Investor urges Enbridge to assess risk of delay
DAVID EBNER
Globe and Mail
March 30, 2009
VANCOUVER — — The prospect that Enbridge Inc. [ENB-T]'s $4-billion Gateway pipeline project, which would connect Alberta's oil sands with lucrative Asian markets, could become mired in disputes with first nations groups has at least one major shareholder demanding a reckoning.
The company is set to bring its Gateway proposal, which has $100-million in backing from 10 companies, oil sands producers in Canada and refiners in Asia, before the National Energy Board in the next three months.
But given the climate of opposition that has dogged both this project, which was shelved in 2007 in part because of a lawsuit by the Carrier Sekani Tribal Council, and the proposed Mackenzie Valley pipeline, Enbridge investor Ethical Funds Co. wants the company to disclose how much risk it sees.
Vancouver-based Ethical Funds, which owns about 500,000 Enbridge shares, is putting a resolution before the company's May annual meeting, published this week in Enbridge's proxy circular. The resolution urges Enbridge to disclose in its quarterly filings how negotiations with native communities are progressing, "including reference to specific opposition."
"It seems pretty clear that there's risk to investors here," said Bob Walker, an Ethical Funds vice-president.
Enbridge, stung by the failure of its first effort to get Gateway moving ahead, has redoubled its work on the project this time, with a particular focus on relations with first nations.
The work centres on the duty of the government to conduct meaningful consultations with first nations about industrial projects that would traverse or be built on their traditional land.
A lack of consultation has slowed other projects, such as the Mackenzie Valley pipeline project.
The Dehcho First Nations sued the federal government about being unfairly excluded from the review of the Mackenzie pipeline. The suit delayed the project for a year and the Dehcho won $31.5-million.
The duty to consult has been largely taken over by companies such as Enbridge. The company last fall held a series of open houses, which is typical, and is trying to use social media such as YouTube and Facebook, where results are mixed. The Gateway project has just two friends on Facebook.
In both the Mackenzie case and Gateway, the first nation regions in question don't have settled land claims, making it harder for a project developer.
Adequate consultation is one of the "most complex questions clients are asking their advisers," said energy regulation lawyer Gord Nettleton of Osler Hoskin & Harcourt LLP.
"You must have very good communication and co-ordination with government."
Success will cost money, said Doug McArthur, a former deputy minister of aboriginal affairs in B.C. and now a public policy professor at Simon Fraser University.
"Sitting down is crucial and it's going to cost money," Mr. McArthur said. "It's no longer possible for companies to build these kinds of things without making substantial offers in terms of benefits and compensation."
Enbridge has tentative support from 25 of the 42 first nations groups along the 1,170-kilometre pipeline route. Enbridge pays money to the groups so they can be involved in deliberations over the pipeline and the money comes with a deal to commit to the review process led by the NEB.
"We've had a pretty good reception," said Ken MacDonald, an Enbridge vice-president.
The Carrier Sekani, representing eight first nations, about 10,000 people and one-third of the Gateway pipeline route, remains the main opposition. Chief David Luggi doesn't trust the National Energy Board process, which he said is almost guaranteed to lead to project approval.
He said the danger of one oil spill is too great for the fisheries business on the many prolific rivers of northern B.C.
"You do the real easy math, one spill, it'll have fatal results, for an undetermined amount of time and perhaps forever," Mr. Luggi said.
The Council of the Haida Nation on the Queen Charlotte Islands is also opposed to the pipeline.
http://business.theglobeandmail.com/servlet/story/RTGAM.20090330.wrenbri...
