Calgary-based Enbridge Inc.‘s September 5 announcement that the company is acquiring US natural gas assets for $14 billion from Dominion Energy is the latest instance of a major, storied Canadian energy company looking south for growth opportunities.
In Canada, recent efforts to undertake asset expansions or new projects have been met with uncertainty, delays, cost overruns and public opposition. Other parts of North America offer more inviting environments.
Enbridge’s acquisition would make it the largest natural gas utility in North America by acquiring three companies operating in Ohio, North Carolina, Utah, Wyoming and Idaho. Enbridge views the additions as complementary to its existing Ontario-focused local distribution network and as a sign of its confidence in natural gas’ long-term presence in the continental energy grid.
Speaking about the Dominion deal, Enbridge President and CEO Greg Ebel commented, “We remain firmly of the view that all forms of energy will be required for a safe and reliable energy transition. This transaction helps to achieve greater balance and gives us increased exposure to natural gas, which is and will continue to be the critical fuel to help realize our lower carbon aspirations.”
Ebel also highlighted that, “The [acquired] utilities are all located in supportive regulatory regimes… and offer diverse, low risk growth opportunities.”
Enbridge isn’t alone
This investment contrasts with Enbridge’s decisions regarding new and existing Canadian assets in recent years.
In 2019, Enbridge Gas New Brunswick — a local distribution utility — was sold after the company failed to realize projected subscription numbers and became mired in legal disputes with the province. Three years earlier, in 2016, Ottawa cancelled the $7.9 billion Northern Gateway oil pipeline to the British Columbia coast, overturning its previous approval.
During this same period, Enbridge’s dealmakers were busy in Houston advancing toward the $37-billion acquisition of Spectra Energy, announced in 2016.
And Enbridge isn’t alone in abandoning major energy transmission projects in Canada.
This summer, the 780-kilometre Gazoduq pipeline designed to deliver Western Canadian natural gas from northeastern Ontario to the Saguenay region in Quebec was also terminated. It was set to supply a proposed $14-billion liquified natural gas terminal in Saguenay. However this terminal was rejected by both provincial and federal governments following environmental reviews. The project’s Atlantic ocean access positioned it to supply Europe, which is seeking new energy sources in response to the war in Ukraine.
Calgary-based TC Energy Corp. has similarly found more success in large projects outside of Canada. The ambitious — and contentious — $16-billion Energy East oil pipeline from Alberta to a marine export facility in Saint John, New Brunswick was cancelled in 2017 following troubled National Energy Board hearings and political drama in multiple jurisdictions.
Like Enbridge, TC Energy made a major US acquisition while projects stalled in Canada. In 2016, the company added Columba Gas to its portfolio for US$13 billion, making it a major player in the US market.
Furthermore, TC Energy has been steadily growing in Mexico. It completed the US$2.1 billion Sur de Texas pipeline project in 2018, and is currently completing the US$4.5 billion Southeast Gateway project in partnership with government-owned utility Comisión Federal de Electricidad (CFE). These projects have either been completed or are progressing both on budget and on schedule.
International successes
TC Energy’s international successes stand in stark contrast to the other major pipeline it’s currently constructing: the Coastal GasLink project (CGL) in British Columbia that will supply LNG Canada’s liquefaction facility in Kitimat.
The current estimated final cost of nearly $14 billion is more than twice the original estimate. The projected completion date of 2024 is years behind schedule. The project has also been a lightning rod for criticism in Canada from environmental groups and activists involved in Indigenous causes, among others.
In a May conversation with Goldy Hyder of the Business Council of Canada, TC Energy’s CEO Francois Poirier reflected on how projects have advanced differently across countries in recent years. “Look at the LNG opportunity that came to North America ten or fifteen years ago, and you look at the outcome of today, the US is the largest exporter in the world from a standing start.”
“We had the same opportunity in Canada… I saw businesses and government in the US collaborate with a strategic goal in mind, which was for the US to establish energy independence and for the US to be a dominant player in world energy markets, and we need to see that in Canada. The opportunity is there for us to grasp.”
The companies looking to advance pipeline projects in Canada now appear to be operating more, not less, autonomously.
In 2021, industry group the Canadian Energy Pipeline Association (CEPA) announced that after 28 years it was ceasing operations following the departure of Enbridge, TC Energy and Pembina Pipeline — the country’s three largest operators — from its membership.
Despite the trends, TC’s Poirier remains optimistic. “Canada has an opportunity to punch above its weight in world energy markets. We have talent in this country that’s every bit as good as anywhere in the world. I would love to see it stay in Canada and create value for all Canadians; and for that to happen business, governments and other stakeholders need to be far more collaborative and strategic in mapping out what success looks like.”
