Enbridge Energy defends plan to replace Line 3 oil pipeline

Enbridge Energy disputed a state agency's recommendation against the company's proposal for replacing its aging Line 3 oil pipeline across northern Minnesota, insisting in filings Wednesday that the project is needed to ensure adequate crude supplies for Minnesota and other Midwestern refineries for decades to come.

The Minnesota Public Utilities Commission is considering whether to grant a certificate of need for the project, which has aroused opposition from environmental and tribal groups because of the potential impacts on climate change and pristine waters where Native Americans harvest wild rice. The state Commerce Department surprised both sides last month when it concluded that the project isn't needed and that it won't benefit Minnesota enough to justify the risks.

Enbridge officials asserted in rebuttal filings with the PUC that the $7.5 billion project is necessary and that Minnesota will benefit because it will make its pipeline network safer across the state and more reliable, and because the state is part of a broader regional market in which products from refineries in nearby states flow back to Minnesota.

"This is an essential project for Minnesotans that will ensure environmental protection of our important natural resources, as well as ensure the safe transportation of crude oil to refineries in Minnesota and neighboring states," Guy Jarvis, an Enbridge executive vice president in charge of liquid pipelines, told reporters on a conference call.

Calgary, Alberta-based Enbridge wants to replace Line 3, which was built in the 1960s, because it now runs at just over half its original capacity of 760,000 barrels per day and the costs of maintaining it are growing. The pipeline runs from Hardisty, Alberta, through the northeast corner of North Dakota, and crosses Minnesota on its way to Enbridge's terminal in Superior, Wisconsin. Construction is already underway in Canada and Wisconsin.

But the Minnesota portion still requires approval from the PUC, which is scheduled to decide in April whether it's needed and whether it should follow Enbridge's referred route or some alternative. The Commerce Department said it would be better if Enbridge simply shuts down the old line.

"In light of the serious risks of the existing Line 3 and the limited benefit that the existing Line 3 provides to Minnesota refineries, Minnesota would be better off if Enbridge proposed to cease operations of the existing Line 3, without any new pipeline being built," Kate O'Connell, manager of the department's Energy Regulation and Planning Unit, said in a Sept. 11 filing.

To back up its claim that the project isn't needed, the Commerce filings included a consultant's comments asserting that refineries in Minnesota and the Upper Midwest are already operating close to capacity, indicating that they aren't short on supplies of crude oil and have little room for refining more of it. And they said Minnesota's demand for transportation and heating fuels is unlikely to increase in the long term. They suggested that Gulf Coast refineries would see the most benefit.

Enbridge called that analysis flawed. Jarvis said its pipeline network already can't move all the oil that shippers would like.

"This system is essentially full today, and demand for pipeline capacity is expected to grow, even under the most conservative crude production forecast," Jarvis said.

Enbridge isn't out to change the minds of Line 3's tribal opponents, said John Swanson, an Enbridge vice president for U.S. major projects. But he said the company is ready to consult with tribes along the route about their needs and explain the steps that Enbridge has taken to minimize the impact on them.