Canada's Supreme Court hands First Nations groups a partial victory as it rules the aboriginals were not adequately consulted on plans to conduct seismic testing for oil and gas, but it also dismisses a separate attempt to stop permits for changes to Enbridge's (NYSE:ENB) Line 9 pipeline.
The court rules that the Chippewas of the Thames First Nation in Ontario were given sufficient notice of hearings on changes to Line 9, which runs between Sarnia, Ontario, and Montreal, through what the Chippewas say is their traditional territory.
The cases were closely watched for their clarification of the government's duty to consult with First Nations as Prime Minister Trudeau has promised to build a stronger relationship with Canada's aboriginals.
Enbridge's (NYSE:ENB) move not to ration space on heavy oil pipelines out of western Canada for the first time since early last year likely will give producers only a short respite from the typical difficulties in getting crude to market, industry players tell Retuers.
ENB said last week that rationing of space on its heavy crude pipelines out of Alberta would be zero in August, meaning producers could ship all the barrels they have said they want to move, but concerns remain that production could again outpace capacity later this year, forcing more producers into the costlier option of shipping crude by rail, as new projects such as Suncor's 194K bbl/day Fort Hills mine start up.
"The pipes will probably get full again by the end of the year and rail will be a way to get those incremental barrels out," GMP FirstEnergy analyst Martin King says, adding that the discount on Canadian crude likely would widen as a result.
Shippers on ENB's Mainline system, which carries the bulk of Canada's 3M bbl/day of crude exports to the U.S., usually have at least some of their nominated heavy crude volumes cut every month.
Energy CEOs, increasingly worried over the lack of sitting members at the Federal Energy Regulation Commission, warn that if the FERC is not functional by August, they could withdraw private investment dollars for as many as 15 energy infrastructure projects valued at $15B-$25B.
The FERC normally has a five-member panel but has only one currently, with two others awaiting a full Senate vote on their nomination; without at least three commissioners, the FERC has been unable to conduct business since February.
Time is running out to approve projects before Congress leaves town for its August break; FERC's regular monthly meeting is scheduled for July 20, but the meeting will be canceled if there is no quorum, and the next meeting is not scheduled until September.
Among the projects on hold: The $2B NEXUS Gas Transport project, developed by Enbridge (NYSE:ENB) and DTE Energy (NYSE:DTE); the $5B Atlantic Coast Pipeline, developed by a group including Dominion Resources (NYSE:D) and Duke Energy (NYSE:DUK); and the $1B PennEast pipeline, owned by UGI, New Jersey Resources (NYSE:NJR), South Jersey Industries (NYSE:SJI), Southern Co. (NYSE:SO) and Spectra Energy Partners (NYSE:SEP).
Canadian lender Desjardins says it is temporarily suspending its funding of energy pipelines and may make the decision permanent in September, citing concerns about the impact such projects may have on the environment.
Desjardins has committed $145M to Kinder Morgan’s (KMI -0.6%) Trans Mountain pipeline expansion, and a permanent decision likely would mean it also would not help finance other major Canadian pipeline projects, including TransCanada’s Keystone XL (TRP -0.4%) and Energy East and Enbridge’s (ENB -0.5%) Line 3.
Such a move would follow Dutch lender ING's policy of not funding projects directly related to oil sands, and is another sign that pipelines could have a harder time getting funding as banks face increasing pressure to back away.
The state of Michigan releases a report looking at how to deal with the spill risk of Enbridge's (NYSE:ENB) Line 5 pipeline that runs exposed underwater in the Straits of Mackinac between Lake Huron and Lake Michigan.
The report says replacing the exposed 1953 pipeline with a $30M underwater trench or a $150M tunnel would minimize or make negligible the risks to the line.
Shutting down the pipeline would lead to disruptions for ENB and the refineries it supplies, with the report estimating that Michigan residents would pay $121M annually more for gasoline and other refined products, while ENB would be stuck with $212M in abandonment charges.
As the report was issued, Michigan Attorney General Schuette called for the development of a “specific and definite timetable” to close Line 5.
“We’re not going to see significant new pipeline capacity until late 2019 or 2020,” says Nick Schultz of the Canadian Association of Petroleum Producers; in the meantime, companies are stuck with the extra shipping expense as crude oil prices are down ~20% from this year's peak.
Pipelines in western Canada can carry ~3.3M bbl/day of crude, according to CAPP, while the area is expected to produce 3.92M bbl/day this year and 4.2M next year; Suncor's (SU +0.9%) Fort Hills oil sands project is expected to start production in Q4 and ramp up to ~90% of its 194K bbl/day capacity within 12 months come online, and Canadian Natural Resources (CNQ +2%) plans to complete a Horizon project expansion that will add 80K bbl/day.
TransCanada's (TRP) Keystone XL pipeline still needs to win approvals from regulators in Nebraska, Enbridge's (ENB +0.7%) Line 3 project has faced delays that have pushed its in-service date to 2019, and the fate of Kinder Morgan's (KMI +1%) Trans Mountain expansion also is uncertain after opponents of the project won power in British Columbia elections.
Canadian National (CNI +1.2%) and Canadian Pacific (CP +1.2%) railways may benefit from a pickup in their oil businesses for the next year or two, says Cormark Securities' David Tyerman, but “they view it as a short-term boost... “They’re happy to haul the stuff, but they’re not going to spend a lot of money on infrastructure because they don’t know if this is going to be around long."
Tropical Storm Cindy has caused the suspension of service at a major Gulf of Mexico oil terminal and evacuations at rigs and platforms as it moves toward an expected landfall early Thursday somewhere near the Texas-Louisiana border.
The storm has triggered a halt to vessel offloading at the Louisiana Offshore Oil Port marine terminal, and warnings to the Houston Ship Channel and Cheniere Energy's (NYSEMKT:LNG) Sabine Pass, the site of the only active U.S. liquefied natural gas export terminal.
Enbridge (NYSE:ENB), Anadarko (NYSE:APC), BHP Billiton (NYSE:BHP) and BP have evacuated non-essential workers from some platforms in the Gulf, and Shell (RDS.A, RDS.B) has suspended some well operations; storms in the Gulf can often roil energy markets because offshore rigs and platforms account for ~17% of U.S. crude oil production and 4% of natural gas output.
Entergy (NYSE:ETR) says restoration workers are ready to respond to any power outages caused by the storm,
“While the storm may not be a whopper, it will influence shipping and may impact imports and exports of oil for next week,” says a senior market analyst at Price Futures Group.
Alliance Pipeline, a joint venture between Enbridge (NYSE:ENB) and Veresen (OTC:FCGYF), says heavy rain in Alberta caused sections of its mainline, which delivers 1.6B cf/day to Chicago, to shift and the company would reduce service on its line as it investigates the problem.
The pipeline’s outage is impacting 500M cf of natural gas production and is expected to negatively affect gas prices at the Station 2 pricing hub in British Columbia and the AECO pricing hub in Alberta.
Canadian Natural Resources (NYSE:CNQ), the largest natural gas producer in the country, says it is affected by the force majeure but the interruption “will be immaterial to our overall operations.”
Cenovus Energy (NYSE:CVE), which recently acquired natural gas assets in a $17.7B deal with ConocoPhillips, says it is partially impacted by the pipeline shutdown but does not provide details on volumes.
Seven Generations Energy (OTC:SVRGF), a major shipper on Alliance, says its liquids-rich gas production is downstream from the affected portion of the pipeline.
Canada's National Energy Board is expected to push for a shift in standards for pipeline parts after TransCanada (TRP +0.5%) and Enbridge (ENB +1%) discovered some that they were using had been substandard, Reuters reports.
The changes must pass external standards committees that include the pipeline industry and would change the way manufacturers have been designing parts, making production more complicated, according to the NEB's chief engineer.
TRP and ENB say they acted immediately and proactively after discovering the issues and that all their pipes were safe.
Enbridge (ENB +1.3%) plans to start early discussions on a new tolling agreement after 2022, seeking to take advantage of the uncertainty facing competitors' pipelines to gain market share, according to a senior executive.
"We see a window of opportunity emerging now to start early discussions with our customers on a post-CTS tolling agreement," VP Guy Jarvis said yesterday, referring to ENB's 10-year competitive tolling settlement for its Mainline system reached in 2011.
Jarvis did not name the competitors, but prospects for Kinder Morgan's Trans Mountain pipeline expansion have been complicated by British Columbia's recent election and TransCanada's Keystone XL pipeline project through the U.S. Energy East project to Canada's Atlantic coast have been mired in controversy.
ENB also said it would take advantage of its now larger scale with plans for a possible expansion of its 280K bbl/day Express Pipeline that once had belonged to Spectra Energy.
Enbridge (NYSE:ENB) says it plans to expand its main oil pipeline system and its newly acquired natural gas pipeline system in British Columbia, with CEO Al Monaco saying the expansion project is "fully subscribed."
Monaco told an investor presentation today that ENB closed a bidding period for new capacity on its T-South pipeline between northern B.C. and Vancouver last week, and gas producers fully committed to supporting an expansion project that would expand the line’s capacity by 190M cf/day.
ENB plans to spend $1B expanding the line, which delivers most of the natural gas Vancouver uses to heat its homes.
Enbridge's (ENB, EEP) Line 5 oil pipeline beneath the Straits of Mackinac has suffered repeated problems with inadequate supports, which Michigan officials have said is a violation of a legal condition for placing the lines in the waterway, according to a report yesterday.
Inspections by ENB reportedly uncovered more than 200 instances in which excessive sections of its Line 5 pipelines had no support from the lake bottom or man-made anchors.
Line 5 carries 23M gallons of crude oil and liquid natural gas daily between Superior, Wis., and Sarnia, Ontario; a nearly five-mile section, divided into two lines that run along the bottom of the straits area where Lakes Huron and Michigan converge, is the problem area.
Kinder Morgan (KMI -3%) plunges in early trading as plans to expand its Trans Mountain crude oil pipeline from Alberta to the Pacific coast are placed at substantial risk following the Green Party's deal with the New Democrats to govern Canada’s British Columbia.
The deal brings together two parties that both oppose KMI's C$7.4B project and forces Liberal premier Christy Clark, who had favored Trans Mountain as well as liquefied natural gas projects, out of office.
The news is weighing on the Kinder Morgan Canada IPO, which opened 7% lower in its trading debut.
Any delay in the Trans Mountain expansion would be a negative for KMI but might provide a boost for rival Enbridge's (ENB -0.4%) mainline system, according to Canaccord analyst David Galison.
Enbridge (ENB -2.1%) may take on some more acquisitions after forecasting gains in adjusted earnings after its deal for Spectra Energy wrapped up at February's end.
Shares fell today after the company posted Q1 earnings that missed expectations, crimped by lower liquids-pipeline profits.
New acquisitions might be smaller in scale than its purchase of Spectra, CEO Al Monaco said on the company's earnings call. He didn't name targets, but added Enbridge is interested in expanding the BC Main Line in the West at a cost of about C$1B.
And building the Line 3 project from Alberta to Wisconsin will continue in the face of an aboriginal legal challenge, he says.