Northern Gateway Pipeline: When Bad Projects Happen To Good Companies

From NEI Investments’ March ESG Report:

Northern Gateway Pipeline: When Bad Projects Happen To Good Companies

As noted in our February newsletter, we have filed a shareholder proposal with Enbridge asking how First Nations opposition has been factored into the decision to pursue the Northern Gateway pipeline. Despite a courteous and respectful dialogue with the company on the proposal, we appear to have a fundamental difference of opinion about the risks facing the project, so we will be taking it to the AGM on May 9.

Enbridge has spent years building a reputation as one of the most progressive companies in the oil patch, something it is rightfully proud of. And the value of this reputation is not in the number of awards it has won: it is in the ability of the company to win its social licence to operate, to be a place where employees can be proud to work and to be an attractive partner for future projects.

This makes the company’s approach to its pursuit of the Gateway project perplexing. It seems clear to us that the company’s current approach is leading straight to a battle with First Nations, and whether the battlefield is in the courts or on the ground it is unlikely to be quick or quiet. If Enbridge finds itself on the wrong side of a massive First Nations blockade, with the world watching, hanging on to that hard earned reputation will be difficult; if not impossible.

There will, of course, also be monetary costs to such a battle — the legal fees, the cost of continued delays, and the opportunity cost of company executives spending their time occupied with Gateway instead of pursuing other profitable projects. But those are costs that can ultimately be recouped, even if they do take a significant bite out of shareholder returns. What is not clear to us is how Enbridge will be able to mitigate the long-term reputational costs that Gateway carries.

To this end, we are looking for answers from the Enbridge board and we hope that other shareholders are just as curious.

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Leede Jones Gable Inc. is a
Member of IIROC and the Canadian Investor Protection Fund
Stephen Whipp is a member of the Responsible Investment Association