A pending merger that would place Calgary-based Enbridge Inc. at the head of North America’s biggest pipeline network is mostly designed to “reassure” investors that oil and gas can still make money at a time when many analysts are calling the future for renewables, investigative ace Mike de Souza writes in the National Observer, citing an internal memo to Natural Resources Minister Jim Carr.
Shareholders of Enbridge and Houston-based Spectra Energy Corporation approved the former’s $37-billion, all-share acquisition of the latter in September. If approved by regulators on both sides of the border, the merged company would be worth about $165 billion, with assets in oil and natural gas pipelines, transshipment and distribution terminals, and renewable energy.
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Shortly thereafter, De Souza reveals, “senior officials in the petroleum resources branch at the federal Natural Resources Department” drafted a memo to Carr, explaining “that the deal’s architects may have been trying to reassure investors at a time when oil and gas production was mired in a global slump.” The Observer obtained the memo through one of De Souza’s famed access to information requests.
“Companies such as Enbridge and Spectra are appealing for investors looking for reasonably safe investments with predictable returns,” the memo said. “It is likely that the main objective of the merger is to enhance this investors’ appeal.”
“Both companies have multiple projects at different stages of development,” the memo added. “However, the outlook for some of these projects may be uncertain, given a context where the demand for new oil and gas pipelines has weakened, with lower growth in oil and gas production due to weak commodity prices, and where pipeline projects face increased regulatory scrutiny and political uncertainty. The merging of the two companies may be a way to show continued financial growth to shareholders without all projects coming to fruition.”
Enbridge President Al Monaco, who would lead the merged giant, may have confirmed as much when he announced the merger. “Getting bigger isn’t the objective here,” Monaco said at the time. “It’s about growing cash flow and earnings per share.”
Carr’s officials estimated the merged company would be able to shed some $540 million in costs, “but that the impact on jobs was not clear.”
Keith Stewart, senior energy strategist with Greenpeace Canada, called the focus on propping up fossil infrastructure misguided.
“Mergers that create ever-larger pipeline companies can’t disguise the fact that the age of oil is coming to an end,” he told De Souza. “Rather than trying to delay the inevitable, the federal government should be focused on accelerating the transition off fossil fuels in a way that maximizes the benefits of the new jobs that will be created and minimizes the impacts on workers in the affected industries.”