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Trans Mountain pipeline expansion cost estimate rises to $12.6B – CityNews Vancouver

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VANCOUVER (NEWS 1130) – The estimated cost of the Trans Mountain pipeline expansion project has jumped significantly.

Trans Mountain says the estimate to build the line has risen to $12.6-billion, representing a 70 per cent increase to the original $7.4-billion projection, which was first made by the previous owner, Houston-based Kinder Morgan Inc.

“I wish I could say that’s exactly how I saw things unfolding and that the process is what I expected it to be, but obviously I can’t,” Trans Mountain President and CEO Ian Anderson says. “My only comfort is that I’m sure that there isn’t anyone that could have pictured the journey that we’ve been on for the last several years to get this project started, and what it will take to get it completed.”

Minister of Finance Bill Morneau says Canadians should get a “fair price” for its resources and argues almost all of the country’s energy exports are being sold at a discounted price to the U.S.

“Getting out resources to global markets in a way that is efficient and safe is Canada’s best interest. Construction of this Project is underway and will create thousands of good middle-class jobs in Western Canada — in construction, engineering, and finance.”

He cites comprehensive consultation with 129 Indigenous communities on economic participation and says the second wave of discussion could be underway.

The company expects the expansion will be completed by 2022, and believes the project is still commercially viable.

On Tuesday, the Federal Court of Appeal dismissed four challenges to the federal government’s approval of the expansion project for a second time. In a unanimous ruling, three judges said the government’s decision to approve the Trans Mountain project was reasonable and would stand, despite First Nations arguing at a December hearing that the government went into consultations with Indigenous communities in the fall of 2018 having predetermined the outcome in favour of the expansion.

The judges said the cabinet’s second round of consultations was “anything but a rubber-stamping exercise.”

The expansion has been a controversial topic for some time now, with opponents attacking the greenhouse gas emission and oil spill risks of the project.Some have been charged it will be a money-loser with unproved markets in Asia that will fail financially and leave the public holding the bag.

Meanwhile, Anderson says the company is recommending that Ottawa, as owner and lender, set aside a further $600 million reserve for cost impacts beyond the control of Trans Mountain.

The expansion will nearly triple the 300,000-barrel-a-day capacity of the existing pipeline, which carries crude oil and refined products from Edmonton to Burnaby Mountain.

“We’re well under construction at our terminals in Burnaby, on the water at Westridge, and at our tank terminal, and we’re on the right of way in Alberta, as you know,” Anderson says. “We had pipe in the ground in Alberta before Christmas and that progress is continuing well.”

He added all construction is expected to be underway in both B.C. and Alberta before the end of the year.

Kinder Morgan sold the expansion project and existing pipeline to the federal government in 2018 for $4.5-billion.

-With files from Ash Kelly

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Warren Buffett ends his deal drought with $10 billion bet on energy – Financial Post

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Warren Buffett finally found his next crisis-era deal.


Warren Buffett

Reuters/Scott Morgan/File Photo

His Berkshire Hathaway Inc., which has stayed relatively quiet during the tumult of the coronavirus pandemic, broke its silence at the end of a holiday weekend with its biggest acquisition in more than four years. The US$9.7 billion deal for Dominion Energy Inc.’s natural gas pipeline and storage assets signalled to the market that Buffett is willing to pounce despite his cautious tone in May about the pandemic, according to David Kass, a professor of finance at the University of Maryland’s Robert H. Smith School of Business.

“He’s willing to make investments now, of a fairly sizable amount,” Kass said. “It’s very positive that he’s sending a signal for the right deal at the right price, US$10 billion or more, ‘We’re ready to go, we’re ready to invest.’”

Buffett, who has crafted Berkshire into a conglomerate valued at US$434 billion, built his reputation as an investor able to swoop in during volatile markets to strike unique and complicated deals in past crises. After being stymied on the acquisition front during the recent bull market for stocks, Buffett still wasn’t striking any deals during the initial stages of the pandemic and even dumped his stakes in the major U.S. airlines.

His inability to make a major acquisition recently has drawn scrutiny from his critics who have argued that Buffett has lost his ability to pull off the game-changing transactions that helped vault Berkshire into the ranks of the most valuable U.S. public companies. Now, the deal to buy substantially all of Dominion Energy’s natural gas transmission and storage assets for US$4 billion, along with the assumption of US$5.7 billion in debt, shows that Buffett is willing to put his money to work, Kass said.

“We are very proud to be adding such a great portfolio of natural gas assets to our already strong energy business,” Buffett, who is chief executive officer and chairman of Omaha, Nebraska-based Berkshire Hathaway, said in a statement Sunday.

“I’m inspired to see that, given that he’s bearish, he’s still willing to make acquisitions where he thinks it makes sense and where it meets Berkshire’s hurdle points,” said Darren Pollock, a portfolio manager at Cheviot Value Management, which invests in Berkshire shares.

Buffett has considered its energy business one of the “lead dogs” of Berkshire’s non-insurance operations alongside its railroad. Berkshire’s purchase expands its hold in the sector, adding more infrastructure to handle natural gas to its already sprawling energy operations across states such as Nevada and Iowa. Berkshire also struck the deal at a low point in the market. Natural gas futures in the U.S. dropped last month to their lowest point in 25 years and have recovered just slightly since then.

“This looks like confirmation that commodities like energy are undervalued,” Bill Smead, chief investment officer at Smead Capital Management, which owns Berkshire shares, said in an emailed comment. “At the bottom, assets move from weak hands to strong hands.”

Berkshire is digging deeper into a business that’s been facing increasing scrutiny amid the push for energy companies to shift away from fossil fuels. In its own statement on Sunday, Dominion Energy cited its target to reach net-zero emissions by 2050.

The deal also highlights the work of one of Buffett’s key deputies, Greg Abel, who led the energy business for years and is now chairman of Berkshire Hathaway Energy alongside his role as Berkshire’s vice chairman for all non-insurance businesses. Abel has gained a reputation as a key dealmaker for Berkshire with the 2013 purchase of NV Energy and even the battle to buy Oncor Electric Delivery Co., which didn’t ultimately come together. Abel is viewed as a potential successor to Buffett, 89.

The Dominion deal is set to be Berkshire’s largest acquisition ranked by enterprise value since its purchase of Precision Castparts Corp. in 2016. Still, Buffett ended the first quarter with a record US$137 billion on hand and has been hankering for an “elephant-sized acquisition” to put a chunk of his cash pile to work. The Dominion agreement’s total enterprise value would account for about 7 per cent of that total.

“It’s not something that’s going to move the needle from a balance sheet standpoint, but it’ll produce several hundred million dollars a year in net income to Berkshire,” said Cheviot’s Pollock. “That’s no paltry sum. That adds up over time.”

Bloomberg.com

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First Nations losing oil revenue amid fall in consumption, drilling – CBC.ca

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In a windswept corner of the Blood Tribe land in southwest Albert is a pumpjack that towers more than three storeys off the ground and reaches three kilometres deep. It’s one of only two new wells to be drilled on the First Nation in the last year, as the downturn in the industry has resulted in reduced drilling across Western Canada.

The well was drilled in December and began operating in February, less than one month before oil prices crashed further as the pandemic spread across the globe. Fuel consumption has fallen sharply as countries continue to react to the virus, while oil production remains relatively high around the globe.

For First Nations that rely on collecting royalties and rent from oilpatch activity on their reserve land, those funds have quickly dried up. In fact, it’s becoming costlier to manage oil and gas production on First Nations land than the amount of money collected from industry.

Indian Oil and Gas Canada (IOGC) is the federal agency, fully funded by Ottawa, responsible for overseeing oil and gas production on those lands and has a monthly budget of about $1 million. In May, when the most recent data is available, the agency only collected about $740,000.

“It doesn’t make sense,” said Chief Roy Fox, with the Blood Tribe. “More money is being spent than what we are realizing.”

Fox is keenly aware of the financial situation in the oilpatch, considering there are about 300 oil and gas wells on Blood Tribe land, and the First Nation has a working interest in some of them. Compared to the beginning of the year, revenue from oil and gas activity is down 75 per cent, according to Fox.

WATCH | Chief Roy Fox on the impact of low royalties:

Revenue from oilpatch activity on the Blood Tribe has fallen by 75 per cent in recent months compared to the beginning of the year. 1:25

Royalties are down as a result of low commodity prices and some companies lowering production levels as some wells become unprofitable to operate.

“In March, April, May, we were really hit with this downturn. Things are picking up a bit, but not as fast as what we would like to see,” he said.

The First Nation uses the revenue to provide programs for elders and youth, improve housing, offer social programs and invest in other business programs, among other initiatives.

“Because of the downturn we won’t be able to help as much,” he said.

This oil well on Blood Tribe First Nation is owned by Calgary-based Tamarack Valley Energy. The Blood Tribe has an equity stake in some of the wells on its land. (Kyle Bakx/CBC)

The Indian Resource Council, which represents First Nations with oil and gas reserves on their territory, is calling on the federal government to top up the royalties to a minimum of $4 million per month.

“These are really troubling times,” said Stephen Buffalo, the group’s president. “It’s very important at this time that our prime minister really look at our communities to see if we can do something extra on the side to offset what has been lost.”

The council has also asked for a special allotment of the funds earmarked for cleaning up oil oil and gas wells in Western Canada.

Revenues for First Nations have fallen by about 80 per cent in the last decade as commodity prices have fallen.

The declines “are likely to continue,” said Strater Crowfoot, CEO of the IOGC, in an emailed statement.

WATCH | Stephen Buffalo on the opportunity to clean up inactive wells:

The CEO of the Indian Resource Council doesn’t want First Nations to miss out on the opportunity to remediate inactive oil and gas wells. 1:22

“We have heard how challenging the decline in First Nation oil and gas revenue has been for First Nation communities, businesses, and individuals. The government of Canada is working collaboratively with First Nations and their member organizations to explore initiatives to provide support.”

In April, the federal government announced $307 million in relief to help Indigenous businesses and $133 million in June toward stimulating the Indigenous economy.

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The Calgary Stampede is mostly deserted due to COVID-19, but the show must go on – The Globe and Mail

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Volunteer Jessica Rooney, left, cooks pancakes during a drive-thru pancake breakfast as people try to enjoy the Calgary Stampede even though it has been cancelled on July 4, 2020.

Jeff McIntosh/The Canadian Press

Stampede Park is mostly deserted but Calgarians are still finding ways to enjoy some Stampede perks from their cars and backyards.

The Calgary Stampede, which includes a rodeo, midway and exhibition, typically attracts more than 100,000 visitors a day, but it was among many large events forced to cancel this year because of the COVID-19 pandemic. To fill the gap, Stampede organizers and local groups are putting on fireworks, drive-through pancake breakfasts and other events that people can take in at a safe distance.

“You can’t cancel Stampede spirit, so we’re trying to keep that alive even though we can’t celebrate in the traditional way,” said Dana Peers, president and chairman of the Calgary Stampede Board.

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The Stampede was scheduled to start on July 3 but was scratched for the first time in more than a century. The 10-day event contributes $540-million to the local economy, organizers say, and creates 4,700 jobs, including 3,500 seasonal workers during the summer. But the Stampede laid off most of its 1,200 year-round employees in March.

Other fairs and exhibitions across the country are also facing cancellations. Toronto’s Canadian National Exhibition, which attracts 1.4 million visitors each year in August, was cancelled in May – only the second time it has been shut down in its 142-year history. Vancouver’s Pacific National Exhibition in August is also out of commission.

In Calgary, instead of piling onto Scotsman’s Hill, a popular spot to watch the fireworks that are part of the Stampede’s nightly grandstand show, local residents with a view of the city skyline can see one of two fireworks displays from their homes. The first was last Friday and the second is this weekend. And the daily pancake breakfasts that usually draw large crowds across Calgary instead will involve lineups of cars and trucks.

“For lots of people, it’s synonymous with the Calgary Stampede that they’re going to have a free pancake breakfast,” Mr. Peers said. “We wanted to keep that tradition alive and the new rules have brought us to this drive-through method.”

A server delivers mini-donuts to a vehicle during a Stampede Food Truck Rally as people try to enjoy the Calgary Stampede even though it has been cancelled, in Calgary, Saturday, July 4, 2020.

Jeff McIntosh/The Canadian Press

The Stampede is the biggest event of the year for food trucks and vendors. To make up some of the loss, YYC Food Trucks is playing host to a 10-day event mimicking the midway, inviting people to drive up to their favourite spots. The event is putting more than 400 people and 30 trucks back to work, according to Jennifer Andrews, co-owner of YYC Food Trucks. A lineup of about 50 cars had formed 10 minutes before opening on the event’s first day.

“A lot of trucks have said that if it hadn’t been for the drive-through, they wouldn’t be in business,” Ms. Andrews said. “The Calgary spirit is vibrant and we’re survivors.”

The Calgary Chamber of Commerce is also holding a series of virtual events to bring the business community together over drinks and food from home. Networking events and parties in local restaurants, bars and temporary tents that sprout up throughout the city’s downtown are a major part of the Stampede experience traditionally for corporate Calgary and business leaders who visit from across the country each summer.

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The festival acts as the launching point for new client relationships and deals – much of which would not happen without the Stampede, according to chamber president and chief executive officer Sandip Lalli.

“The business community is having a hard time connecting and generating leads for business because of COVID-19,” Ms. Lalli said. “A lot of the conversation will probably be around how they got through the last six months.”

To keep the Stampede spirit going this summer, some crowd-drawing attractions are being held with physical distancing in mind.

A small group welcomed parade marshal Filipe Masetti Leite as he arrived at the Calgary Stampede grounds last Friday after a 13-month ride on horseback from Anchorage, Alaska. The 33-year-old Brazilian, who immigrated to Canada as a teenager, completed a 3,400-kilometre journey the same day the Stampede was supposed to begin.

Filipe Masetti Leite, a Brazilian cowboy who has been riding from Alaska to Calgary and who has also been chosen as the parade marshal for the Calgary Stampede, becomes emotional as he leads his horse Mack into the Stampede grounds in Calgary on Friday, July 3, 2020.

Jeff McIntosh/The Canadian Press

“What this rodeo means, not only to Canada but to the world, thank you boys and girls,” he said as he stood on the stage at the rodeo grandstand. “I’m a cowboy and the older I get I fear our world ending, and I value it so much because the greatest lessons in my life were taught from a man who wears a cowboy hat and spurs, and I would not have finished this journey if I weren’t a cowboy.”

Local organizations are also holding their own community celebrations. Some breweries are planning Stampede-themed parties with cowboy hats, hay bales and wagon wheels.

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Grace Presbyterian Church is putting together a social-media video of prerecorded footage of people at home making pancakes and line-dancing. After more than 800 people attended the church’s pancake breakfast last year, the group hopes to provide its community members with a way to participate in the Stampede during the pandemic while fundraising for a local charity.

“There is a real sense of community spirit with the Stampede breakfasts that happen all across the city and people gathering together and celebrate,” said Rev. Jake Van Pernis. “We put together a virtual stampede party as a way of continuing with that sense of community connection.”

But some businesses are not able to adapt and Stampede guests will have to wait until pandemic restrictions lift for festival favourites to return. Amusement-park rides and games providers and retailers that display products at the midway are still unable to reopen.

“These businesses essentially will have little to no revenue for the next year and they’re going to have to hang on to make it through to next year,” Mr. Peers said. “It’s not an easy thing to say and it’s not an easy thing to do.”

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