CALGARY -- Enbridge Inc. could be forced to book a "significant" writedown on its gas assets in New Brunswick if the province goes ahead with legislation to cut prices, the company says.
The Calgary-based pipeline operator (TSX:ENB) said Monday a move to reduce natural gas distribution rates could potentially cause it to take a writedown of a "significant portion" of its $460-million investment in Enbridge Gas New Brunswick.
Guy Jarvis, Enbridge's president of gas distribution, said the company is "extremely disappointed" with the draft regulations.
"Enbridge has made a substantial investment in bringing natural gas to New Brunswick businesses and residents, including reinvesting the money we have earned in the province to further develop our system, and we have adhered to our side of the franchise agreement with the government," Jarvis said in a release.
There are several reasons it's more expensive to distribute natural gas in New Brunswick than in larger markets like Ontario, where Enbridge also has a big gas distribution business, Jarvis added.
But gas is still the cheapest source of energy available in New Brunswick, where techniques used to extract natural gas from shale formations in the province has been controversial.
"The regulations, as drafted, would severely limit our ability to extend the benefits of natural gas to additional businesses and residents in New Brunswick," said Jarvis.
"We believe that natural gas offers great potential benefits to New Brunswick, and that the regulations could be structured to ensure continued savings for existing customers while supporting extension of those same savings to new customers."
Enbridge has opposed the legislation, which former energy minister Craig Leonard said is fair.
Leonard was shuffled out of that cabinet post earlier this month due to concerns over a perceived conflict of interest. His sister recently became a lobbyist for the Canadian Association of Petroleum Producers and before that she was a civil servant helping the province develop shale gas regulations. Leonard now handles the government services portfolio.
Leonard has said market prices for natural gas have been at historic lows, but New Brunswickers are paying among the highest natural gas distribution rates in North America.
He said the existing system has not allowed people in the province to benefit from lower gas prices.
Gas distribution rates are based on a variety of factors, including the price of home-heating oil and electricity.
They are also based on a deferral account established to recover the costs of setting up the province's gas pipeline network.