Economic GRI Performance Indicators
EC2 – Financial implications and other risks and opportunities for the organization’s activities due to climate change
Regulatory risks – Enbridge may experience increased costs from levies imposed by regulators on direct GHG emissions from our businesses including gas distribution and services, our sponsored investments in gas processing and gathering in the U.S., crude oil transportation businesses, and refined products pipelines or from increased energy prices that may affect the long-term growth of our operations.
We could also be exposed to increased power costs on our operations, if regulatory constraints associated with climate change are imposed on power utilities. We anticipate that there will be no competitive disadvantage to Enbridge if regulatory costs are uniform internationally (i.e., if they impact our competitors to the same degree).
Costs are difficult to quantify at this time as related policies in North America and elsewhere are in a state of flux.
We do not expect to have significant new costs to enable us to track and report our GHG emissions.
There is considerable uncertainty with respect to the impact of future regulations, as the Canadian Federal Government still has not provided a final view on its proposed GHG management plan. While the “Turning the Corner” document (which was released on March 10, 2008) expands on the April 2007 “Regulatory Framework for Air Emissions” document, further consultation and development of regulations is still required. However, Enbridge’s gas distribution businesses may benefit from the fact that this sector is now no longer to be considered a Large Final Emitter, and that the fugitive emissions will be managed through the development of a best management practices code.
Recently issued reports by the National Roundtable on the Environment and the Economy (NRTEE) and the Conference Board of Canada recommend a broadly-based carbon price signal either as an emission tax, cap and trade system or some combination of the two. A final regulatory decision has not yet been made on this issue.
We continue to work with the Canadian Federal Government and with various industry organizations such as the Canadian Gas Association (CGA), the Canadian Association of Petroleum Producers (CAPP), the Canadian Energy Pipelines Association (CEPA), and the Canadian Gas Association (CGA) to develop regulations.
Through these associations and internal reviews, Enbridge is evaluating our position with respect to either a cap and trade system, a carbon tax or a combination of the two instruments.
As with our response in 2007, the financial impact of climate change policies still cannot be evaluated in the U.S. because of continuing legislative and regulatory uncertainty. However, we continue to develop internal management systems to enable the collection of GHG emissions data to allow future analysis of our emissions management to be undertaken.
In Ontario, Enbridge has entered into a five-year Incentive Regulation regime under which company revenue will be based on the number of customer additions. Any compliance costs that are associated with the management of our GHG emissions under either a federal or provincial scheme may be recovered through our rate structure. Elsewhere there is no change in our regulatory requirements.
Physical Risks – The Enbridge operations most vulnerable to potential climate change impacts are our natural gas midstream systems located in the mid U.S. and along the Texas and Louisiana Gulf Coast. Here we operate the Enbridge off-shore natural gas system, 36 above-ground gas processing stations, and 100 compressor stations, as well as the pipeline interconnecting systems. This vulnerability arises from potential increased hurricane activity and storm surges.
Mitigating these risks is the fact that these systems are an important part of a broadly-based logistics network that connects producers to consumers along the Gulf Coast. Thus all parties are motivated to restore energy supply as a first priority after a natural disaster. This connectivity, we believe, helps limit any potential impacts.
Although Enbridge has facilities in areas prone to extreme weather events, we believe that such occurrences will not materially affect our operating or financial performance.
There may be other externally-driven impacts, particularly in areas where the electrical grid is vulnerable to overloading, which may affect our ability to deliver contractual volumes to some customers. However, mitigation actions have already been taken to minimize these potential impacts. For example, Enbridge Gas Distribution has installed natural gas-driven back-up generators at strategic locations in Ontario to ensure the continued delivery of natural gas during power failures.
Demand/Competitor Risks – With respect to Enbridge’s gas distribution businesses in eastern North America, milder winters may lead to a minimal decrease in natural gas consumption for residential space heating. We are endeavouring to offset this risk through fuel switching opportunities that will see end-users switch from electricity to natural gas for clothes drying and cooking. Through our Energy Technology group we are continuing to develop new gas/electrical integrated technologies that will help offset this potential decrease in future years and help broaden the scope of energy delivery services. In addition, we expect no decrease in petroleum transportation revenue as oil markets remain robust into the foreseeable future.
The introduction of new renewable technologies may result in decreased consumption and use of natural gas.
Investor Risks – Enbridge is experiencing growing interest in our business among individuals and organizations that can influence investor confidence, and we constructively respond to their inquiries. With respect to social and ethical investor analysts, we believe that Enbridge’s ability to respond in a timely and transparent manner to requests for information regarding our climate change commitment enhances our corporate reputation. Our climate change policy is clear on establishing reduction targets for the enterprise as well as our continued support for publicly reporting on our progress in this area.
To help ensure a more accurate GHG inventory, Enbridge, in concert with other Canadian-based natural gas utilities, has developed protocols for measuring fugitive GHG emissions using the Hi-Flow sampling technique. This technique will enable us to better estimate our emissions, leading to improvements in our maintenance programs and management of this issue.
We have implemented a measurement program on our cast-iron mains system in the Toronto area in conjunction with the U.S. EPA, and potentially with Environment Canada, to help generate more accurate data than we currently have. We are also in the process of conducting an external, independent audit of our GHG management system with a view to determining the improvements required to meet recognized international standards. The auditors have completed a file mapping exercise and the draft verification report wherein they have listed the sites in our Canadian operations to be visited. Planning for these site visits is in progress.
Technology Risk – As with other companies in the energy business, Enbridge is exposed to a technology risk factor, particularly in the domain of energy delivery where new generations of renewable technologies are making progress in their evolution, efficiency performance and controlled manufacturing costs.
To mitigate risk and capitalize on emerging technologies, Enbridge, through an internal dedicated department, tracks developments, identifies and screens appropriate new technologies. Technologies of interest are generally associated with new and improved energy delivery and efficiency, as well as renewable and alternative low-impact energy generation.
Significant investments have been made with respect to wind power and fuel cells. Evaluations concerning solar PV, solar thermal, ground source heat and carbon capture and storage are ongoing.