Enbridge favors voluntary emissions disclosures, balks at US methane fee plan

Canadian oil and gas pipeline giant Enbridge Inc. is taking steps to track its share of the intensity of emissions associated with products and services for exploration and production, but executives stopped short of endorsing a proposal by U.S. House Democrats to place a fee on climate-warming emissions that would trigger fines for parts of the midstream sector.

Most North American pipeline operators do not include Scope 3 emissions, a category of emissions that includes customers' end use of fuels, in their net-zero emissions targets, but Enbridge Vice President and Chief Sustainability Officer Pete Sheffield said the firm is monitoring them despite "a lack of science-based guidance for ... midstream operations." Scope 3 emissions make up the vast majority of an oil and gas company's carbon footprint, and they are a difficult area for the industry to manage.

When it came to the House Democrats' proposal that could subject pipeline companies to hundreds of millions of dollars in annual fines starting in 2022, however, Sheffield noted that such "direct regulation" has a significant execution risk. The proposal is part of a $3.5 trillion budget reconciliation bill.

"We're supportive of that broadly," Sheffield said during the company's Sept. 28 ESG investor conference. "I think the question around a methane fee as it has been discussed in some congressional proposals — at its core we see it as a little bit duplicative to the focus on direct regulation and perhaps, if not well-designed, somewhat counterproductive."

Still, Enbridge President, CEO and Director Al Monaco reiterated the firm's commitment to stand out from the rest of the midstream sector as companies in the upstream and downstream segments look for partners in the transition to cleaner forms of energy.

"We believe that … more and more, those elements of the value chain are going to look to midstream to demonstrate that we're differentiated," Monaco said.

Monaco added that Enbridge's recently announced agreement to acquire Moda Midstream Operating LLC from private equity firm EnCap Flatrock Midstream for around $3.0 billion aligns with that strategy.

"We tested the assets against a range of energy transition scenarios before we acquired them," the CEO said about the package, which includes the Ingleside Energy Center located near Corpus Christi, Texas. "We concluded its competitive position and export focus make it a resilient business and provides tremendous upside … and its location on the [Gulf of Mexico] gives us huge optionality for hydrogen, ammonia and carbon capture."

Moda Midstream also "more than passed the test" regarding Enbridge's commitment to net-zero emissions by 2050, Monaco said. The Canadian firm is developing a 60-MW solar farm at the Ingleside facility "that meets our own power needs and then more," Sheffield said.

Enbridge on Sept. 28 also announced it has struck a partnership deal with Vanguard Renewables LLC under which the pipeline operator will buy upwards of 2 Bcf of renewable natural gas yearly from the energy facilities that Vanguard will develop.

The company's existing renewable energy projects include an independent carbon capture development partnership with Svante Inc., Cross River Infrastructure Partners LLC and OTS Ltd., as well as a pilot project to blend renewable hydrogen produced at a power-to-gas facility in Markham, Ontario, into part of an existing natural gas network.

"Many energy companies are just signing contracts with third-party renewable players for a portion of their electricity requirements, but we stand out with our scale, asset base and broad capabilities in developing, construction and operating renewable power," Enbridge Senior Vice President of Corporate Strategy and Power Matthew Akman said.