Minnesota Commerce Department on Enbridge Pipeline: Thanks, But No Thanks

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Researched by Industrial Info Resources (Sugar Land, Texas)--The Minnesota Department of Commerce says it sees no need for Enbridge Incorporated's (NYSE:ENB) (Calgary, Alberta) proposed Line 3 replacement oil pipeline. In testimony submitted on Monday to the Minnesota Public Utilities Commission (PUC), the department said the pipeline would primarily benefit areas outside Minnesota and poses "serious environmental and socioeconomic risks" that outweigh potential benefits.

Line 3 is an existing 1,097-mile crude oil pipeline, originally installed in the 1960s, that extends from Edmonton, Alberta, to Superior, Wisconsin, and is a part of Enbridge's Mainline System. The Line 3 Replacement Project is an integrity- and maintenance-driven project, according to Enbridge, and spans from Hardisty, Alberta, to Superior, Wisconsin. It would consist of 1,031 miles of 36-inch diameter pipeline, and would double the capacity of the existing pipeline to an initial rate of 760,000 barrels per day (BBL/d). The $2.9 billion U.S. portion of the replacement line would run from Neche, North Dakota, through Minnesota, to Wisconsin. The existing Line 3 pipeline would be decommissioned. The anticipated in-service date for the project is 2019, pending U.S. regulatory approvals. The Canadian government announced its approval of the project in late 2016.

Industrial Info is tracking 26 active projects that are tied to the replacement program. This includes $1.9 billion in project activity in Minnesota. For more information, see Industrial Info's project report.

In its testimony to the PUC, the Minnesota Department of Commerce noted that the state's criteria for new large energy projects include whether the project is needed for the "future adequacy, reliability and efficiency of energy supply."

Among the factors to be considered is the accuracy of the applicant's forecast of demand for oil that would be supplied by the pipeline, as well as the ability of current and planned facilities to meet future demand, the Department of Commerce said.

An analysis by global energy economics consulting firm London Economics International found that refineries in Minnesota and the Upper Midwest "have been 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," the Commerce Department said. The analysis found that "Minnesota demand for refined products appears unlikely to increase in the long term."

The Department of Commerce also said recent expansions of Enbridge's Line 67 pipeline include increased capacity that is "equivalent to Enbridge's stated need to increase capacity on Line 3," adding that "it appears that the increases in the capacity of Enbridge's Line 67, which were granted certificates of need, are already meeting that need."

"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 operating of the existing Line 3, without an new pipeline being built," the department continued.

Enbridge said it and other shippers and oil consumers disagree with the Department of Commerce assessment and would respond in detail, according to Reuters.

The Minnesota PUC is expected to decide on the project's certificate of need and route permit applications in the spring of 2018.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.