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'Shovels are ready' at Enbridge as it waits for Nexus pipeline approval

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Essential Energy Insights - January 2021


'Shovels are ready' at Enbridge as it waits for Nexus pipeline approval

Enbridge Inc. is watching for the U.S. Senate to restore the Federal Energy Regulatory Commission, its signal to release construction crews for the proposed 1.5-Bcf/d Nexus Gas Partners LLC pipeline project.

"On Nexus, we are ready to go with construction once the FERC quorum has been established," Enbridge President and CEO Al Monaco said on an Aug. 3 earnings call.

"Obviously, we're a little bit frustrated with the timing here," Monaco said. "It is a good project that is going to be a great economic driver for the local area. The shovels are ready to go. Many people are ready to go to work. And customers are anxious to get lower gas prices from the region."

Monaco said the 257-mile pipeline, designed to deliver Marcellus Shale gas to Ohio, Michigan and Ontario, would take about seven to 10 months to build, depending on the time of year the FERC approval comes through.

DTE Energy Co., which is developing the Nexus pipeline with Enbridge, confirmed in a July 26 earnings call that the in-service date had slipped to 2018 because FERC has only one out of five members and therefore lacks a voting quorum for major decisions. Analysts said DTE investors should not be worried about the delay, because it would not have a significant impact on the company's growth and financials.

Monaco pointed out that Enbridge has been moving ahead in other areas of its gas and liquids pipeline businesses. The company has a total capital program worth roughly C$31 billion, with roughly C$6 billion of projects in service already in 2017, including the 515-mile Sabal Trail pipeline for Florida, plus C$7 billion expected in the second half. Monaco also talked about the Valley Crossing intrastate pipeline, which began construction in April and is on track for an in-service date in the second half of 2018. The Texas pipeline connects to the Valley Crossing border facility, which received a positive environmental review from FERC at the end of June.

"This project is part of our strategy to capitalize on the changing natural gas flows on the continent," Monaco said. "It is a critical link, in this case between growing Permian supply and increasing demand in Mexico."

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Monaco listed expansions on Enbridge's British Columbia gas pipeline system as recently secured growth projects. The 402-MMcf/d Spruce Ridge expansion has a planned in-service date in late 2018, and the approximately 190-MMcf/d T-South expansion has a planned in-service date in 2020.

During a question-and-answer session at the end of the call, analysts wanted to know whether Energy Transfer Partners LP's Dakota Access or TransCanada Corp.'s Keystone XL crude oil pipelines would hurt Enbridge's oil pipelines, which travel through North Dakota from Canada on the way to Midwest and Gulf Coast markets. Enbridge executives said they were not worried. Their oil pipeline system in the Bakken Shale area is "extremely competitive," they said, and they expect the business impact to be small. "Things are playing out pretty much as we expected," said Guy Jarvis, executive vice president of liquid pipelines.

For the second quarter, which Monaco observed was the first full quarter with Spectra Energy Corp and Spectra Energy Partners LP assets in the fold, Enbridge reported adjusted earnings of C$662 million, or 41 Canadian cents per share, surging from C$456 million, or 50 Canadian cents per share, in the same quarter in 2016.