Enbridge Re-Examined Stake in Bakken Pipeline after Dakota Access Protests

Enbridge president and CEO Al Monaco attends the company’s annual general meeting in Toronto in this 2015 file photo. (Chris Young/THE CANADIAN PRESS)

The Globe and Mail | May 11, 2017

The intense images of clashes between protesters and U.S. law enforcement at the construction site of the Dakota Access pipeline south of the border last year made Canada’s Enbridge Inc. reconsider its minority stake in the controversial project.

Chief executive Al Monaco revealed Thursday that he, the rest of the executive team, the board and other units of the Calgary-based pipeline company spent weeks re-examining their already-stated plan to acquire a 27.6-per-cent interest in the Bakken pipeline system – which includes the Dakota Access pipeline.

“It was hard to miss what was going on out there. And we were very concerned about it,” Mr. Monaco told reporters following his company’s annual general meeting.

“Frankly we spent a lot of time pondering this issue, given the circumstances,” he said. “We considered all kinds of alternatives, just like we do with any investment. This one had, certainly, a heightened degree of concern given what was going on.”

Mr. Monaco and other North American energy executives have argued that pipelines are now the “point of attack” for environmental opposition to new oil and natural gas projects. In early January, it became apparent that Enbridge had delayed its plan to acquire an interest in the Bakken properties for $1.5-billion.

What’s now clear is Enbridge’s unease was spurred by protests, and confrontations between U.S. law enforcement and opponents, at the Missouri River in Standing Rock, N.D. Construction was allowed to continue only after the project received a required easement from the U.S. Army Corps of Engineers – the federal agency tasked with issuing permits for water crossings for such pipeline projects – under orders from U.S. President Donald Trump.

Enbridge finally decided to continue to move forward with the deal for the near-constructed pipeline after looking at the vetting the project had already received by operator Energy Transfer Partners LLC, including a number of route changes made in response to environmental concerns, Mr. Monaco said. Energy Transfer Partners and the Corps of Engineers “actually did a fair job, a good job, of listening to people,” he said, reiterating a promise to work closely with Indigenous communities affected by projects.

Oil shipments on the Dakota Access pipeline, now partially owned by Enbridge, are set to begin as soon as Sunday.

However, the protests against Dakota Access, and other oil pipelines, haven’t ended. A few dozen protesters gathered outside the Enbridge meeting on Thursday, speaking against both the Dakota Access pipeline and the $7.5-billion Line 3 replacement program, which will see the refurbishment and expansion of pipeline already in the ground.

Enbridge is waiting on draft environmental impact statement from Minnesota on Line 3. And while the project has received approvals in Canada, the Assembly of Manitoba Chiefs has filed a court challenge, citing Canada’s climate change commitments and other concerns about water and the environment.

Lawyer Tara Houska of the U.S. Indigenous environmental group Honor criticized Enbridge proceeding with its Dakota Access investment given the treatment of protesters.

Ms. Houska, who is originally from Minnesota, also said affected Indigenous people are opposed to the Line 3 project “across the board.”

On Thursday, Enbridge reported lower first-quarter earnings due to the timing of its $37-billion Spectra Energy Corp. takeover and warmer weather in Southern Ontario.

First-quarter earnings were $638-million or 54 cents a share, compared with $1.2-billion or $1.38 for the same quarter last year.

The change came as a result of a number of unusual and non-recurring factors, the company said, including the timing of the closing of its Spectra takeover, the impact of warmer-than-normal weather on gas distribution franchises, and transactions undertaken in 2016 to strengthen the balance sheet.

The first-quarter results reflect about one month of the financial contributions from the assets acquired in Enbridge’s takeover of Houston-based Spectra, which closed at the end of February.

The fact that profits from Spectra assets for January and most of February are not included in this year’s first-quarter results had a significant impact, Mr. Monaco said. Those two cold, high-gas volume months typically provide a disproportionate amount of earnings compared to the rest of the year.

But Enbridge says the creation of what is now North America’s largest infrastructure company will generate billions in additional profits this year. Its full-year, post-merger guidance stands at adjusted earnings of as much as $7.6-billion, before interest and taxes. That compares with about $4.7-billion.

“We’re very pleased with how the companies came together. We had a seamless Day-One transition, and integration-wise, we’re on track,” Mr. Monaco said on a conference call.

“When we account for the effects of closing in February, we’re where we expected to be.”