National Post (National Edition)
Minnesota pipeline foes pan Enbridge options
S T. PAU L , M I N N E S O T A • Indigenous bands and environmental groups took aim on Wednesday at Enbridge Inc’s preferred route for its rebuilt Line 3 oil pipeline, while others panned all options ahead of an expected decision this week by a Min- nesota regulator on whether the project can proceed.
Enbridge wants to replace the aging 1,660-km pipeline that runs from Alberta to Wisconsin. It needs approval from the five-member Minnesota Public Utilities Commission, which must decide whether the project is needed, and the route.
Public scrutiny has fo- cused on Enbridge’s preferred route, which would follow Line 3’s existing corridor partway through Minnesota before veering south to miss the Leech Lake reservation and avoid a nine to 12-month pipeline shutdown. A judge recommended in April that Line 3 follow the existing corridor instead. The commission this week has also un- expectedly looked at lesserstudied route alternatives.
“You may find that all of them suck,” said Paul Blackburn, lawyer for activist group Honor the Earth.
The Sierra Club environmental group echoed that view, saying Line 3 should operate as is until regulators ultimately shut it down.
Enbridge’s preferred route is “a non-starter,” said David Zoll, a lawyer for Mille Lacs band, adding that the best solution might be more time to study alternatives.
“We should not feel compelled to make uninformed decisions,” he said.
Enbridge’s favoured route is “by far the worst,” said Seth Bichler, lawyer for Fond du Lac band.
But Leech Lake said Enbridge’s preferred route is the best option as it means the pipeline will no longer bisect the reserve.
Line 3, which began service in 1968, operates at half its capacity because of age and deterioration. Its replacement would allow it to return to approved capacity of 760,000 barrels per day.
Selecting a route is a tricky task for the commission, which must balance concerns about Indigenous wild rice harvesting areas and culturally important sites with possible construction delays and a pipeline shutdown that could harm refiners.
Bottlenecks in Alberta have steepened a price discount for its heavy crude this year, while refiners in Minnesota and surrounding states say Line 3 is necessary to increase crude supplies.
“This is a very important project for Canada,” Canada’s Natural Resources Minister Jim Carr told Reuters in Washington where he attended a gas conference.
“We’re very hopeful that there will be a positive result.”
But if three projects proceed, the industry could soon see surplus capacity transporting Canadian crude.
Line 3, the Ottawa-backed Trans Mountain pipeline expansion and Transcanada Corp.’s Keystone XL would raise Canada’s crude export capacity to 5.5 million bar- rels per day from nearly 4 million bpd in 2017, according to the Canadian Energy Research Institute (CERI). Canada’s crude oil production is not forecast to reach 5.5 million bpd until 2030.
Terry Lamb, a volunteer with activist group MN 350, used to build pipelines for a living. Now he spends part of his retirement protesting them, first the Dakota Access Pipeline in North Dakota, and now Line 3.
“We don’t want to take the chance of (a spill),” Lamb said. “It’s another big giant corporation rolling over everyday people.”
Phillip Wallace, business representative for Pipeliners Union 798, said its members will have to leave Minnesota for work if the project is defeated.
“If this is shut down, it would be another trophy for (activists),” he said. “They’ll get more confidence. But let’s face it — we need crude.”
• Canopy Growth Corp. posted a wider-than-expected loss in its most recent quarter, which included a spike in costs as the licensed marijuana producer gears up for the legalization of recreational pot in October.
The Smiths Falls, Ont.based company reported a net loss attributable to shareholders of $61.5 million, compared to a $12 million loss during the same quarter a year ago. Analysts had expected a $12.8-million loss, according to those surveyed by Thomson Reuters Eikon.
The pot producer’s net loss for fiscal fourth quarter ended March 31 was driven in large part by a 149 per cent surge in overall operating expenses to $58.2 million from $23.4 million in the same period of 2017.
Canopy has been investing heavily to ramp up production ahead of Oct. 17, when adult use pot of becomes legal across Canada, after which it expects to “generate significantly greater revenues” starting in the second quarter of fiscal 2019.
“We are loaded up on the right people in the right places and it’s go time,” Canopy’s chief executive Bruce Linton said on a call with analysts on Wednesday.
Canopy’s revenue for the quarter of $22.8 million was up from $14.6 million in the same quarter last year, but fell short of the $25.05 million expected by analysts.
Shares of Canada’s biggest licensed producer fell 10 per cent to close at $36.93 on the Toronto Stock Exchange.
The stock dip may indicate the market is shifting its focus away from potential to measures of profitability “and wants to see more performance on that front in this space,” said Russell Stanley, an analyst with Echelon Wealth Partners.
The company expects to be profitable by the end of the calendar year, or its fiscal third quarter.
“Investors may hold them to that,” said Stanley.
Analyzing marijuana company earnings is tough because of accounting rules used in the agriculture industry that require companies to put a value on their pot plants before they are harvested, and approaches differ between producers on how to apply these guidelines.
And on Wednesday, Canopy said it would no longer report its weighted average cost per gram metric, a measure that some companies had moved to adopt in an effort to provide transparency on the cost of production.
The company said it would consider reporting a similar measure that is instead calculated in milligrams of THC or CBD cannabinoids, though it did not provide that metric.
The weighted average cost per gram metric hadn’t been consistently used among pot companies, but was useful for tracking an individual company’s progress over time, said Mark Rosen, co-founder and director of research for forensic accountancy Accountability Research Corp.
It’s not uncommon for a company to replace or change a metric, but unusual that they didn’t immediately replace it with another measure, both Stanley and Rosen said.
“I wouldn’t be surprised if they’re waiting to get past this big hump, when their full production for the recreational market comes on and you’re seeing a little more normal numbers, a little more reflective of what they hope to have in the future,” Rosen said.
Its total licensed footprint is now more than 2.4 million square feet, with another 3.2 million square feet of expansion underway, Canopy said, adding it has signed supply agreements with all provinces who have announced their plans to this point.
Canopy also plans to have as many as 18 cannabis retail stores ready on Oct. 17 — six in Newfoundland, five or six in Manitoba and Saskatchewan.