Commerce Department’s analysis of Enbridge’s new pipeline could just be the death of this project

REUTERS/Mark Blinch
Commerce’s recommendation against a certificate of need for the new pipeline — and its recommendation that the old and troubled Line 3 be mothballed — is based on its conclusion that no new pipeline capacity is needed to ensure “future adequacy, reliability and efficiency of energy supply.”

If the public relations industry gave achievement awards for wishful obfuscation, consideration would be due the Enbridge spinmeister who dismissed Monday’s Minnesota Department of Commerce analysis as “only one view” on permitting for the company’s Line 3 pipeline project.

Yeah, and the plain sight of a tornado-borne Kansas farmhouse flattening the Wicked Witch of the West could be considered “only one view” that, ding-dong, she be dead.

Commerce’s recommendation against a certificate of need for the new pipeline — and its recommendation that the old and troubled Line 3 be mothballed — is based on its conclusion that no new pipeline capacity is needed to ensure “future adequacy, reliability and efficiency of energy supply.” Key findings as laid out in a department summary:

  • Refineries in Minnesota, Wisconsin and elsewhere in the Upper Midwest are operating at “high levels of utilization, which indicates both they are not short of physical supplies of crude oil, and that they have little room to increase total crude runs.”
  • An independent analysis of fuel consumption trends — significantly at odds with Enbridge’s application — shows that “Minnesota demand for refined products appears unlikely to increase in the long term.”
  • Enbridge has already achieved new transport capacity with a clever and controversial exploitation of its Line 67, “equivalent to Enbridge’s stated need to increase capacity on Line 3.”

Factoring in the environmental questions, along with Line 3’s safety problems, Commerce finds that “in light of the serious risks and effects on the natural and socioeconomic environments of the existing Line 3 and the limited benefit that the existing Line 3 provides to Minnesota refineries, it is reasonable to conclude that Minnesota would be better off if Enbridge proposed to cease operations of the existing Line 3, without any new pipeline being built.” 

Obviously this a very serious setback for Enbridge, adding the weight of economics to the already heavy environmental/tribal opposition over the project’s risk of oil spills in sensitive and sacred areas.

Months of public hearings and administrative reviews lie between Monday’s bombshell and a final decision by the Minnesota Public Utilities Commission, so it may be springtime before we know whether Line 3 is not merely dead but really most sincerely dead. 

But by law, the project cannot go forward unless the PUC certifies that Minnesota needs the project, and the state office empowered to analyze that question has now answered with a broad, detailed and resounding No.

To reject this finding in a form that withstands court review, the PUC would essentially have to reach its own contradictory analysis of the project’s costs and benefits. Having followed this kind of process for a couple of decades, and considering that Enbridge has already made its best case for the project, I think the odds of that happening have to be pretty slim.

But, of course, that’s only one view.

Details of the analysis

To understand the thrust of Commerce’s analysis, and in fairness to Enbridge, let’s begin with the company’s case for a new Line 3 — replacing a crude oil pipeline that runs from Alberta to Superior, Wisconsin, and was built in the 1960s.

Enbridge says a combination of repair needs and safety concerns have persuaded it that the corroding line needs to be replaced. And also to hold its average daily volume to 390,000 barrels per day, against a design capacity of 760,000 bpd.

But the replacement would have a higher capacity (844,000 bpd) and would follow a significantly different route between Clearbrook, Minnesota, and Superior. For those reasons, the project must gain approval from Minnesota regulators — including the previously mentioned certificate of need, a step that wasn’t required when the first Line 3 was laid.

Many other things have changed since then, including the size of the North American pipeline network. Line 3 is now one of six Enbridge pipelines crossing Minnesota, and more-or-less automatic approvals for new lines are a thing of the past.

A year ago, after a three-year public relations campaign and permitting struggle, the company abandoned plans for its Sandpiper line that would have run from the North Dakota oil fields to Superior, in part because of slacking demand for the oil.

(It was no doubt with the Sandpiper defeat and Line 3’s prospects in mind that last year’s Republican legislative majorities tried but failed to remove the certificate of need requirement, in order to move key  pipeline decisions out of the realm of expert technical review and leave them in the arena of bare-knuckle politics where they belong.)

Enbridge also ran into a court fight over its Line 67, which runs from Alberta to Superior and enters the U.S. a bit west of the Minnesota state line, in the same right-of-way as Line 3. Laying a new pipeline or significantly enlarging an old one that crosses the international border requires a U.S. presidential permit issued through the State Department.

Seeking to expand shipments through Line 67 from 450,000 bpd to 880,000 bpd, the company applied for a new permit. Then, tired of waiting for approval, it simply rebuilt a short transborder segment of Line 3 — with interconnections in Manitoba and North Dakota — to accomplish the same boost in volume by temporarily shifting oil from Line 67 to Line 3 and back again.

As I wrote at the time, Enbridge had come up with a way — which subsequently survived a court challenge, and won signoffs from the Minnesota PUC — to move a Keystone XL-sized volume of crude oil without federal approval, through an equipment switcheroo that didn’t require advance approval from any agency at the federal, state or local levels.

Quite an achievement, that. And if it ends up undercutting its campaign for a new Line 3, by making it essentially unnecessary, I suppose a fairness-minded person could see something like justice in the outcome.

But that would be only one view.

Safety concerns, too

Beyond answering the yes/no question on a new Line 3 in the negative, the Commerce analysis suggests that even if the project were justified by economic factors, it should not be allowed without considerable modifications to various safety features.

Among other items, it says Enbridge should be required to build two new maintenance shops in the new alignment east of Clearbrook; to use thicker pipe than proposed throughout the entire Minnesota section; to show greater reliability 0f security monitoring and backup power supplies; to build and maintain new roads or other access for emergency crews to all shutoff valves in the Minnesota portion; and to provide guarantees of how Enbridge and/or its insurers will be able to pay for any damage caused by leaks and other accidents along the line when they occur.

Finally, it rejects outright the Enbridge proposal to leave the old Line 3 in place after shutdown.

Instead, it says, the company should be required “to remove all exposed segments of existing Line 3 in Minnesota without unnecessary harm to the natural environment,” while making annual reports to the PUC about its progress and assuring that the commission has authority to enforcement the company’s removal commitments.

* * *

The full Commerce Department analysis, in the form of testimony to the PUC, can be found here with supplemental findings here and here.

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Comments (3)

  1. Submitted by Frank Phelan on 09/13/2017 - 09:54 am.


    In the era of MAGA, why would we let some foreigners come into our state and push us around? How many jobs would this mean for Minnesotans?

    Are we some 3rd world country the we let these foreigners have their way with us just so they can ship crude to ‘Sconi?

  2. Submitted by John Webster on 09/13/2017 - 11:06 am.

    Should Be Federal Action

    Whatever the merits of this state action, no state should have the power to decide an issue like this that affects interstate commerce. If the state had given approval, this project’s detractors would have asked the federal government to block this pipeline, or even more likely, federal courts. Both sides favor states’ rights when that advances their policy objectives; both sides favor federal action when that advances their policy objectives.

  3. Submitted by Abigail Whiterock on 09/15/2017 - 06:21 pm.

    Why are we opposing a safer pipeline?

    What spin? Enbridge made an utterly benign, factually accurate comment that this is “one view” from across the dozens of jurisdictions the pipe travels across, spanning two countries over its more than 1000-mile length – and that is exactly what it is, one view. Look no further for a point of view that makes no sense than to cite the “safety concerns” of the line on one hand and then say there is no need to replace it on the other. Also, this isn’t all about refining capacity or the use of “refined products.” How could a “Commerce Department” not understand how commodity marketing works? The line transports CRUDE oil, not refined products. The refiners are transporting their OWN product from producing regions in Canada to their refineries in the Chicago area refining hub and have expressed a need for the added pipeline capacity. These are not “foreigners,” they are often Houston based energy companies moving their product to market at a HUGE discount to benchmark (WTI) crude prices to supply U.S. industry and consumers with more than 2 million barrels a day of vitally needed crude stock for a wide range of jobs, products and services, not just gas in cars. Enbridge will continue to use the line whether it is replaced or not. Anyone who truly cares about the environment would want the safest possible essential service in place. Minnesota’s rejection of their portion won’t kill the project, which is already approved north of the border, it will just mean that everyone else gets a brand new, state of the art, safer pipeline while Minnesota keeps the old one. So… good luck with that protesting.

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