Enbridge Inc.

Last edited by lenazun on March 5, 2013 - 12:44pm

Profile editor:

Phil Mattera

Company Snapshot:

Enbridge, operator of the world’s largest crude oil pipeline system, focuses on carrying petroleum from Western Canada—including the notorious tar sand fields of Alberta—to refineries in Ontario and the U.S. Midwest. It and its affiliates have other pipelines in several parts of Canada and United States and operate Canada’s largest natural gas distribution company. In July 2010 the company’s U.S. subsidiary Enbridge Energy Partners L.P. was involved in a serious pipeline rupture and oil spill in Michigan that appears to have resulted from the company’s failure to properly monitor corrosion.

Ownership status:

Publicly traded

Number of employees worldwide:

6,000

Chief executive officer:

Patrick D. Daniel

Website:

http://www.enbridge.com/

Tel:

(403) 231-3900

Net Income:

US$1.5 billion

Total revenue:

US$11.9 billion

Corporate accountability

Accountability overview:

Enbridge has generated controversy both because of its own performance problems, including a series of spills such as the July 2010 accident in Michigan, and its role in facilitating the distribution of oil produced in environmentally destructive situations such as the Alberta tar sands.

In the course of building its pipelines across long distances, Enbridge has often encountered resistance from First Nations communities and other landowners, especially when eminent domain was used to obtain the land. See Section 1.5 of the Polaris Institute profile of the company for details on some of the most significant of these cases.

Environment and product safety:

Even before the Michigan accident, Enbridge’s safety record was far from unblemished. Here are some of the more significant spills and other environmental problems during the past decade.

In January 2001 a seam failure on a pipeline near Enbridge’s Hardisty Terminal in Alberta spilled more than 1 million gallons of oil.

In July 2002 a 34-inch-diameter pipeline owned by Enbridge Energy Partners ruptured in northern Minnesota, contaminating five acres of wetland with about 250,000 gallons of crude oil.

In January 2003 about 189,000 gallons of crude oil spilled into the Nemadji River from the Enbridge Energy Terminal in Superior, Wisconsin. Fortunately, the river was frozen at the time, so damage was limited.

In 2004 the federal Pipeline and Hazardous Materials Safety Administration (PHMSA) proposed a fine of $11,500 against Enbridge Energy for safety violations found during inspections of pipelines in Illinois, Indiana and Michigan. The penalty was later reduced to $5,000. In a parallel case involving Enbridge Pipelines operations in Minnesota, an initial penalty of $30,000 was revised to $25,000.

In January 2007 an Enbridge pipeline in Wisconsin spilled more than 50,000 gallons of crude oil onto a farmer’s field in Clark County. The following month another Enbridge spill in Wisconsin released 176,000 gallons of crude in Rusk County.

In November 2007 two workers were killed in an explosion that occurred at an Enbridge pipeline in Clearbrook, Minnesota. The PHMSA fined the company $2.4 million for safety violations connected to the incident.

In 2008 the Wisconsin Department of Natural Resources charged Enbridge Energy with more than 100 environmental violations relating to the construction of a 320-mile pipeline across much of the state. The agency said that Enbridge workers illegally cleared and disrupted wooded wetlands and were responsible for other actions that resulted in discharging sediment into waterways. In January 2009 the company settled the charges by agreeing to pay $1.1 million in penalties.

In 2009 the PHMSA fined Enbridge Pipelines LLC-North Dakota $105,000 for a 2007 accident that released more than 9,000 gallons of crude oil.

In March 2010 the PHMSA proposed a fine of $28,800 against Enbridge Pipelines LLC for safety violations in Oklahoma; the case is not yet resolved.

In July 2010 an Enbridge Energy pipeline in Michigan ruptured, sending more than 800,000 gallons of crude oil into the Kalamazoo River, a major state waterway that flows into Lake Michigan. Within a couple of days the spill stretched for some 35 miles. The incident occurred only months after the company was warned that it was not property monitoring corrosion.

Apart from its safety record, Enbridge is targeted by environmentalists for its role in transporting crude oil from the controversial tar sand operations of northeastern Alberta, which are regarded as one of the largest contributors to global warming as well as a major source of air and water pollution and forest destruction. Enbridge’s predecessor companies had some involvement in the tar sands as early as the 1970s. That role expanded greatly in the late 1990s, when Enbridge completed construction of an $800 million expansion of its pipeline system to bring tar sands oil to Eastern Canada and the U.S. Midwest. The pipeline initially served Suncor Energy, a spinoff of U.S.-based Sunoco that is now Canada’s largest petroleum company.

In recent years Enbridge has spent billions of dollars to expand its oil pipeline capacity, much of it dedicated to the tar sands industry. Enbridge is set to provide another boon to the tar sands producers with the opening later this year of its Alberta Clipper pipeline, which will carry more of the dirty crude to Superior, Wisconsin. It is also proceeding with its Northern Gateway Project, which involves the construction of parallel pipelines from the tar sands region to the western shore of British Columbia. Enbridge is partnering with PetroChina on that project.

Enbridge is also headed for more controversy in light of its announcement in March 2010 that it would develop a natural gas pipeline serving areas of Pennsylvania and nearby states where Marcellus Shale drilling is taking place. Those drilling activities have been the subject of numerous reports of drinking water contamination.

History

Enbridge’s pipeline business dates back to the 1940s, when Canada’s Imperial Oil Company (owned by Exxon predecessor Standard Oil of New Jersey) experienced a surge in production at its oil fields in Alberta. Seeking to market its product over longer distances, Imperial formed the Interprovincial Pipe Line Co. (IPL), which was authorized by the Canadian government to build a 450-mile pipeline from Edmonton to Regina, Saskatchewan. Before long, the company decided to extend the pipeline much farther—across the border into the United States to the shore of Lake Superior, where the crude oil could be moved by tanker during the summer shipping season to refineries in southeastern Ontario. The U.S. operations of the company were incorporated under the name Lakehead Pipe Line Co.

IPL’s decision not to keep the entire pipeline within Canada sparked some nationalist protests, but the fact that the all-Canada route was some 120 miles longer and considerably more expensive blunted the opposition. The first Canadian oil reached Superior, Wisconsin in December 1950.

IPL grew rapidly during the 1950s and began trading on the Toronto and Montreal stock exchanges. Rather than continuing to terminate at Lake Superior, the company chose to extend its system through Wisconsin and Michigan, pioneering the use of underwater pipes to traverse Lakes Michigan and Huron. During this period it also formed Trans Mountain Oil Pipe Line Co. to ship Alberta crude to the west. By 1956 IPL owned and operated the longest crude oil pipeline in the world.

During the 1960s and 1970s IPL doubled its capacity, providing U.S. and Canadian Great Lakes refineries a robust source of crude, especially during the OPEC oil embargo. In 1983 IPL joined with Amoco and other investors in Frontier Pipeline Co., which ran a line from northeastern Utah to Caspar, Wyoming. Later in the decade, IPL went through a series of transactions with conglomerate Hiram Walker and its subsidiary Home Oil, leading to several corporate name changes. The maneuvers also gave control of IPL to the wealthy Reichmann family until they sold off their holdings in 1992.

With the new name IPL Energy, the company ended its total focus on crude oil transportation by acquiring a majority stake in Consumers Gas, Canada’s largest natural gas utility, in 1994 (it took total ownership two years later). IPL then set out to build an expanded gas pipeline network in places such as Quebec, New Brunswick, Ontario and New York.

IPL did not forget about oil. In 1999 it began operation of its Athabasca Pipeline, which connected the controversial tar sands deposits of northeastern Alberta to its main oil transportation system. During the 1990s it also made its first foray outside North America by joining TransCanada PipeLines in the OCENSA project in Colombia.

Seeking to reflect its broader business portfolio, IPL changed its name in 1998 to Enbridge Inc., a name that combined “energy” and “bridge.” In 2001 its publicly traded U.S. subsidiary Lakehead Pipe Line Partners L.P. changed its name to Enbridge Energy Partners L.P.

In 2001 Enbridge acquired Midcoast Energy Resources, a natural gas pipeline company based in Houston, and the following year it bought the Williams Companies’ stake in the Alliance natural gas pipeline from western Canada to the U.S. Midwest. In 2004 Enbridge purchased Shell Gas Transmission for more than $600 million, giving it stakes in pipelines that carry about half of the deepwater gas production in the Gulf of Mexico. In 2005 Enbridge acquired a 65 percent stake in the Olympic Pipe Line Company, the largest petroleum transporter in Washington State, from BP.

In 2008 Enbridge signed an agreement with BP to develop a pipeline to transport Canadian heavy crude oil (i.e. from the tar sands) from Illinois to BP’s operations in Texas.

In 2009 Enbridge sold its interest in the Colombia pipeline and announced plans for a $250 million deepwater crude oil pipeline in the Gulf of Mexico. In April 2010 Enbridge completed its Alberta Clipper pipeline to serve Alberta’s tar sands operations and expected to begin operation in late 2010.

Financial information

Stock ticker symbol:

ENB (Toronto and New York)

Fiscal year:

2009

Fiscal year:

2009

Major lines of business/segments:

Enbridge divides its operations into four segments:

Liquids Pipelines - includes the operation and construction of the Enbridge crude oil mainline system and feeder pipelines that transport crude oil and other liquid hydrocarbons. Liquids Pipelines consists of crude oil, natural gas liquids (NGLs) and refined products pipelines and terminals in Canada and the United States.

Natural Gas Delivery and Services - consists of natural gas utility operations, investments in natural gas pipelines, the company’s commodity marketing businesses and international activities. The core of the company’s natural gas utility operations is Enbridge Gas Distribution Inc. (EGD) which serves residential, commercial, industrial and transportation customers, primarily in central and eastern Ontario as well as northern New York State. This business segment also includes natural gas distribution activities in Quebec and New Brunswick. Investments in natural gas pipelines include the Company’s interests in the U.S. portion of Alliance Pipeline (Alliance Pipeline US), Vector Pipeline and transmission and gathering pipelines in the Gulf of Mexico. This segment also includes the Company’s investment in Aux Sable, a natural gas fractionation and extraction business.

Sponsored Investments - includes the Company’s 27 percent ownership interest in Enbridge Energy Partners, L.P. (EEP), Enbridge’s funding of 66.7 percent of the U.S. segment of the Alberta Clipper Project through EEP and Enbridge Energy, L.P. and a 72 percent economic interest in Enbridge Income Fund (EIF). Enbridge manages the day-to-day operations and develops and assesses opportunities for each of these investments. EEP transports crude oil and other liquid hydrocarbons through common carrier and feeder pipelines and transports, gathers, processes and markets natural gas and NGLs. EIF is a publicly traded income fund whose primary operations include a crude oil and liquids pipeline and gathering system, a 50 percent interest in the Canadian portion of Alliance Pipeline (Alliance Pipeline Canada) and partial interests in several green energy investments.

Corporate - consists of new business development activities as well as investing and financing activities, including general corporate investments and financing costs not allocated to the business segments. Corporate also includes the company’s investments in green energy projects, which include a solar project with First Solar Inc. and several wind energy projects.

Enbridge Inc.

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