Enbridge Lines 3 and 5 -- The Saga Continues
As Enbridge has stated, its multibillion-dollar replacement of Line 3, running from Hardisty, Alberta to Superior, Wisconsin, is the largest project in Enbridge history. The portion of the project in Wisconsin is already complete and the Canadian portion is expected to be in service by the end of this year. Enbridge does not plan to start construction on the segments in North Dakota and Minnesota until it can get the permits for construction in Minnesota. At the same time, Enbridge is facing demands in Michigan that it replace the section of its Line 5 that crosses under the Straits of Mackinac. Line 5 starts where Line 3 ends and continues to Sarnia, Ontario.
There is no immediate threat to the continued operation of Line 3, but deferring its replacement also defers the public benefits that Enbridge has identified, including reducing the frequency and magnitude of maintenance activities and better serving the general public, which relies on the refineries served by the line to meet the need for refined petroleum products. The threat to Line 5 is more immediate, in that Michigan’s Attorney General has filed a lawsuit seeking to permanently decommission the pipeline where it runs under the Straits of Mackinac “as soon as possible after a reasonable notice period to allow adjustments by affected parties.”
Today we look at the litigation issues that are delaying the permits for Line 3 in Minnesota, and the litigation to shut down Line 5 in Michigan. Any indications of success in Michigan to shut down Line 5 could have a substantial impact on regional refineries and prices for refined products in the Upper Midwest.
The States Directly Impacted
As discussed above, Minnesota, Wisconsin and Michigan are directly impacted by either the construction of Line 3 or the continued operation of Line 5. As the visual below shows, data from the Energy Information Administration shows how reliant these three states are on the goodwill of other states and Canada to meet their need for petroleum products. Two of the states produce no crude at all and Michigan doesn’t produce nearly enough to meet its in-state demands. So, all three states are heavily reliant on the other states and Canada to not only produce that crude but to ship it there, usually by pipeline.
Annual Petroleum Production and Consumption
(Source: EIA)
Is Line 5 at Risk of Being Shut-In?
The short answer to this question is, likely, no.
In The Hits Keep on Comin’ for NESE and Line 3; Are Line 5 and PennEast Next? , we noted the threats made by the Michigan Attorney General (AG) to take legal action to decommission Line 5 “to protect the freshwater resources that are absolutely critical to our state.” Sure enough, on June 27, the AG launched a two-pronged attack to do just that. First, she filed a complaint in state court seeking a permanent injunction against the continued operation of the pipeline in the Straits of Mackinac. Second, she moved to dismiss a lawsuit that Enbridge had filed to have the court declare that Enbridge’s agreements with the prior governor, along with the legislation passed to memorialize those agreements, are valid and enforceable.
The AG asserts in her lawsuit that the court can order the permanent decommissioning of Line 5 in the Straits of Mackinac, but her position depends on the court making some key findings, namely that:
1. The easement granted to Enbridge in 1953 was either never valid or that the easement should be revoked because to allow its continued use by Enbridge would be a violation of the public trust.
2. The continued operation of Line 5 is likely to cause pollution, impairment or destruction of the State’s critical natural resources, namely the Great Lakes.
Interestingly, the AG does not take the position that Enbridge has in any way violated the terms of the easement which would allow her to terminate it for breach. Therefore, her argument is essentially a legal one that turns on her reading of the concept of a public trust.
As she interprets the law, as evidenced in her complaint, the state may only allow the conveyance of an easement in two very limited circumstances, and she asserts that there was no finding that either circumstance existed at the time the easement was granted. The Michigan Supreme Court case on which she rests this intriguing argument was not decided until almost seven years after the easement was granted and addressed a completely different situation. In that case, the legislature had, in fact, passed a statute, as it did in this case, that conveyed lake bottomlands to a private party, a dock-owner, who then built a dock beyond the limits granted in the conveyance by the legislature. There was no discussion at all of the legislative power, which the court assumed existed, and no discussion on how the public trust would limit the legislative power. Instead, the entire decision was focused on whether the rights of the owner could extend beyond those granted by the state legislature, which the court, unsurprisingly, found did not.
The AG’s attempt to void an easement that was authorized by the legislature over 50 years ago seems to be primarily based on a misreading of this one case and we do not think it will ultimately succeed. Her other reasons as to why the court can order the decommissioning of the pipeline rise and fall on this argument and her attempts at showing imminent environmental harm are exceedingly weak.
When Will Line 3 Get Approved in Minnesota?
The decision by the Minnesota Court of Appeals on June 3 finding that the Final Environmental Impact Statement (FEIS) for the Line 3 project was not sufficient was a major setback for the project. The project requires three separate approvals from the Minnesota Public Utility Commission (MPUC):
1. An adequate FEIS
2. A certificate of need
3. A route permit
The MPUC found the FEIS adequate on March 15, 2018. It issued the route permit on October 26, 2018 and issued the certificate of need on January 23, 2019. All three of these findings by the MPUC were appealed to the Minnesota Court of Appeals. The first one to come to a decision was the challenge to the finding by the MPUC that the FEIS was adequate.
In that decision, the Court of Appeals generally denied all of the challenges to the finding of adequacy but did hold that the MPUC was wrong for finding that the FEIS adequately discussed how “an oil spill from Enbridge’s Line 3 project would impact Lake Superior and its watershed.”
Such a limited decision would not generally be a major setback, as the agency would typically correct the deficiency and reissue the FEIS. But both the courts and the other agencies in Minnesota are taking the position that, until an adequate FEIS is reissued, they can’t act on other needed permits. So, the Minnesota Court of Appeals has stayed the appeals of the other two MPUC decisions until the FEIS decision is finally resolved. Similarly, the Minnesota Department of Natural Resources and the Minnesota Pollution Control Agency (MPCA) issued a joint release stating that each will continue reviewing the pending permit applications, but will not “take final action on the applications pending before them until the [MPUC] addresses the EIS deficiency identified in the court’s remand.” In addition, due to the Court of Appeals decision on the FEIS, the MPCA chose not to release its draft permits and the 401 water quality certification (WQC) on July 1 as previously scheduled.
While Enbridge has said it still expects to receive all permits by the end of this year and to be in-service by the end of 2020, that timeline appears to be under substantial pressure. Just looking at the graphical timelines for three of the permits pending before the MPCA (none of which have even been submitted for public comment) shows why that is:
Air Quality Permit for Clearbrook Terminal
(Source: MPCA)
MPCA received Enbridge’s air permit application for the Clearbrook Terminal on September 14, 2018. After almost one year, the MPCA has still not completed a technical review of the project. After it completes its technical review, it will accept public comments on the application.
Water Quality Certification
(Source: MPCA)
The MPCA received Enbridge’s application for its Clean Water Act Section 401 water quality certificate on October 30, 2018. The MPCA is currently reviewing the application for completeness and may request additional information from the applicant, as necessary. As indicated above, it also chose not to issue its draft of the WQC.
Hydrostatic Test Discharge Permits
(Source: MPCA)
Enbridge’s application was received on October 31, 2018. Nine months later, the MPCA has determined that the application is complete enough for processing, but may request additional information from the applicant, as necessary.
Where Do We Go From Here?
Enbridge and the MPUC chose not to appeal the Court of Appeals decision to the Michigan Supreme Court, so the process appears to be back to the MPUC to determine how best to resolve the issue identified as deficient in the court’s decision. Opponents of the project did appeal the decision to the Supreme Court, which has until September 3 to decide whether it will accept those appeals. It will be an adverse result for the project’s timeline if the Supreme Court opts to hear those appeals because it could mean that the issues that the MPUC needs to remedy in the FEIS will not be known until any decision arising from those appeals is reached. In the meantime, Enbridge appears caught in a seemingly endless loop of permit approvals.