As Minnesota Senate Republicans consider whether to remove Steve Kelley as Commissioner of the state’s Department of Commerce, his decision to challenge Enbridge’s proposed Line 3 oil pipeline in court has drawn intense scrutiny.
The GOP broadly backs the $2.6 billion pipeline, which would carry 760,000 barrels of oil per day across northern Minnesota and create thousands of construction jobs amid the state’s economic downturn. Regulators on the state’s Public Utilities Commission have repeatedly approved the project, saying building the new, larger, 36-inch pipeline would be safer than continuing to operate a 34-inch one built in the 1960s that is operating at half-capacity and considered a spill risk — or allowing oil to instead be transported by rail to market.
But Line 3 has been fought by environmental groups like The Sierra Club, who say new fossil fuel infrastructure is reckless and unnecessary amid climate change. And several tribes — the Red lake Band of Chippewa Indians, the White Earth Band of Ojibwe and the Mille Lacs Band of Ojibwe — have opposed the pipeline as well, arguing a new line would also bring its own spill risks, including to treaty land that tribes use to hunt, fish and gather wild rice. Those opponents have their own legal challenges to Line 3.
Separately, the Minnesota Department of Commerce has tried three times to appeal a critical permit for the project, its Certificate of Need, which has been granted to Enbridge twice. The court has not weighed in on the state agency’s arguments yet, but Kelley and the administration of DFL Gov. Tim Walz have a more narrow set of claims than other Line 3 opponents, and the state’s lawsuit hinges on whether there is demand for the oil the pipeline would deliver.
What is the state’s problem with Line 3?
Kelley’s agency insists that Enbridge has not provided a long-range forecast of oil demand for the Line 3 pipeline, which is required by state law to prove the pipeline is actually necessary. Any judgment made by the PUC was made in error, the Commerce Department argues, because they did not have the full information to approve a Certificate of Need for the project — a critical permit.
[image_caption]Steve Kelley[/image_caption]
The PUC is made up of five commissioners appointed by the governor. Currently there are three Democrats, one Republican and one commissioner with no party. Two of the Democrats were appointed by Walz.
Did Enbridge actually fail to prove demand?
The PUC has rejected the argument made by Commerce, saying what Enbridge has provided is enough to show demand for oil that Line 3 would transport 337 miles across the state to a terminal in Superior, Wisconsin. The full line begins near Edmonton and travels through Canada and North Dakota before reaching Minnesota.
In a May 1, 2020 order granting Enbridge a Certificate of Need, the PUC wrote it relied on several forecasts through the years-long permitting process that showed “oil supply would continue to increase throughout the forecast period,” as well as other evidence that oil supply would continue to be “equal to or less than demand.”
That includes a 2015 report by the oil and gas consultancy Muse Stancil, which concludes there is enough demand in Enbridge’s vast markets for crude oil from Western Canada that the company’s pipeline system will be operating at, or near, capacity through 2033. Crude oil transported by Line 3 can be expected, in part, to be processed in Midwestern refineries like Flint Hills, supplying petroleum to Minnesota, North Dakota, South Dakota, Wisconsin and Iowa. And refineries in that five-state area can’t meet local demand for transportation fuels, the report says.
The Department of Commerce, however, maintains that the Muse Stancil Report is based primarily on forecasts of supply, not demand, of Canadian crude oil and makes wrong assumptions of continued global demand. That conclusion was based, in part, on testimony from Marie Fagan, an economist at the Boston firm London Economics International, which was hired by the state.
In her own 2017 report, Fagan argued the Muse Stancil was inadequate, in part because she said the company provided a forecast that showed just one future scenario of pipeline use, rather than a range of possibilities.
In 2018, the PUC wrote that it had granted previous certificates of need to Enbridge pipeline projects based on similar “supply forecasts” to establish demand for crude oil that would increase or be stable for the foreseeable future. The commission did say that this method of forecasting demand may not be enough in the future, as governments work to slash carbon emissions and promote electric vehicles in a way that could hurt oil demand. In May, however, a majority of the Commission said oil shippers still regularly are unable to move all of the crude oil they want to export to the U.S. The PUC approved Line 3 on a 4-1 vote.
[image_caption]Commissioner Matthew Schuerger[/image_caption]
Schuerger argued that advancing climate change science, such as the October 2018 United Nations Intergovernmental Panel on Climate Change, has prompted governments and businesses to take quicker action to slash carbon emissions, impacting demand for oil in a way that Enbridge has not accounted for. The Walz administration, for instance, has pushed for tougher new auto emissions regulations to promote electric vehicles since the PUC granted a Certificate of Need for Line 3 in 2018.
In a prepared statement, Enbridge spokeswoman Juli Kellner said multiple independent crude oil supply forecasts and alternative scenarios for pipelines “indicate that even with lower demand for refined product in Minnesota and the region there will still be ample need for crude oil supplied by a replaced Line 3.” Keller said there would be a need for Line 3 even if there was widespread adoption of electric vehicles in Minnesota over the next 15 years.
Does the state’s argument hold merit?
Courts have yet to decide whether the Commerce Department is correct that Enbridge has not provided a long-term demand forecast. Late in his term, Dayton challenged the Certificate of Need, but the Court of Appeals threw out the lawsuit because it was filed too early.
When Walz took over, his administration chose to continue the legal challenge. But it was again thrown out when the Court of Appeals ruled that an environmental impact study for Line 3 was incomplete, invalidating the Certificate of Need on unrelated grounds.
The Commerce Department has now filed the legal challenge a third time because the PUC re-authorized the Certificate of Need — after further environmental research — but did not change its position on the long-term forecast.
Alexandra Klass, a professor at the University of Minnesota specializing in environmental law, said the Commerce Department has a “very compelling argument” that may be stronger than it was in the past as the state continues to march toward electrifying the transportation system. And while the five commissioners on the PUC have closely scrutinized the project, Commerce is the “expert agency on this idea of the demand forecast.”
Klass said case law generally dictates that courts be deferential to the PUC, in part because the commissioners have expertise on the issues. But the courts lately have also rejected a string of permits issued by the PUC or other state regulators for industrial projects like Line 3 and the PolyMet copper-nickel mine. “The court certainly is scrutinizing some controversial permits and making sure the law is being followed, and I would assume that they would do that in this case too,” Klass said.
Is this about process or politics?
At Kelley’s confirmation hearing last week, Republican Senators portrayed Kelley’s decision to challenge Line 3 as a political choice aimed at halting or delaying the pipeline despite the decisions reached by experts on the PUC.
[image_caption]State Sen. David Osmek[/image_caption]
Kelley said his Department was focused on a more narrow issue of law requiring a demand forecast — not broader arguments. such as the safety of a new pipeline compared to the old one. Kelley said the decision to appeal was ultimately his, though Walz supported the choice.
Still, the dispute over the demand forecast is critical to the future of the project. Walz said he views the appeal as effectively part of the environmental permitting process, since his administration believes the law in the actual Certificate of Need process has not been properly followed. Enbridge still needs permits from the Minnesota Pollution Control Agency, the state Department of Natural Resources and the U.S. Army Corps of Engineers before it can start construction.
“When it comes to any project that impacts our environment and our economy, we must follow the process, the law, and the science,” Walz said.
Correction: This post has been updated to reflect that the Public Utilities Commission has granted Enbridge a Certificate of Need for its Line 3 project twice.
Exxon-Mobil has been removed from the Dow Jones Industrial Average.
It was once one of the world’s largest corporations. Now? There’s just one oil company left. The market doesn’t want oil- it’s a loser in our future.
Meanwhile, tar sands investors have pulled out, as the price does not justify the extraction cost. Even North Dakota crude cannot survive the glut.
This is one more thing that absolutely cannot be left to politics. Sure Leech Lake Reservation needs to have its Line 3 removed. Red Lake and the vast Big Bog is yet another place that does not belong to Canada’s oil industry and creates another environmental time bomb. Imagine trying to clean up a single spill in the Bog. No scientific approach would recommend this line, or its route across tribal lands in a fragile environment where fishing is not just a hobby.
Enbridge is desperate to make some money on a Line that is not needed, but the construction of which is profitable only in the short run, if at all.
I read a book a few years ago about Exxon-Mobil and how it needed to support a subtle reclassification of oil reserves to be able to report the tar sands in their reserves as assets. Because the company was unable to locate any new source of reserve supply that was more available and less cost. Someone else I read compared the mining and processing of tar sand for petroleum alternative to an alcoholic thirsty for another drink tearing up the carpet at a bar to extract the droppings of dried booze to satisfy his addiction.
It’s absurd and hypocritical to criticize Kelley’s and the Department’s challenge to the need for Line 3 as being “political.” The only reason for the political and public support for this line is Enbridge’s generosity in promising jobs (= money)and taxes and other intangible benefits. (Meanwhile, what’s happened to its lawsuit against the State to recover back taxes from these northern Minnesota counties?). The only reason pipelines have to obtain certificates and permits from an agency like the Public Utilities Commission is so that they don’t come to the legislature for such relief. If these politicians don’t like the “politics” of pipeline permitting, maybe they should just repeal the laws which require it and let the pipelines take people’s property for their pipelines without government interference?
This topic always leaves me with more questions than anything else:
1. Can Enbridge continue to repair and maintain it’s 34″ pipeline for as long as it cares to?
2. I do not know pipeline flow math, but I do know a 36″ pipe is 12% bigger than a 34″ pipe. Seems a lot of trouble for a 12% increase
3. It seems the 50% flow reduction because of the current one being old and leaky is the biggest problem for Enbridge economics.
4. Can they just build a new 34″ line on the existing route with no permits? All at once or one chunk at a time?
5. What is the hoped for final disposition for environmentalists if Enbridge gives up on the new 36″ line?
The old one gets so leaky and unreliable that Enbridge shuts it down and goes away?
Hardly seems an ecologically friendly means to an end.
6. Why would Enbridge want to build a pipeline if there is no demand for the stuff flowing out of the exit end, even if the guys at the input end have lots of stuff to send?
I want to side with the environmentally friendly end of this issue, but can’t seem to get enough answers to figure out what is the environmentally friendly end of this issue.
I don’t know the answer all of your good questions, but I can tell you that the pipe diameter AND THE PRESSURE in the new line is what makes it more efficient.
But when a pipeline rupture does occur, the higher pressures mean the spill will be bigger and more consequential.
As for profitability, Enbridge will make money on their capacity, as it is their productive capital– it will increase the value of the company.
Line 3 is being used to threaten, as is the prospect of another rail car explosive accident. Black mail will not work if Enbridge is forced to remove their old line 3.
The needs assessment is not being done for a reason.
Thanks for that.
“Black mail will not work if Enbridge is forced to remove their old line 3.”
Agreed, is there pressure to remove it? If there is and there is some likelihood of that happening, then denying the new route makes sense.
If they can just keep on using the old leaky one, we have the unenviable choice of train cars of oil blowing up or pipeline spills.
Not an easy choice either way.
Its both law and political. The law/process needs to be followed. The politics says it needs to be stopped.
Flint Hills refinery does not get any of its oil from this section of Line 3. Its oil comes from a different pipeline that runs from Clearbrook to the refinery. So when this part of Line 3 is stopped, it will have no negative impact on Flint Hills.
There seems to be a lot of tip-toeing around the big issue here: doesn’t this pipeline apparently enable the future extraction of the environmentally disastrous Canadian tar sands? If our anti-environment Neighbors to the North want a giant drainpipe for their tar sands experiment, they are welcome to build a pipeline across their pristine watersheds to say, Vancouver. You want the crude, YOU take the risk, Canadian friends. As for the Jobs Jobs Jobs! argument, these are always overestimated by the proponents, both in quantity and duration. You want construction jobs job jobs, MN Repubs? Then where’s the bonding bill you torpedoed (twice) out of pique and petulance over (popular) Covid-19 suppression attempts?
And of course the super big picture is the total insanity of allowing “consumers” to purchase so many terrible mileage/CO2 emitting $50,000 monster pickups that they are becoming the largest model in the vehicle pool, simply because there is a current global glut of (cheaper) oil, allowing them to keep wasteful, dangerous behemoths gassed up. One would think this to be the very best time to downsize the “fleet”, but no, of course we do the exact opposite, because: Freedom! (….to wreck the planet for a few millennia).
Once again, it seems that elected (and agency) officials are afraid of actually saying they are taking action to try to save the last remnants of the 11,000 year old natural climate, while protecting our water resources. Why?