Minnesota judge recommends "true replacement" of Enbridge's Line 3

Minnesota judge recommends "true replacement" of Enbridge's Line 3

In a decision eerily similar to TransCanada's Keystone XL, Administrative Law Judge Ann O'Reilly recommends approval of Enbridge's Line 3 Replacement Project in the State of Minnesota, but only for an in-trench replacement using the existing right-of-way, rejecting the company's request for a different routing.

WHY ENBRIDGE CHOSE A DIFFERENT ROUTE

Line 3 currently runs through two Native American Reservation lands: the Leech Lake and the Fond du Lac Reservations, along with five other Enbridge pipelines. The company had planned to abandon 450 km of pipe within the state, replacing it with 550 km of new pipe, with some sections running parallel to the existing line and other segments rerouted around the reservation lands.

Enbridge says it came up with its preferred route based on "extensive pipeline routing experience, knowledge of applicable federal and state regulations, as well as agency, landowner and other input." The company maintains that the preferred route minimizes impacts to the environment, particularly in reference to temporary disturbance of land, wetlands, and waterbodies.

 

EXISTING AND PREFERRED ROUTE (COURTESY ENBRIDGE)

 

DISPUTING THE TERM "REPLACEMENT"

In her ruling, Judge O'Reilly disputes Enbridge's labelling of Line 3 as a "replacement project," noting the company plans to abandon 50% of the current line and construct a longer and wider pipeline in a new location, with the capacity to transport more oil. The judge concludes that the risks around Enbridge's Preferred Route outweigh the benefits of the Project within the State of Minnesota.

The judge admits her state does not have the authority to permit work within reservation lands, but urged both Enbridge and affected Tribes to "accelerate discussions" on Line 3 and the five other operating lines.

ADDING CAPACITY TO THE MIDWEST

The 34-inch Line 3 pipeline was originally commissioned in 1968, running about 1,700 km from Edmonton, Alberta, to a terminal in Superior, Wisconsin. 

Line 3 transports a variety of crudes as part of Enbridge's Mainline System, Western Canada's main export pipeline to US markets. Due to the age of the line, capacity has been limited to about 390,000 bbl/day. Replacement of the pipe will restore capacity to 760,000 bbl/day, adding another 370,000 bbl/day of export capacity to the Midwest and more importantly, the Gulf Coast. Line 3 is currently running under "apportionment," meaning that demand is exceeding capacity, forcing the company to throttle flows from some shippers.

Judge O'Reilly agrees that a "new" Line 3 would resolve integrity issues with the old line and allow Enbridge to meet the demand of its customers. The judge says denial of the project would "adversely affect the future adequacy, reliability, or efficiency of the transportation of crude oil" by Enbridge and its Canadian customers. 

PAVING THE WAY FOR MORE HEAVY CANADIAN CRUDE TO THE GULF COAST

Wisconsin's Superior terminal consists of 45 storage tanks, connecting to several Minnesota refineries and four export pipelines, providing access to other refineries in the Midwest (PADD 2), southern Ontario and the US Gulf Coast (PADD 3).

The Gulf Coast has a refining capacity of almost 10 million bbl/day and is the world's largest market for heavy oil. The region only imports about 550,000 bbl/day of heavy oil due to pipeline constraints and postponement of TransCanada's Keystone XL. In contrast, the US Midwest imports almost 1.8 million bbl/day of heavy Canadian crude, but is currently at its limit for heavy oil.

 
 

Last December, Enbridge noted it has the capacity to further increase flows to the Gulf Coast through an expansion of both its Mainline Network, the Flanagan South/Seaway system and reversal of its jointly-owned Capline pipeline.

ENBRIDGE STILL MULLING THE IMPACTS

Enbridge says it is pleased that the judge has listened to the "extensive evidence" presented and agreed there is a need for this "safety-driven maintenance project." However, the company also notes it doesn't agree with the judge's recommendation and still believes its preferred route is in the best interest of the state.

Minnesota's Public Utilities Commission (PUC) is scheduled to issue its final "Certificate of Need" on the project in June, the last approval required before construction can proceed in the state. Although the judge's ruling is non-binding, it is expected to weigh heavily in the PUC's ruling. North Dakota and Wisconsin have already approved the segments in their respective states. The National Energy Board approved the Canadian portion of the project in 2016.

According to Enbridge, the complete replacement project has an estimated price tag of $5.3 billion for the Canadian portion and US$2.9 billion for work south of the border, making it the most expensive project in the company's history. If all goes according to plan, the expanded line could be placed into service by the end of 2019.


SOURCES:
STATE OF MINNESOTA OFFICE OF ADMINISTRATIVE HEARINGS • CERTIFICATE OF NEED FOR THE LINE 3 PROJECT IN MINNESOTA • April 23, 2018
ENBRIDGE • JUDGE SUPPORTS NEED FOR ENBRIDGE LINE 3 REPLACEMENT PROJECT • April 23, 2018
ENBRIDGE • LINE 3 REPLACEMENT PROJECT SUMMARY
MINNESOTA PUBLIC UTILITIES COMMISSION • ENBRIDGE LINE 3 PIPELINE REPLACEMENT PROJECT
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