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Enbridge posted lower profit Wednesday, partly because of unrealized losses from derivatives. (Nathan VanderKlippe/The Globe and Mail)
Enbridge posted lower profit Wednesday, partly because of unrealized losses from derivatives. (Nathan VanderKlippe/The Globe and Mail)

ENERGY

Enbridge earnings down after cleanup costs Add to ...

Enbridge Inc. saw its net income decrease more than 4 per cent in its first quarter to $250-million from $261-million a year earlier, in part due to projected increased cleanup costs related to the 2010 pipeline oil spill into Michigan’s Kalamazoo River.

Enbridge, however, said with Canadian oil production continuing to grow, its more than two-million-barrels-per-day mainline system had a record quarter with volumes and tolls up, and its regional oil sands system was another strong contributor to the first quarter.

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“It was a very strong quarter, although we don’t expect this pace to continue for the remaining quarters of the year,” chief executive Al Monaco said in a conference call.

In March, the U.S. Environmental Protection Agency ordered Enbridge Energy Partners LP – the partnership that operates the U.S. portion of Enbridge’s oil pipeline network – to perform additional dredging to remove submerged oil and to maintain sediment traps throughout the river as a result of the Line 6B rupture in Michigan three years ago. At the time, Enbridge Energy Partners estimated it will incur approximately $175-million more in costs to pay for the additional work. On Wednesday, parent company Enbridge Inc. said it will have to pay $24-million of that after-tax cost.

But speaking to analysts on Wednesday, Mr. Monaco said a number of new projects will come into service this year to provide access to new markets and alleviate what producers say is pipeline congestion. The new projects include the Line 5 expansion this month, which will add 50,000 barrels per day of light oil capacity into Sarnia, Ont., and the Line 9A reversal into Nanticoke, Ont., which he said will displace higher-cost crude. The full Line 9 reversal will be able feed 240,000 barrels per day to Quebec refiners by mid-year.

By mid-2014, Enbridge will also add 585,000 barrels per day of crude transport capacity through the Seaway and the Flanagan South pipeline systems. Mr. Monaco noted these projects will allow the first large volumes of Canadian heavy oil to access the crucial Gulf Coast market.

Enbridge acknowledged expansion plans for its Alberta Clipper, a 1,600-km crude oil pipeline that provides service between Hardisty, Alta., and Superior, Wis., could attract some attention given the recent opposition from environmentalists and landowners to other cross-border pipelines – mainly TransCanada Corp.’s Keystone XL project.

However, company executives noted the expansion – which will bring capacity to 800,000 barrels per day – only requires an amendment to the current presidential permit. They said there are no routing issues because the pipeline is already in the ground, and only additional station work is required.

Enbridge aims to build the Northern Gateway pipeline from Edmonton to Kitimat, on B.C.’s West Coast. The proposed project would traverse 1,177 kilometres of Alberta and the B.C. Interior and carry an average of 525,000 barrels of petroleum per day, and has attracted significant opposition from British Columbians, including First Nations members.

Outside the Enbridge shareholder meeting in downtown Calgary on Wednesday, Karen Tam Wu of the environmental group ForestEthics said about a half dozen opponents of the pipeline, representing thousands more, travelled to Calgary to protest the pipeline and give their message to Mr. Monaco as proxy holders.

“We’re a week away from an election in B.C. where basically all the politicians have been jockeying for who has the strongest position against the pipeline,” Ms. Tam Wu said.

The Yinka Dene Alliance, a coalition of First Nations in northern B.C. who oppose Northern Gateway, ran a half-page ad in the Calgary Herald on Wednesday, saying the Northern Gateway pipeline will never be built, and advising Enbridge “it’s time for an exit strategy.”

 

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