Enbridge replacement pipeline now in service

By Bruce Lantz

It has been a long road but the Enbridge Line 3 Replacement pipeline is finally in service.

The Enbridge Inc. [TSX:ENB; NYSE:ENB] pipeline replacement carrying oil from Edmonton, Alberta to Superior, Wisconsin became operational on Oct.1. The $9.3-billion project has been in the works since 2017 but has been mired in delays and opposition from environmental and indigenous groups, with opponents saying the expansion will accelerate climate change and risk oil spills in environmentally sensitive areas. The 542-kilometre Minnesota segment of the 1,765-kilometre pipeline, which follows others already in service in Canada, North Dakota and Wisconsin, restores the pipeline’s full capacity of 760,000 barrels per day of oil. The line, which replaces and expands an aging pipeline built in the 1960s, features new, state-of-the-art, thicker-walled pipe.

The Canadian Association of Energy Contractors (CAOEC) said in a news release the completion, combined with high commodity prices for oil, natural gas and liquefied natural gas (LNG) is “welcome and encouraging news for investors and Canadians from coast to coast, and another strong signal of recovery for Canada’s energy sector.”

“The completion of Line 3 is a milestone for Canada’s energy sector,” said CAOEC CEO Mark Scholz. The CAOEC represents Canada’s energy service contractors operating close to the wellhead.

“Pipelines continue to be a safer, more reliable way to transport fuel than truck, train or barge,” Enbridge Communications and Media Relations Strategist Jesse Semko told Resource World Magazine.”These other modes burn far more fuel in order to move it, releasing more greenhouse gases into the environment, and would increase safety risk along each of those transportation routes.”

The Line 3 Replacement Project is the first major Canadian oil pipeline expansion to be completed in six years, and took eight years of rigorous planning. The project supported thousands of good jobs, providing an estimated 24,494 temporary full-time equivalent jobs in Canada and contributing $2.87 billion of GDP through the design and construction phases. Energy projects such as Line 3 are vital to Canada’s energy future, and to our economic recovery post COVID-19, said the CAOEC news release.

“It is essential that our regulatory environment supports Canada’s best-in-class energy and prioritizes pipeline projects,” said Scholz. “Countries around the world need clean energy solutions, and Canada should be the first choice in meeting those needs. Now is the time for Canada to be a global energy leader and champion resource projects that get our commodities to market.”

Semko said Line 3 was the largest project in the history of Enbridge, “and we are very proud” of that achievement.

“From day one this project has been about modernizing our system and improving safety and reliability for the benefit of communities, the environment and our customers.” He also said the company was proud of the “relationship of trust” Enbridge has built with communities along the right-of-way in both Canada and the U.S.

“Our goal is to continuously live up to the trust that all of our stakeholders have placed in us.”

Enbridge has said the Minnesota leg of the project was the most studied pipeline project in that state’s history. Federal, state and local agency approvals came only after 71 public comment regulatory meetings and more than 3,500 community engagement meetings. Enbridge said it is proud of its efforts to engage indigenous communities along the pipeline route, and noted that more than 1,500 indigenous people worked on the replacement project, with seven per cent of the Line 3 workforce made up of native Americans and the company investing C$750 million with indigenous individuals, communities and businesses.

There were numerous court challenges along the way, but in June the Minnesota Court of Appeals affirmed the approvals granted by independent regulators which had allowed construction of the Minnesota portion of the pipeline replacement to begin last December. That decision could still be appealed to the Minnesota Supreme Court.

Also, Enbridge was fined US$3.2 million and threatened with criminal action for breaching an aquifer containing groundwater during construction of a trench near the company’s Clearbrook Terminal. The Minnesota Department of Natural Resources (MDNR) said Enbridge didn’t follow its original construction plan and dug a deeper trench which caused the release of 24.2 million gallons of water, which had to be pumped and treated before being released. The company also was ordered to place US$2.75 million in escrow for restoration and mitigation of any damage to the wetlands.

Semko said his company has been working with the MDNR since June on approval of a corrective action plan which is now being implemented. “Safety is our top priority, and that means protecting Minnesota waters and the environment,” he said. “We are continuing to work closely with the agency on a resolution to this matter.”

The Canadian portion of Line 3, from Edmonton, Alberta to Gretna, Manitoba and to the Canada-US border, was completed and went into service in 2019, with “no significant protest activity”, Semko said.

Canadian pipelines are few and far between these days. In June, TC Energy Corporation (NYSE:TRP) cancelled its Keystone XL pipeline project, leaving just Enbridge’s Line 3 and the Trans Mountain Pipeline project, which is owned the the Canadian federal government and isn’t expected to be in service until December 2022, as the nation’s main remaining pipeline projects.

But Enbridge’s pipeline conflicts don’t end with the startup of the Line 3 replacement. There’s Line 5.

Line 5 ships 540,000 barrels a day of crude and refined products from Superior, Wisconsin to Sarnia, Ontario but the state of Michigan ordered it shut down over a potential leak in a four-mile section running under the Great Lakes. Enbridge ignored the order, launching a legal battle. Canada’s federal government has been pushing the U.S. government to intervene and on Oct. 4 formally invoked a never-used 1977 treaty with the American government to request bilateral negotiations. The Transit Pipelines Treaty guarantees the uninterrupted movement of light crude oil and natural gas liquids between the two countries.

The state of Michigan reportedly has given up on the talks although Enbridge insists that both sides are legally obliged to engage in good-faith efforts to resolve the long-running dispute. Court documents show the state has effectively abandoned the process, with “no desire” to continue with mediation.

But the status of those talks remains unclear: In a written ruling late last month, U.S. District Court Judge Janet Neff described the process as “at least at a standstill.”

The dispute has been raging since last November, when Michigan Gov. Gretchen Whitmer abruptly revoked the easement that had allowed it to operate since 1953, citing the risk of a spill in the Straits of Mackinac.

Enbridge insists the pipeline is safe and has made it clear that it has no intention of shutting down the line voluntarily. Noting that the company has invested more than $100 million in Line 5 safety enhancements, Semko said Line 5 has operated safely for more than 68 years providing the Midwest and Great Lakes regions with a much-needed source of energy. “To have that threatened by a single government entity creates concerns about energy security as winter approaches and the economy as the region looks to re-emerge from the pandemic.

“Enbridge greatly appreciates the efforts of ‘Team Canada’ – from the Government of Canada to the provinces of Ontario, Quebec, Alberta and Saskatchewan for their commitments and efforts to keep Line 5 open (which is a critical source of energy for the Great Lakes region on both sides of the Canadian-US border),” said Semko. “We also greatly appreciate their desire to advance the timely construction of the Great Lakes Tunnel Project.

“We have spoken with government officials on both sides of the border as the State of Michigan has let parties know it is not committed for further mediation. Enbridge has continued to participate in the mediation process in good faith and still is hopeful that a negotiated resolution will continue to provide consumers and industry in the region with safe, reliable energy and advance the quick construction of the tunnel at the Straits of Makinac.”

Regardless of its pipeline issues, Enbridge has not been standing pat. In late September it signed low carbon infrastructure partnerships with Royal Dutch Shell and Vanguard Renewables to help meet its emission reduction goal of being a net zero emitter of greenhouse gases by 2050. Also in September, the company entered into a definitive purchase agreement with EnCap Flatrock Midstream to acquire Moda Midstream Operating LLC for US$3.0 billion and thus advance its US Gulf Coast export strategy and connectivity to low-cost and long-lived reserves in the Permian and Eagle Ford basins. Through this, Enbridge will acquire a 100 per cent operating interest in the Ingleside Energy Center near Corpus Christi, Texas, North America’s largest crude export terminal. Also, it is acquiring a 20 per cent interest in the Cactus II pipeline, 100 per cent of the Viola pipeline, and 100 per cent operating interest in the Taft Terminal – all designed to provide a fully-integrated light crude export platform and an organic growth potential post-2023.