Enbridge keeps the faith in Gateway as pipeline debate rages
Al Monaco has not lost his hankering for a Timmies coffee and still savours his “absolutely black, dark roast” cup of joe.
“That’s the only way you get the true taste of the coffee,” says Monaco. “You don’t want to mess that with cream and sugar.”
The CEO of Enbridge Inc. could have been forgiven for losing his taste for Canada’s iconic coffee brand after his company saw its association with Tim Hortons Inc. run completely cold: abruptly, publicly, virally.
In what is now its own chapter in Canadian social media folklore, in June Tims famously yanked the Enbridge ads from its in-house TV channel after an online petition from an American activist group that accused the energy company of misleading the public on “tarsands” oil. What ensued was a noisy backlash from many oilpatch supporters, calling for a Tims boycott.
But Tims is a tough habit to break for Monaco, a hockey dad who spent years bleary eyed around hockey rinks at 7 a.m. with a bitter cup of java as he watched his three boys practice.
And while Tim Hortons may have been unprepared for the scalding backlash, Al Monaco is no stranger to working in the face of adversity.
As the CEO of Canada’s largest pipeline company and backer-in-chief of the Northern Gateway, the 54-year-old isn’t about to win certain popularity contests, especially in British Columbia where the pipeline is set to link Alberta crude to big, hulking oil tankers destined for Asia.
The $6.5-billion Northern Gateway proposal to take as much as 525,000 barrels per day of Alberta crude to Asian markets via the West Coast, is a lightning rod for many who believe its construction would spell doom for the environment.
Launched in 2004, the project secured regulatory approval in late 2013 with 209 conditions, but few believe the project can get into the ground as First Nations and environmental groups launch an intense — and sure to be vicious — campaign against the project.
So the Tims controversy may have been one of the few where Enbridge came out with less egg on its face than its opponent.
“If you look at what happened afterwards — you really saw the profile of that debate elevated and that’s exactly what we needed to see,” Monaco said in an interview with Financial Post at the company’s Toronto office.
It’s a debate that’s playing out across Canada. The importance of Alberta’s crude oil to Canada’s economy, juxtaposed with its impact on the environment has left the nation navel-gazing with major crude oil pipeline projects delayed as First Nations and local communities square-off against Ottawa and the industry.
Monaco says that, while many of the issues surrounding pipelines are policy matters, “we look at it as our job.”
“We take it upon ourselves to make sure we are responsible for ensuring that people understand what we do.”
Robert Janes, a Victoria-based lawyer for Gitxaala Nation, one of the many aboriginal groups stewarding the West Coast, says it’s the company that does not understand the opposition to Northern Gateway.
“How Enbridge sees it is that it’s a process of education, and once the company has the opportunity to teach the communities, they will come over to Enbridge’s side,” Janes said. “A lot of the communities take that as a very insulting statement.”
But, notably, in recent months, close observers would have noted that any mention of the project has barely crossed the lips of executives at recent events. But make no mistake, insists Monaco: That doesn’t mean the project is dead.
“I wouldn’t take the reduced public profile as an indication of our declining interest,” Monaco said. “Our partners are right behind us. We are continuing to work on the project. Actually, the lower profile has helped, as it’s very hard when you are trying to build relationships and build trust with people and to have that discussion in the media.”
Enbridge says 28 out of 45 First Nations along the route are on its side — although none yet from the all-important coastal regions where community activists claim oil tankers will harm marine life.
And while the mothballing of a number of oilsands projects gives Enbridge some breathing room, the project remains crucial to the industry, as just over 1 million barrels per day of additional oil is expected to come on stream over the next 10 years.
Enbridge has already sunk around $500 million into the regulatory costs associated with Northern Gateway, and the final product will likely be costlier than original estimates as the company complies with yet more regulatory burden. Then there are the legal fees and, possibly, new conditions, too, as the company staves off as many as 18 court challenges.
“I think we will probably get more clarity on the cost once we conclude our efforts with the First Nations and communities, and that’s probably going to be near the end of the year,” Monaco says.
Enbridge and the Canadian government are expected to submit their written arguments to the Federal Court of Appeal on July 7, after Northern Gateway opponents launched a court case challenging the federal government’s approval of the project. A hearing is expected in early October.
“The hearings are set for six days which is the longest hearing in the Federal Court of Appeal that has ever been scheduled — the judges have pointed that out to us several times,” Janes said.
Monaco, who took over from Patrick Daniels in 2012, expresses regret that the company did not do a better job in the past of engaging with First Nations.
“When we started Gateway 10 to 12 years ago, it was a different world. We probably should have spent more time building trust, taking time with individual First Nations and trying to build that relationship.”
Unlike his predecessor, Monaco is less desk-bound and is often out in the field, smoothing relationships with landowners that have traditionally complained of getting short shrift from the industry.
“Enbridge has seen the light,” says Dave Core, chief executive of the Canadian Association of Energy and Pipeline Landowner Associations, who is often at loggerheads with the pipeline industry and regulators.
At Enbridge’s 2014 annual meeting, Core criticized the company, but returned a year later with fulsome praise.
“In 2014 we began to sense a shift in attitude — an evolution of thinking, if you will, coming from the executive suite at Enbridge,” Core told Enbridge investors at a meeting in May, after working with the company on the Canadian portion of the Line 3 replacement project from Hardisty, Alta, to Gretna, Man.
A number of other Enbridge projects are also in the regulatory wringer: The National Energy Board has slapped additional conditions on its Line 9 reversal project, from Sarnia to Montreal, which would push its start date back by at least a year.
Expansion of Alberta Clipper, or the Hardisty-to-Superior Line 67, to 800,000 barrels per day from its current 450,000-bpd, has yet to secure a U.S. presidential permit as it crosses an international border.
While Monaco dismisses Clipper’s comparison to rival TransCanada Corp.’s much-maligned Keystone XL, which is awaiting a similar permit, the company is pushing crude by connecting spurs to the parallel Line 3 pipeline. Critics say the company is bypassing regulations.
“Interconnections is what we do,” Monaco counters. “We have been absolutely transparent … and we have discussed that with the State Department.”
Despite regulatory delays, by 2017 Enbridge expects to expand capacity by 1.7 million bpd — more than three times the size of Northern Gateway.
“In the last decade, we have put 40 projects into the ground, worth $20 billion,” Monaco says. “In 2015, we are looking at another $9 billion worth of projects. And in 2016, 2017, 2018 another $24 billion in projects.”
The company recently completed the Flanagan South conduit that can transport 600,000 bpd and is expandable to 800,000 bpd, connecting Western Canadian producers’ access from Illinois to Cushing, Okla.
From there, Alberta producers have a direct line to the prized Gulf Coast via the 600,000 Seaway pipeline system that Enbridge owns along with Enterprise Products Partners L.P.
The projects down south are part of Enbridge’s great push into the Gulf Coast, as the company aims to plug a major gap in its network.
“We have traditionally been focused on Western Canada regional systems, the Bakken system and have huge positions in Chicago region. Now we have access to the Gulf Coast,” Monaco says.