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Enbridge enters new world North American transportation giant can no longer count on traditional strengths to win; C$74B in work bogged down GARY PARK For Petroleum News
Enbridge, which operates a spider’s web of natural gas, liquids and oil pipelines, is now the largest energy infrastructure company in North America.
That happened late last year through a merger deal with Spectra Energy involving a C$37 billion stock-for-stock transaction that added 20,000 miles of delivery lines to Enbridge’s existing 32,000-mile system.
In the process, Enbridge raised the value of its assets to C$165 billion, with another C$74 billion of current and potential projects in an advanced stage.
It sounded a lot like the growth picture Enbridge painted of itself over more than five decades, able to expand almost when and where it liked by gliding with ease through a benign regulatory and government approval process.
Not anymore. These days the Calgary-based company exists under a cloud of doubt, facing a seemingly insurmountable wall of resistance from aboriginal communities, environmentalists, landowners and governments at municipal, state and provincial levels.
Company a victim? The first signs that Enbridge was losing its grip on events surfaced almost five years ago when First Nations started campaigning against the Northern Gateway project, seen as the launching pad for exports of oil sands crude to Asia, and culminated two months ago when the Canadian government delivered what is widely viewed as a fatal blow to a project that had already swallowed up C$600 million of investment by Enbridge and its customers.
Enbridge had every reason to conclude that it was the victim of a cynical intrigues within the ranks of Prime Minister Justin Trudeau’s Canadian government, which approved Kinder Morgan’s Trans Mountain expansion (despite threats of legal action and civil unrest) and Enbridge’s Line 3 into the U.S. Midwest (a project that has been lost in all of the smoke and fire generated by Trans Mountain and TransCanada’s two big ventures, Energy East and Keystone XL.)
The only consolation Enbridge could draw from its Northern Gateway experience was the support it gained from 70 percent of the First Nations along the pipeline right of way and the praise it earned from Canada’s National Energy Board and the Federal Court of Appeal.
Company ‘disappointed’ “We are disappointed,” said Enbridge Chief Executive Officer Al Monaco. “How could we not be?”
There was reason to think Northern Gateway would proceed when the company accepted 209 conditions relating to the environment and aboriginal benefits and spent two years working to meet those standards.
“It would have been a world leading example of how to do things right,” said Martha Hall Findlay, chief executive officer of the Canada West Foundation, an independent think-tank, noting the lost opportunity to involve Native communities in enjoying some of the economic benefits of Northern Gateway rather than engaging in an endless battle against poverty.
There has been some low-level speculation within the petroleum industry that Enbridge may return with an alternative pipeline route to the British Columbia coast that bypasses traditional Native lands.
But its acquisition of Houston-based Spectra, including 55 percent of British Columbia’s natural gas pipelines and a proposed Westcoast Connector LNG project is facing more of the same opposition as Northern Gateway.
“Enbridge does not have a social license to operate in northern B.C.,” said Nadia Nowak, one of the strongest voices against Northern Gateway.”
Is Enbridge hoping to “convert gas pipelines to oil pipelines?” she asked. “Are they realizing they failed to export oil sands crude and hoping to have better luck with LNG?”
Dakota Access difficulties In addition to troubles on its home front, Enbridge is also facing difficulties stemming from the Standing Rock protests against the Dakota Access pipeline, to the point where it has twice delayed its proposed US$1.5 billion acquisition of a 27 percent stake in that project.
The company said it has extended the deadline for completing its transaction with Energy Transfer Partners to March 31, but won’t say whether that results from the December denial by the U.S. Army Corps of Engineers of an easement to allow a crossing of the Missouri River near the Standing Rock Sioux reservation where indigenous activists and their allies have encamped.
However, Enbridge notes that its acquisition deal includes a termination option if certain conditions aren’t met by March 31, including an easement needed to allow the final 15 percent of the 1,100-mile pipeline to be completed.
But it offers no hints that it is counting on incoming U.S. President Donald Trump - a one-time investor in Energy Transfer Partners - to deliver on his vow to act promptly to approval pipeline projects.
Enbridge is also encountering opposition from indigenous communities to its existing crude export pipeline projects.
In Minnesota, tribal leaders have threatened mass protests to block expansion of the Line 3, while in Manitoba the Assembly of Manitoba Chiefs has appealed the Trudeau government’s approval of the Line 3 rebuilt.
In Wisconsin, a Chippewa band passed a resolution earlier in January to refuse to renew Enbridge’s permits for a 65-year-old Line 5 to cross rivers in the Band River reserve, demanding instead that the company decommission the line that carries 544,000 barrels per day of Western Canadian crude across Wisconsin and Michigan en route to Ontario.
Enbridge offered an alternative to litigation by Band River, urging “conversation and collaboration,” which now appear to carry greater weight than the company’s traditional strengths in pipeline planning, engineering and operation.
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