Enbridge's Alberta-Wisconsin pipeline expansion delayed by U.S. regulators

Enbridge Inc. says the U.S. State Department is taking longer than expected to review an expansion to an Alberta-to-Wisconsin pipeline.

But executives with the Calgary-based energy shipper said Friday they're confident of getting a green light in time to expand the Alberta Clipper line to 800,000 barrels per day by the middle of next year.

Enbridge obtained a U.S. federal permit in 2009 before starting up the first 450,000-barrel-per-day phase of the line, but the U.S. State Department says it needs to amend its environmental review before allowing the expansions to go ahead.

The company had initially expected a mid-2014 decision, but as public scrutiny over oil pipelines intensifies, the process is being drawn out.

"Obviously, things take longer in this environment that we're in," CEO Al Monaco told reporters and analysts on a conference call to discuss the company's fourth-quarter results, which included a net loss.

"I don't think we want to draw any conclusions about the political environment. It's not something that we can control. What we control is the fullness of our application.

"I think there's a lot more questioning or intervention by various groups. I think the regulatory authorities are doing their best to work through what they need to, and that's the process that we need to follow."

Pipeline 'already in the ground'

Enbridge envisaged expanding Alberta Clipper in two phases. The first expansion was to bring the line to 570,000 barrels a day by the middle of this year. A second one would bring it to the full 800,000 barrels by mid-2015. The plan does not entail laying down any new pipe; rather, capacity is to be boosted by adding pumping horsepower.

"In this case, this is a fairly routine matter. The pipeline's already in the ground, so we're hoping that we move this along as quickly as possible," said Monaco.

In the meantime, Enbridge says it has the means to lessen the impact of the delay on the first expansion phase, which is not expected to affect its earnings for this year. One of the measures it's taking is adding a "drag-reducing agent" to its pipelines to improve their flow.

Pipelines that cross the Canada-U.S. border require the blessing of the State Department.

Another Canadian pipeline firm, TransCanada Corp., has been seeking U.S. approval to build its Keystone XL pipeline since 2008, but the debate over that pipeline has become highly politicized and the company has faced a number of setbacks.

The State Department released its final environmental report into Keystone XL two weeks ago and concluded that future oilsands output — and its accompanying contribution to higher greenhouse gas emissions — does not hinge on a single pipeline. U.S. President Barack Obama has the final say, and it's not clear when that decision will be announced.

Fourth quarter brings $267M loss

Also Friday, Enbridge announced some executive changes. Steve Wuori, currently in charge of oil pipelines, will become a strategic adviser to Monaco. Guy Jarvis, currently chief commercial officer for liquids pipelines, will replace Wuori.

Earlier in the day, Enbridge posted a $267-million net loss in the fourth quarter as it took a hedging loss in its energy services division. A year earlier, Enbridge posted a $146 million profit worth 18 cents per share.

Stripped of one-time items, Enbridge's adjusted earnings were $362 million, or 44 cents per share in the quarter, up from 42 cents per share in the comparable period of 2012 but short of analyst estimates of 46 cents per share.

"Although profitability declined in most of energy services' lines of business, the fourth-quarter loss primarily related to losses realized on financial contracts intended to hedge the value of committed physical transportation capacity, but which were not effective in doing so in the last three months of the year," the company said.

In addition to the financial report, Enbridge announced its quarterly dividend will rise by 11 per cent.

The payout to Enbridge shareholders will rise to 35 cents per common share as of March 1.

On the Toronto Stock Exchange, Enbridge shares were up 39 cents, or 0.82 per cent, at $47.76 in late afternoon trading Friday.