The Minnesota Public Utilities Commission approved a certificate of need for Enbridge to rebuild its aging Line 3 pipeline. This is the final regulatory hurdle for the pipeline project. Government of Alberta/Epic Photography photo by Marc Chalifoux.
Enbridge’s Line 3 clears final regulatory hurdle
The Minnesota Public Utilities Commission approved a certificate of need for Calgary-based Enbridge to rebuild its aging Line 3 pipeline. The decision angered environmentalists, but gave hope to Canadian oil producers struggling to transport their crude to US refiners.
The approval is the final hurdle for the contentious pipeline which ships Alberta crude to refiners in the US Midwest. Enbridge has fought for three years to get the green light to rebuild the 1,031 mile long pipeline.
After the decision was announced, Enbridge shares rose 3.7 per cent on the TSE.
The state commission has yet to determine the route for the pipeline through Minnesota. The certificate of need also comes with conditions, including the company make a financial guarantee to clean up any environmental damages. It also must remove, at landowner’s request, pipeline that is no longer in use.
Canadian producers have been facing pipeline bottlenecks which have increased the discount for Western Canadian crude this year. And refiners in Minnesota and nearby states say the pipeline is necessary to increase crude supplies.
During the hearing, Native Americans and environmentalists disrupted the meeting. “Shame on you, you cowards”, one woman shouted.
Opponents, including environmentalists and some indigenous communities are concerned about spills and the impact the pipeline will have on tribal wild rice harvesting areas. On the other side, business groups believe the $7 billion project will create jobs and boost tax revenue.
About $2.5 billion has been earmarked for the Minnesota leg of the pipeline.
“It’s going to give everybody a real boost,” Bob Schoneberger told Reuters. Schoneberger runs a piping contractor business in Duluth, Minnesota.
Enbridge’s Line 3 initially went online in 1968 and now due to declining structural integrity is operating at half its capacity. The new pipeline will allow the company to boost its capacity to the original 760,000 barrels per day (b/d).
Several commissioners doubted Enbridge’s claim that demand for crude and refined products, such as gasoline, would increase enough to warrant the pipeline.
“That pipeline is an accident waiting to happen,” said commissioner Dan Lipschultz. “It feels like a gun to our head that compels us to approve a new line … but the gun is real and it’s loaded.”
But Enbridge argued rationing of demand from oil shippers for space on Line 3 showed there was a need to rebuild, according to chairwoman Nancy Lange.
RBC analyst Robert Kwan wrote in a note that while obtaining the certificate of need is positive for Enbridge, the ensuing decision on the route of the pipeline is pivotal.
Enbridge has proposed the route follow the existing pipeline corridor partway through Minnesota. But, it would like to see the line head south to avoid the Leech Lake reservation that the pipeline currently runs through.
The company is concerned that if the commission issues a permit for the pipeline to continue through the current corridor, it would have to shut down the line for nine to 12 months for construction.
Recognized parties, including Enbridge, environmental and Native American groups, have 20 days to make a request to the committee to reconsider its decision.
If such an application is denied, the party can appeal to the Minnesota appeals court.