Like a politician out knocking on doors in search of votes, Enbridge Inc. CEO Al Monaco is working the rubber-chicken circuit in search of public support for new pipelines. And like any aspiring candidate, the veteran utility executive is getting doors slammed in his face as he tries to find new ways to move Alberta oil to global markets.
Mr. Monaco took the stage at a Canadian Club lunch two weeks ago to pitch for the elusive social licence Enbridge needs to complete projects such as the $9-billion Line 3 pipeline that runs from central Alberta to Wisconsin. It was a thoughtful presentation, made alongside Royal Bank of Canada CEO David McKay, that neatly tied developing Canada’s energy resources to the nation’s future prosperity. The pair made it clear that Canada can exploit its oil and natural gas reserves, while fighting climate change and moving forward on reconciliation with indigenous groups.
But Mr. Monaco’s charm offensive isn’t swaying regulators.
Enbridge announced late Friday that oil won’t flow through Line 3 until late in 2020, at least a year later than previously anticipated. The Calgary-based company is waiting on approvals from regulators in Minnesota and U.S. federal permits, which would come after the state approvals. RBC Capital Markets analyst Michael Tran summed up the situation by saying: “The delay to the Line 3 replacement is yet another blow to a beleaguered Canadian oil industry that simply cannot catch a break.”
Regulatory woes knocked the stuffing out of energy stocks of all stripes on Monday. Shares in Enbridge, one of North America’s largest utilities, fell 5.8 per cent. The prospect of a widening gap between world prices and what Canada’s largest producers get for their oil hit the price of shares in Canadian Natural Resources Ltd., down 4.5 per cent, and Cenovus Energy Inc., down by 5.7 per cent.
To CEOs such as Mr. Monaco and Mr. McKay, the case for building new pipelines is a no-brainer. While knives and forks clattered, the two executives said the best way to fight climate change is for Canada to export oil and relatively clean natural gas, allowing countries such as the United States, India and China to increase energy consumption while retiring dirty coal-burning power stations. Mr. Monaco showed a sense of humor by calling the rising global demand for fossil fuels an “inconvenient truth,” riffing off the title of Al Gore’s award-winning climate change documentary.
The two CEOs went on to argue that Canada can use the capital raised from selling energy to fund its transformation to a green economy, a subtle argument that Prime Minister Justin Trudeau has also rolled out, with limited success. Mr. Monaco and Mr. McKay said exploiting oil and gas reserves in an efficient and consistent manner would boost Canada’s GDP by 1.1 per cent, the equivalent of developing a new auto sector, and increase government tax revenues by $200-billion over the next decade.
Alberta’s NDP government, which faces an election this spring, reacted to the Line 3 delay by pointing out that it has a strategy to deal with the problem that includes temporary production cuts and plans to lease 4,400 rail cars to help transport crude to market.
Again, Mr. Monaco took a diplomatic approach when discussing rail shipments as a competitor to his company’s pipelines. At last month’s lunch, RBC’s Mr. McKay pointed out the recent rail accident in B.C.'s Kicking Horse Pass, which claimed three lives, would have been far worse if the train were carrying crude. Mr. Monaco responded by saying while everyone in the energy transportation industry tries to refrain from highlighting each other’s mishaps, it’s clear that pipelines are by far the safest way to transport oil.
As plates were being cleared at the Canadian Club lunch, Mr. Monaco acknowledged that so far he and his oil patch peers have failed to make their case to the public. He said: “Let me share my frustration as a Canadian. It feels like we are not proud of our energy industry. It feels like we just tolerate it."
Look for more CEO speeches, and continued marketing campaigns for pipelines from backers such as the Alberta government, as Enbridge and its peers try to win support for their multibillion-dollar projects from regulators and a skeptical public.
Andrew Willis