that panel members met with lobbyists for TransCanada prior to hearings this fall.

The energy regulator had also suspended hearings late last month scheduled for Montreal after protesters caused a "violent disruption," prompting concerns about security.

"We believe the opposition to the project is too much for the project to overcome," said Robert Hope, energy-infrastructure analyst at Bank of Nova Scotia, in a note to clients. His firm estimates a 25% probability that the project, which would carry up to 1.1 million barrels of crude from western Canada to refineries in the east, will go ahead.

The energy board said once the government appoints a new panel, the review process "can and will proceed."

The Quebec government tried to get a court injunction to stop the Energy East hearings, which it then withdrew after TransCanada agreed to a provincial environmental review. Energy East is opposed by the majority of municipal politicians in the greater Montreal area, as the corridor would run through the northern part of Canada's second-largest city.

The pipeline "goes through sources of fresh water for three million people," said Mr. Leitao, who represents constituents from west-end Montreal. "These things cannot be handled in a cavalier way and you need to make sure you look at all the safety issues around this."

A spokesman for TransCanada said the company looks forward to the energy board's review process resuming, as it wants to conduct a "respectful and constructive dialogue with Canadians about Energy East." He added the company continues to speak with municipalities, landowners and aboriginal communities about the pipeline.

TransCanada was on track to get a final verdict from the Canadian government on Energy East's fate by mid-2018. Canadian Resources Minister Jim Carr said Tuesday that TransCanada could now face a "modest" delay as the government looks to appoint new panel members.

Mr. Carr added that it is up to the energy board, an independent agency, to decide whether the review should "have to go back to square one."

The government launched a review of the country's environmental-review process earlier this year with an eye toward boosting oversight.

Write to Paul Vieira at paul.vieira@wsj.com

 

(END) Dow Jones Newswires

September 14, 2016 10:25 ET (14:25 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.
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