Tuesday, May 16, 2023

Canada 'extremely concerned' about fate of Line 5 pipeline in Wisconsin, embassy says

Canada is "extremely concerned" about the potential fate of the Line 5 pipeline, emissaries warned Tuesday in advance of a Wisconsin court hearing that threatens to shut down what they call a vital cross-border oil and gas corridor. 

The warning from Canada's embassy in Washington, D.C., comprised Ottawa's first formal comments about the pipeline in months — a lengthy, measured statement that nonetheless made plain its fears for Line 5's future. 

And it leaned hard into three areas always sure to get attention in the U.S.: protecting American jobs and growth, defending continental energy security and honouring treaty obligations to an important and trusted ally. 

"The energy security of both Canada and the United States would be directly impacted by a Line 5 closure," said the statement from the Canadian Embassy in D.C. 

"At a time of heightened concern over energy security and supply, including during the energy transition, maintaining and protecting existing infrastructure should be a top priority."

The economic argument is one the pipeline's proponents have been making for years: a shutdown would cause "significant economic disruption" across the U.S. Midwest, where it provides feedstock to refineries in Michigan, Ohio and Pennsylvania. 

Line 5 also supplies refineries in Ontario and Quebec, and is vital to the production of jet fuel for some of Canada's busiest airports. Some 33,000 U.S. jobs and US$20 billion in economic activity would be imperilled, the embassy warned. 

The source of the alarm is a court dispute in Wisconsin between the pipeline's owner, Alberta-based Enbridge Inc., and the Bad River Band of the Lake Superior Chippewa, through whose territory Line 5 runs. 

Spring flooding has washed away significant portions of the riverbank where Line 5 intersects the Bad River, a meandering, 120-kilometre course that feeds Lake Superior and a complex network of ecologically delicate wetlands.

The band has been in court with Enbridge since 2019 in an effort to compel the pipeline's owner and operator to reroute Line 5 around its traditional territory — something the company has already agreed to do. 

But the flooding has turned a theoretical risk into a very real one, the band argued in an emergency motion last week, and it wants the pipeline closed off immediately to prevent catastrophe.

"There can be little doubt now that the small amount of remaining bank could be eroded and the pipeline undermined and breached in short order," the band's lawyers argued.

"Very little margin for error remains."

Line 5 meets the river on Indigenous territory just past a location the court has come to know as the "meander," where the riverbed snakes back and forth multiple times, separated from itself only by several metres of forest and the pipeline.

At four locations, the river was less than 4.6 metres from the pipeline — just 3.4 metres in one particular spot — and the erosion has continued in recent days at an "alarming" rate, the motion said.

In one case, so-called "monuments" installed to measure the losses show that where there was more than 10 metres of riverbank in early April before the flooding began, only 3.7 metres remained as of last Tuesday.

"Significant erosion is continuing as of the filing of this motion, and the evidence strongly suggests that further bank loss could be substantial and result in exposure and rupture of the pipeline."

Wisconsin district court Judge William Conley is expected to hear oral arguments on the motion Thursday. It's not clear if he'll reserve judgment or rule immediately whether to order Enbridge to shut down the pipeline and purge its contents.

But Conley has already indicated a reluctance to shut down the pipeline, citing the potential economic and foreign-policy consequences, suggesting Tuesday's statement from the embassy was aimed squarely at him. 

"I think Canada is saying, 'Please be aware,'" said Kristen van de Biezenbos, a professor of energy law at the University of Calgary. 

Because there are no alternatives to Line 5 for shipping fossil-fuel energy to Ontario and Quebec, the stakes of a shutdown would likely be higher for Canada than for the U.S., she added. 

"Even knowing that it's not a great idea to be largely dependent on just one source of oil, there hasn't been anything done to change that," van de Biezenbos said. 

"It would be a serious problem for Canada if Line 5 was shut down — not just because of the wider economic impacts for the oilpatch in Alberta, but also because that is the main source of crude oil products for eastern Canada." 

Later Tuesday, lawyers for Enbridge began filing a raft of affidavits and sworn statements from pipeline safety experts, scientists, environmental engineers and even the company's own director of tribal engagement, all in opposition to the request for an injunction. 

One of them, from a Vancouver hydrologist named Hamish Weatherly, acknowledged that the threat of a rupture caused by erosion is higher than it was at the end of last year, but still far from critical. 

"It is thus my opinion based on my knowledge, training and experience that there is not an 'emergency' or 'imminent threat' of a release at the meander," Weatherly's declaration reads. 

A separate declaration from David Stafford, the company's U.S. pipeline compliance manager, said the U.S. Pipeline and Hazardous Materials Safety Administration has been kept apprised of all the latest developments. 

"Since receiving notification of the erosion at the meander, PHMSA has not expressed any concern regarding the safety of Line 5 at this location," Stafford asserts in the document.

Tuesday's filings also included a string of affirmations from senior executives across the Canadian energy sector from companies like Suncor, Cenovus, Imperial Oil, Shell Canada and Superior Gas, among others. 

Canada has already invoked a 1977 pipelines treaty with the U.S. in both Wisconsin and Michigan, where that state's attorney general is also in court trying to get the pipeline shut down. 

Talks under that treaty have been ongoing for months, with the latest session taking place last month in Washington. 

"Canada invoked the treaty's dispute settlement provisions because actions to close Line 5 represent a violation of Canada's rights under the treaty to an uninterrupted flow of hydrocarbons in transit," the embassy said. 

"If a shutdown were ordered because of this specific, temporary flood situation, Canada expects the United States to comply with its obligations under the 1977 Transit Pipelines Treaty, including the expeditious restoration of normal pipeline operations."

The key word there is "temporary," van de Biezenbos said. 

"The pipeline treaty makes it clear that you can order temporary shutdown of international pipelines between the U.S. and Canada for public safety reasons," she said.

"If there is a shutdown that's ordered because of the flooding, then as soon as the flood risk has been abated, then the pipeline has to be brought back online."

This report by The Canadian Press was first published May 16, 2023.

 

Lower child-care fees could see 100,000 more Ontario women in workforce: report

Ontario has the potential to see nearly 100,000 more women enter the labour market due to $10-a-day child care, but only if the province creates more daycare spaces, a report from the Financial Accountability Office said Tuesday.

Labour participation rates for mothers with children under six years old, the ages covered by the national child-care program, increased by 2.4 percentage points just from 2021 to 2022, the first year the reduced fees started taking effect, the report said.

Once fully rolled out, the $10-a-day child-care program in Ontario could increase labour market participation for women aged 25 to 54 from 84 per cent in 2022 to between 85.6 per cent and 87.1 per cent by 2027, adding up to 98,600 women to the workforce, the FAO said.

However, the 71,000 new child-care spaces promised by Ontario under the federal agreement won't nearly be enough to meet the demand for care, and if the government doesn't create more spaces it will offset some of the positive labour market impacts, the report warned.

Education Minister Stephen Lecce said that's why the deal with Ottawa includes an agreement to review any deficits that emerge halfway through the rollout, which will allow Ontario to ask for more funding in order to create more spaces and meet demand.

"You may recall, before we signed the deal with the federal government, we said, 'Look, we do think there's going to be some shortages to the federal contributions,'" Lecce said.

He believes additional funding from Ottawa would allow the province to create enough child-care spaces to accommodate the rising demand.

"We've had a constructive relationship with the federal government on this issue," he said. 

"At the end of the day, this has to be a bipartisan priority, when it comes to creating more affordability and reducing barriers for women to work in the economy." 

The FAO has calculated that increased demand for affordable care will leave the province short more than 220,000 spots.

Child-care advocates, operators and early childhood educators say a key component of expansion will be addressing current staff shortages and introducing stronger recruitment and retention policies. 

Lecce said he has completed a workforce stabilization strategy that he will unveil "in due course" that includes "more competitive packages." 

"We've got amazing early childhood educators and I'm thrilled that we're going to provide them even more incentives to stay."

The ministry estimated in documents from the beginning of the workforce consultations that Ontario would need about 14,700 new registered early childhood educators by 2025-26 but would fall about 8,500 short without further actions on recruitment and retention.

As part of Ontario's deal with the federal government, the province set a wage floor for RECEs — $18 an hour in 2022 and increasing by $1 a year up to $25. 

The Association of Early Childhood Educators of Ontario has called for an immediate $30-and-hour minimum wage for RECEs and $25 for the many non-RECE child-care workers. They would also like to see the implementation of a wage grid as an incentive to keep workers in the sector.

The FAO report also finds that labour market participation for women with young children lags significantly behind that of men with young children — a gap more than four times wider than among workers without young children.

As well, the FAO says that the gender wage gap, which sees women earn on average 87 cents for every dollar earned by men, has not improved in a decade.

This report by The Canadian Press was first published May 16, 2023.

Accounting errors, overspending lead Canopy Growth to sour on its $50M BioSteel investment


When Canopy Growth Corp. announced it took a controlling stake in a near-insolvent BioSteel Sports Nutrition Inc. nearly three years ago to help make a line of CBD-infused sports drinks, investors cheered the move, pushing its stock up as much as five per cent that day.

Now, that same investment has suddenly emerged as an albatross for the stumbling cannabis player, forcing Canopy to announce the embarrassing move of restating its financial statements for its 2022 fiscal year while former employees paint a picture of a dysfunctional organization rife with overspending.

Late Wednesday, Canopy released a filing stating a review of BioSteel's sales in 2022 found numerous "material misstatements" and accounting errors in its financial statements for its 2022 first-quarter, second-quarter, and third-quarter results as well as its audited statements for the fiscal year ended 2022, which should no longer be relied upon. It said it will re-file those statements as soon as possible, a company spokesperson said.

In addition to that revelation that sent Canopy's stock plunging by more than 14 per cent on Thursday, the company's once-lauded acquisition has been caught in a sweeping re-organization that's seen its co-founder John Celenza ousted following a testy exchange with Canopy's Chief Executive Officer David Klein in March, two people familiar with the situation told BNN Bloomberg.

Celenza -- who started BioSteel in 2009 with former NHL star Mike Cammalleri to find a nutritional recovery drink that wouldn't fall afoul of new NHL drug testing rules -- was described by one source as a high-energy leader who clashed with Klein. Canopy acquired a 72 per cent stake in BioSteel in Oct. 2019 for $50.7 million.


Celenza declined to comment when reached by BNN Bloomberg. A Canopy spokesperson declined to comment on Klein’s relationship with Celenza.

Sources who worked for BioSteel and its partners described the working environment at the company as chaotic and, at times, disorganized.  While the specific nature of the arguments between the executives is not fully known, sources said BioSteel's spending plans often clashed with Canopy's need to rein in costs within its struggling cannabis ventures.

While BioSteel's revenue has purportedly climbed 56 per cent in 2022 to $44.6 million, a rare bright spot in Canopy's floundering Canadian cannabis business, those sales may have come at a steep cost with costly endorsement deals awarded to a slew of NHL, NFL, MLB, and NBA players, the source said. Industry sources suggested endorsement deals with well-known athletes could start at $100,000, while contracts with professional teams could often be at least triple that amount.

A Canopy spokesperson declined to confirm whether Celenza was part of a recent wave of BioSteel departures that saw about 20 staff leave the company, citing a policy where they do not comment on individual departures. Those staff cuts were tied to an announcement Canopy made in February that it would transition to an asset-light model and close its Smiths Falls, Ont. headquarters. That announcement also reaffirmed management's expectations that those recent closures would result in positive adjusted EBITDA in its fiscal 2024, with the noted exception of its BioSteel business.

Canopy's review of its BioSteel business also comes at an inopportune time for the beleaguered cannabis company. Aside from reporting a $2.6 billion loss so far this current fiscal year, Canopy is also looking to secure shareholder support for its plan to ring-fence its U.S. investments and tack them onto its balance sheet.

Due to U.S. and Canadian regulatory restrictions tied to cannabis investing, Canopy hasn't formally acquired the three U.S. cannabis companies to which it has staked claims. It has pushed back a shareholder vote needed to begin the process of converting its stock to exchangeable shares needed to create the new U.S.-domiciled holding company which will control its U.S. cannabis investments.

That plan was seen as a way for Canopy to curry back investor support, specifically from institutional players at a time when U.S. Congress continued to delay any momentum on pro-cannabis legislation. As a result, Canopy's stock now trades at a level not seen since August 2015, a 98 per cent drop from its all-time high.

Citi's Clark says inflation cements her outlier call for June rate hike in Canada

The only economist in a Bloomberg survey who’s forecasting an interest-rate hike at the Bank of Canada’s next meeting is confident the latest inflation data prove she’s right. 

Even before Tuesday’s unexpected acceleration in headline inflation, Citigroup Inc.’s Veronica Clark had been predicting the central bank would raise borrowing costs by 25 basis points on June 7. Tuesday’s consumer price figures have cemented her call — and she’s surprised other economists have yet to change their forecasts. 

“The Bank of Canada is literally saying we’re waiting to see if we’ve done enough, and none of the data is telling you that you’ve done enough. I’m trusting what they say,” Clark said in a phone interview. “It’s been hard for markets to imagine another hike in Canada. But the Bank of Canada is first and foremost an inflation-targeting central bank, and inflation looks sticky, strong and much higher than 2 per cent.”


Rates markets reacted quickly to the unexpectedly hot inflation print. Swaps traders are now placing bigger bets on a hike in June or July and have reduced the odds of a rate cut in 2023 to zero. Just a week ago, traders were pricing in as many as two cuts over the next 12 months. 

The Bank of Canada raised its benchmark overnight rate eight straight times to 4.5 per cent before signaling a conditional pause in January. While Clark is currently the only economist among 28 forecasters in the survey who expect a hike next month, others have started flagging rising chances that policymakers will soon be pulled off the sidelines. 

“There is a highly compelling case for returning with a hike at the June meeting and if not then July’s odds go up,” Derek Holt, an economist with Bank of Nova Scotia, said in a report to investors. “I would assign high market probability to a June hike with info to this point.”

For Clark, the substantial upside surprise to April’s consumer price index signaled to markets that there’s a “distinct possibility” the bank needs to hike again after holding for two straight meetings. She also said surging home prices present a “clear risk” that inflation could accelerate further. 

Since the Bank of Canada’s first move in this tightening cycle in March 2022, Clark was right nine out of 10 times. Her only miss was in July, when the bank surprised markets with a full percentage-point increase to borrowing costs versus her call for a 75 basis-point hike.

Growing number of Canadians rely on credit cards to pay for essentials: Survey

A growing number of Canadians have turned to their credit cards as a means to cover essential items within the past year, a NerdWallet survey released on Monday revealed.

Seven in 10 Canadians (70 per cent) said they have used credit to pay for essentials items, including groceries and utilities, within the past 12 months, the data showed. Alternatively, one in three survey respondents (33 per cent) said they have redeemed credit card rewards to pay for mandatory items.

Of those who reported a change in their credit card habits in the last year, 68 per cent said it was because of the increased costs of goods and services.

While inflation in Canada has begun to cool, the latest consumer price index read showed an unexpected rise. In April, inflation rose 4.4 per cent annually, according to Statistics. The data was hotter than economists had forecasted. 

In this environment, of the Canadians who use a credit card, only 58 per cent reported paying the balance in full every month. Another 40 per cent said it will take them six months or longer to pay off all their debt while another 11 per cent said they were unsure as to how long it will take them to clear their consumer debt.

The survey showed Generation Z (53 per cent), aged 18 to 26, was less likely to rely on their credit to pay for essential costs of living in comparison to Generation X (76 per cent) aged 43 to 58.

Methodology: This survey was conducted online by The Harris Poll on behalf of NerdWallet from April 3-5, 2023 among 1,025 Canadian adults ages 18 and older. The study sample data is accurate to within +/- 3.8 percentage points using a 95% confidence level.

Rent, mortgage interest helped drive inflation 

higher in April: Statistics Canada

The first increase in annual inflation since its June 2022 peak was driven in part by higher mortgage interest costs and higher rent prices, Statistics Canada said Tuesday.

Mortgage interest costs were up 28.5 per cent in April compared with a year ago as a result of the Bank of Canada raising interest rates at a breakneck pace over the past year. That's up from 26.4 per cent in March and 23.9 per cent in February.

“That’s the sharpest increase we’ve seen recently,” said Kiefer Van Mulligen, economist with The Conference Board of Canada

Mortgage payments have spiked as Canadians are forced to renew mortgages at current high interest rates, he said.

“It's a trend that will probably continue as mortgages are renewed at the higher prevailing mortgage rates,” Van Mulligen said. “As a bigger share of mortgages are renewed at higher rates, mortgage interest writ large for Canada will go up.”


Meanwhile, inflation for rent was 6.1 per cent year over year, up from 5.3 per cent in April.

That's despite overall shelter costs rising at a slower pace in April, at 4.9 per cent.

“Rent prices are also climbing and that’s probably related to the same phenomenon,” Van Mulligen said. “Housing affordability is deteriorating because mortgages are more expensive.”

According to Rentals.ca, average advertised rental prices in April were up 20 per cent from pandemic lows in April 2021. Average rents across Canada were up 9.6 per cent compared with April 2022.

The year-over-year increase in the homeowners' replacement cost index also slowed for the 12th consecutive month, which Statistics Canada says reflects a general cooling of the housing market.

A report by RBC Economics says shelter was the largest contributor to headline inflation in April, accounting for a third of the growth.

The Bank of Canada has been aggressively hiking interest rates in order to tame high inflation. Yet, in a paradoxical twist, higher interest rates have pushed up housing costs, contributing to higher inflation this month.

For example, excluding mortgage interest costs, inflation rose by 3.7 per cent in April compared to the same month last year. With mortgage costs included in the consumer price index, inflation was up 4.4 per cent.

The central bank’s interest-rate hikes have come full circle, feeding back into inflation even though other key drivers like commodities have been coming back down, said Colin Cieszynski, chief market strategist at SIA Wealth Management, in a note.

However, RBC said year-over-year mortgage interest costs are expected to start slowing because of the central bank’s pause on interest rate hikes.

But as for rent, high demand for rental housing could keep prices up. A March report by RBC said Canada's shortage of rental housing could quadruple by 2026, and the fierce demand for rental units has been driving record rent increases.


The higher housing costs come despite house prices declining slightly.

The Canadian Real Estate Association said Monday the actual average home price in Canada reached roughly $716,000 in April, down 3.9 per cent from April 2022.

— With files from Brett Bundale

This report by The Canadian Press was first published May 16, 2023.


RioCan REIT saw strong Q1 retail occupancy levels, rent rates ticking up

RIOCAN REAL ESTATE INVST TR (REI-U:CT)

20.08 0.56 (2.71%)
As of: 05/17/23 1:32:12 am
REAL-TIME QUOTE. Prices update every five seconds for TSX-listed stocks
Jul '22Oct '22Jan '23Apr '231618202224
Chart Type - 1year
See Full Stock Page »

The chief executive of one of the country's most prominent commercial landlords says retail occupancy levels and rent rates are ticking up even as many storefronts across Canada sit empty.

Jonathan Gitlin of RioCan Real Estate Investment Trust says retail committed occupancy across his company's portfolio edged up to 98 per cent in the first quarter of the year from 97.4 per cent in the same period a year ago.

Rent per square for new leasing during the period ended March 31 was $28.57, down from $31.40 a year ago, but up from $24.10 in the prior quarter.

The first quarter’s rent per square foot was even higher than the average net rent per square foot of $21.13 that it saw across the rest of its portfolio, he added.

"These exceptional occupancy levels...continue to be driven by intense demand for RioCan's quality retail space, the sort of retail space that simply put is in a short supply," Gitlin said on a Thursday call with analysts.

His remarks came a day after his company revealed its net income for the first quarter amounted to $118 million, down from $160 million a year earlier.

The Toronto-based company attributed the drop to a fair value loss on investment properties which compared with a fair value gain a year earlier.

Revenue for the quarter reached $279.5 million, down from $294.0 million a year earlier, while fair value loss on investment properties was $17.4 million, down from a gain of $35.4 million during the same quarter in 2022.

Funds from operations totalled $131.3 million, or 44 cents per diluted unit, up from $130.6 million a year ago, or 42 cents per diluted unit.

RioCan's portfolio during the quarter was made up of 191 properties, including retail, office and residential space.

Much of it is comprised of "necessity-based retail anchor tenants," including 19.3 per cent grocery, pharmacy and liquor retailers, 14.1 per cent essential personal services and 10.7 per cent value retailers.

RioCan also had 13 spaces leased by Bed Bath & Beyond, the home goods retailer whose Canadian arm is winding down operations after going into bankruptcy protection in April.

There was "immediate and pronounced" demand for the locations, which made up less than one per cent of RioCan's revenue, Gitlin said.

Tenants expressed interest in all the properties almost immediately, but many chose to "take a more secure route" and "snapped up" 10 of the sites from the receiver who ran an auction to sell off Bed Bath & Beyond's assets.

"Retailers were unwilling to risk losing these sites," said Gitlin.

For his company, there was "the ability to fill the spaces with strong tenants, zero downtime and no outlay of capital."


As for the three sites that weren't secured at auction, Gitlin said his company recently finalized a lease for one and is the final stage of negotiations to secure tenants for the remaining two properties.

The tenants are "predictable," he said.

"They are very much strong existing incumbent users within the Canada retail landscape," he said.

"They covet that sort of 20,000 square-foot box and they won't be a surprise to you when we can announce them."

Earlier in the month, Putman Investments Inc., which bought Toys "R" Us' Canadian operations, HMV and Sunrise Records, announced it is opening a new home store retailer in 21 former Bed Bath & Beyond and BuyBuy Baby locations.

Canadian Tire Corp. Ltd. is also acquiring 10 former Bed Bath & Beyond leases to expand its Mark's and Pro Hockey Life banners.

This report by The Canadian Press was first published May 11, 2023