CALGARY – A decision to cancel approval for Enbridge’s Northern Gateway pipeline has implications for a wide range of other energy projects, such as Kinder Morgan’s TransMountain project and the Energy East initiative.
The Federal Court of Appeal on Thursday overturned the previous Conservative government’s approval of the Enbridge Inc. pipeline, saying there was a lack of consultation with First Nations. It’s up to the Liberal government to now decide if it should be built.
Lawyers said other companies looking to build energy infrastructure should take note.
In a scathing decision, the court found that Ottawa did not meaningfully consult with aboriginal groups in northern British Columbia after the National Energy Board published a preliminary list of conditions for the Northern Gateway pipeline.
“The inadequacies – more than just a handful and more than mere imperfections – left entire subjects of central interest to the affected First Nations, sometimes subjects affecting their subsistence and well-being, entirely ignored,” Justices Eleanor Dawson and David Stratas wrote in their decision.
“It would have taken Canada little time and little organizational effort to engage in meaningful dialogue on these and other subjects of prime importance to Aboriginal peoples. But this did not happen,” they wrote.
The decision now requires the federal government to “promptly” go out and consult with affected groups once again before it issues a new decision on whether Enbridge is allowed to build the pipeline between Alberta and the West Coast. Natural Resources Minister Jim Carr said in an email that the government is taking time to determine its next steps.
The Northern Gateway project was first approved, subject to more than 200 conditions, in 2014 under the previous Conservative government. Construction has not begun, however, due to multiple legal challenges.
In recent months, Enbridge has applied for a three-year extension for the project so it can carry out more consultations with First Nations along the route with the intention of getting more groups to support the project.
Following the appeals court ruling, Northern Gateway president John Carruthers said in a release that the company would consult with the aboriginal groups that have signed on and support the $7.9-billion project before it determines what to do next.
Enbridge has the option of asking the Supreme Court of Canada to hear an appeal of the decision – though the decision takes issue primarily with the government’s consultation with First Nations rather than Enbridge’s consultation.
Lawyers said the federal government would have to review how it consults with aboriginal groups during pipeline reviews, especially after preliminary conditions are released during a process known in legal circles as “phase four” of a five-phase consultative process.
JFK Law Corp. associate Elin Sigurdson, who was part of the team acting for the Gitxaala Nation on the case, said the federal government “is going to have to take a lot of guidance from this decision” for carrying out future consultation on pipeline projects.
“That’s applicable to Kinder Morgan, that’s applicable to other projects that are either being planned or investigated,” she said.
“The decision confirms what we have known all along – the federal government’s consultation on this project fell well short of the mark,” Nadleh Whut’en First Nation chief Larry Nooski said in a release.
The ruling also puts the pipeline’s fate in the hands of a new government, which vocally opposed the project during last year’s federal election.
“The Liberals ran on a platform of rejecting this pipeline and we intend to hold them to that promise,” said Sven Biggs, a campaigner with Stand – an organization previously called ForestEthics. ForestEthics was one of the complainants in the case.
“Either when they come to reconsider this decision by the court or whether it’s through the North Coast tanker ban, the Liberals will find a way to stop this project,” Biggs said.
It feels like a lifetime ago, but only five months have passed since investors thought Canada’s two biggest copper miners were at risk of collapsing.
In mid-January, Teck Resources Ltd.’s long-term notes traded as low as 38.5 cents on the dollar. Meanwhile, the debt of First Quantum Minerals Ltd., one of its chief rivals, traded between 40 and 45 cents. The mining industry was drowning in debt and the market feared that big-name companies were heading for painful restructurings, if not outright failure.
It’s easy to see where that kind of thinking came from. Commodity prices were plummeting, and most experts thought they were going nowhere for at least the next few years, possibly the next decade. Stock prices across the mining sector were at multi-year lows, and investor sentiment on the sector was arguably the worst it had ever been.
It is a different world today. Nearly every significant mining stock has doubled, tripled or quadrupled from its mid-January low. The debt concerns, which were front and centre over the winter, are long forgotten. Money has been raised across the sector — even some of the micro-caps on the long-neglected TSX Venture Exchange managed to get their hands on cash.
The sector’s stock performance has been simply incredible. Every one of the top 10 performers on the S&P/TSX Composite Index so far in 2016 is a mining company, as are 17 of the top 20. It is a complete reversal from 2015, when the worst performers were all mining and energy firms.
The initial bump in January and February was not surprising since the stocks were absurdly cheap and a relief rally was inevitable. But many onlookers have been stunned at how they have continued to rise over the past several weeks.
Now the industry is facing a new, albeit less problematic concern: That the rally is completely overdone, and there will be a lot of pain to go around once the euphoria runs out.
One red flag is that mining stock prices have vastly outperformed the underlying commodities. Metals such as gold and silver have strongly rallied from their January lows, but others are up only modestly. Copper and aluminum, for example, have gained about 11 per cent each.
Some equities now appear to be priced based on significantly higher commodity prices.
Experts do not think these commodities are about to bust out: supply is ample, Chinese demand remains wobbly and the Brexit crisis has boosted global economic uncertainty. The one big factor working in favour of commodities this year has been a weakening U.S. dollar, and even that has rallied since the Brexit vote.
The rally is not sustainable at all
The days of China growing 12 per cent a year are also long over, and the general feeling is that gains in industrial metal prices are likely to be far more modest than they were a decade ago.
As a result, the calls for a correction have become louder as the stocks move higher. Teck now has more sell ratings than buy ratings from equity analysts, which almost never happens in Canada’s cozy brokerage world for any company not heading to zero.
“The rally is not sustainable at all,” said portfolio manager John Stephenson, who runs his own asset management firm in Toronto.
“If you’re an investor, you have to ask yourself, ‘Why won’t these go down?’ The fundamentals haven’t changed, and the commodity prices are likely to move down because there’s too much capacity.”
Stephenson shares the prevailing view that the sector’s rally started because equities were oversold and priced in the risk of bankruptcy (which was never going to happen). But now he thinks they factoring in big gains in commodity prices, and he doesn’t see how those will materialize.
“You’ve got banks trading at a discount, and metals companies trading at a premium to their (net asset value). It makes no sense,” he said.
Independent mining analyst Terry Ortslan noted another factor behind the rally: after all the industry consolidation of the past 15 years, there simply aren’t many quality mining stocks to invest in. Once the sector rebounded, the remaining ones were bound to attract a lot of capital and post huge gains.
“There’s no surprise Teck moved up by a factor of four, and First Quantum the same thing,” he said. “The market is not looking at the price of copper. It’s looking for the next momentum generator.”
THE CANADIAN PRESS/HO, Teck ResourcesA truck hauls a load at Teck Resources Coal Mountain operation near Sparwood, B.C.
Ortslan added that the industry continues to suffer from a number of entrenched problems that haven’t gone away: high taxation, lack of new discoveries, permitting challenges and the virtual disappearance of M&A premiums. Put together, he does not expect this rally to last much longer.
But others disagree. For one thing, there is increasing confidence that January really did mark the bottom after a brutal four-year bear market. Commodity demand remains relatively stable, and supply will come under pressure over the next decade as the industry finally pays the penalty for years of under-investment.
This dynamic is already happening in zinc, which has outperformed other base metals this year as old mines have closed and not been replaced by new ones.
And equities still look affordable on some metrics, experts said. Ian Nakamoto, director of research at MacDougall, MacDougall & MacTier Inc., said Teck was trading at 15 to 20 per cent of replacement value at the bottom of the market. Today, it still only trades at about half of book value, he said, adding that it has traded far above book value during previous stronger commodity price environments.
“It’s fair to say the worst is over for these natural resource companies,” he said. “A major retracement in commodity prices seems unlikely barring recession, and I don’t think a recession is very likely.”
Only a minority of investors think base metals equities are a screaming buy at this point, but a far greater number remain convinced gold stocks are going higher, despite this year’s stellar performance.
Gold prices have soared 25 per cent in 2016 as the U.S. economy weakened and the Federal Reserve turned skittish about rate hikes. Brexit, of course, has only boosted gold’s appeal as a safe haven.
Shares of the big producers such as Barrick Gold Corp. and Kinross Gold Corp. have more than tripled from their lows, but they still trade at multiples far weaker than they did a decade ago.
The gold bugs argue that gold is going higher forever and the stocks are always a screaming buy. But bullish fund managers are making a more reasonable argument today: quite simply, these stocks remain incredibly under-owned by investors.
It’s fair to say the worst is over for these natural resource companies
Jason Mayer, a senior portfolio manager at Sprott Asset Management LP, said gold stocks made up 7.7 per cent of stocks in the S&P/TSX Composite in the first quarter, but drove 40 per cent of the index’s overall return. He figures generalist investors have zero to one per cent of their holdings in gold, so they barely participated in the upswing.
“We know the generalist is nowhere near market weight in gold. So they’re underperforming the benchmark,” Mayer said. “When the generalist says, ‘I need gold exposure and I don’t care at what cost,’ it drives (net asset values) higher.”
More broadly, it is easy to forget how little base and precious metal mining stocks are worth today compared to their peaks in 2011. Even after the incredible gains this year, Barrick is down more than 50 per cent from its high, while Teck is down 75 per cent.
The companies themselves are also much stronger than they used to be, experts note. Over the past few years, miners have implemented major cost cuts and debt reduction measures. As a result, they are generating much more cash at current metal prices than they would have at the same prices a decade ago. They can easily withstand another drop in prices, and they benefit more than ever if there is an upswing.
An ugly correction may well be on the horizon for the mining sector. But the last five months have, at the very least, provided assurance that no major company is on the brink of collapse. The panic is truly over, even if the euphoria doesn’t replace it for too much longer.
The good news is that the start line for the first social impact bond to be developed in Ontario and brought to the market is within sight.
And when the line appears, investors will be able to purchase a fixed income security that combines a financial return plus a social return – provided, of course that positive measurable outcomes are achieved. “Money is at risk, given that returns are based on outcomes,” said Susan Manwaring, a partner at Miller Thomson whose practice is advising organizations in the social and community sector.
Manwaring said social impact bonds and a social enterprise strategy, which have been used elsewhere, “are ideas and new instruments that people are saying ‘why don’t we see if we can make this work.”
Manwaring, who has been on panels that have advised governments on social impact investing, added there is a potential upside: more resources may be put into areas or projects where it can be shown the outcomes are positive.
The idea, she says, is to match up that desire for a new approach by governments, which fund the services, and enterprises, which deliver the services, with those investors who are not merely motivated by a financial return. “Those investors are interested in knowing that their money is having an impact. And they might free up more capital knowing that the way it’s being used is directly having an impact.”
Manwaring’s firm worked on the country’s first social impact bond launched in 2014 by the Saskatoon Downtown Youth Centre. With $1 million provided by a financial institution, Conexus Credit Union, and the husband and wife team of Wally and Colleen Mah, the investment was earmarked for at-risk single mothers. The mothers and their children were supported by the service provider, which allowed the mothers complete their education and secure employment. If those objectives are achieved, the government funds the provider, which in turn repays the investors.
One-year back 14 mothers and 20 children were in the program that is known as the Sweet Dreams project. The provincial government estimated that the savings would be $0.5 million – $1.5 million over five years. This year construction started on a child-care facility at the centre.
The provincial government has spent considerable time researching the topic.
As part of that work –and remembering that the MaRS Discovery District has set up a Centre for Impact Investing – ideas have been canvassed: in 2014, for instance, it received 83 ideas from 79 organizations. Those ideas –which focused on three main areas; housing and homelessness; youth at risk and improving employment opportunities for persons facing barriers – have been analysed into an original short of four projects and a final short list of two. This year, the two projects were identified:
Mainstay: This service provider wants to sell bonds to “provide stable housing and intensive support to 100 chronically homeless individuals,” specifically those who have been homeless for at least five years.
The RAFT: This southern Ontario based provider wants to develop a project for at-risk young people, designed “to increase high school graduation rates and improve housing stability.”
Ontario said this week that a “series of milestones” remain on the path to implementing the two pilot projects. Those milestones include “completing investor market sounding” to gain market insight on investor interest as well as testing the two frontrunner projects.
The National Highway Traffic Safety Administration is about to take a closer look at Tesla’s Autopilot, the company revealed on Thursday. In a blog post, Tesla says that it learned on Wednesday evening that the NHTSA is “opening a preliminary evaluation into the performance of Autopilot” following a fatal crash involving a Model S.
The incident, which happened in May, involved a white tractor-trailer that was turning left across a divided highway, perpendicular to the path of the Tesla, which was cruising on Autopilot. “Neither Autopilot nor the driver noticed the white side of the tractor trailer against a brightly lit sky, so the brake was not applied. The high ride height of the trailer combined with its positioning across the road and the extremely rare circumstances of the impact caused the Model S to pass under the trailer, with the bottom of the trailer impacting the windshield of the Model S,” Tesla stated.
The company also stated that in a front-on or rear-end collision with the tractor-trailer, the outcome would not have ended in tragedy. It described the driver as “a friend to Tesla and the broader EV community” and expressed sympathy for his friends and family for their loss.
WASHINGTON (Reuters) – The Republican-controlled U.S. House of Representatives, under mounting pressure to advance gun-control legislation, will vote next week on a measure to keep guns out of the hands of people on government terrorism watch lists.
From the Silkeborg Museum, this is a recreation of the high-status woman’s grave found in a Viking “death house” in Denmark.
8 more images in gallery
Construction of a new highway in Hårup, southwest Denmark, has unearthed farms and houses from the Middle Ages, including a rare Viking dødehus or “death house” dated to 950 C.E., packed with grave goods that reveal a lot about the three people buried within it. The death house was a common form of Viking tomb, but the Hårup death house has a very unusual design. It appears to have been inspired by early stave churches of Western Europe, with large wooden posts holding up heavy roof beams. Inside, archaeologists found other international influences. A ceramic vase came from the Baltic and two silver coins hail from the region now known as Afghanistan. These discoveries are testimony to how far Vikings traveled and how extensive their trade networks were.
The tomb itself is fairly roomy at 13 x 43 feet and was initially the resting place of a wealthy couple. Later, a third grave was added for another man. Though little remains of the bodies themselves, a few strands of the woman’s black hair stood the test of time, as did the two keys she wore around her neck. The larger of these keys would have symbolized that she was the lady of a great house, and the other unlocked an unusual shrine. She was buried in a small wooden wagon, an honor also reserved only for noblewomen. At the woman’s feet was the shrine, full of golden thread (probably used in fabric), fur, glass beads, and fine wool. Her husband was also buried in high style, with a massive Dane Axe, popular among high status men and seriously destructive on the battlefield. The third man, possibly the couple’s heir, was buried with a slightly smaller Dane Axe.
The Silkeborg Museum made a 3D rendering of the dødehus site, which gives you an idea of the size of the excavation.
First discovered in 2012, the grave has now been thoroughly analyzed, and many items from the excavation are on display in Denmark’s Silkeborg Museum—including a recreation of the woman’s grave, which you can see in our gallery above. Kirsten Nelleman Nielsen, leader of the excavation, said she could only speculate about who the people might have been. “It could be the gentleman and the lady of the local area and maybe their successor. They’ve at least been honoured in a special way, so they must have been important.” But she’s certain that the couple were both of the same status, because they were buried together, with equal sumptuousness: “It’s very special that the man and woman’s graves are marked by the same tomb or palisade. It’s unusual that we’re able to establish that the man and woman were equals with such certainty.”
Nearly everyone knows you’re supposed to eat heaping helpings of fruits and vegetables every day. But that doesn’t mean that people actually follow through. In fact, in updated dietary guidelines released in January, the federal government called out nearly everyone for not eating enough produce (as well as eating way too much sugar). But now, researchers have followed up with what may be a simple fix.
In grocery stores, big emojis and arrows on the floor that direct and encourage people to head to the produce section actually got shoppers to buy more produce, researchers report Thursday in the Journal of Nutrition Education and Behavior. Moreover, after analyzing grocery bills, the researchers found that shoppers didn’t up their overall shopping budget to accommodate the fresh additions. In other words, grocery store goers weren’t simply piling on crops to their already full carts, but, rather, they were swapping other grocery items for healthy fruits and vegetables.
The findings suggest that adding the minor signage to more stores could be an easy way to get consumers to eat healthier produce. And if so, it “could trigger a public health shift” in a general population that is largely struggling with weight and dietary problems, lead author Collin Payne, of New Mexico State University, said in a statement.
WASHINGTON (Reuters) – Seven U.S. senators urged Secretary of State John Kerry on Thursday to press Bahrain’s government to do more to promote political and social reform, adding to recent concern in Washington over that country’s human rights record.