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Minnesota court rules confirm permission for line 3 pipeline replacement project

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As the Minnesota Court of Appeals upheld the pipeline's permit approval on June 14, the line 3 replacement project may continue construction to allow more Canadian heavy oil to be shipped to the United States by the end of 2021.

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The court’s main ruling temporarily prevented any major delays in Enbridge’s largest pending project, which will increase the crude oil pipeline capacity of Line 3 from the current 370,000 barrels/day to 760,000 barrels/day, as it will transport Canadian crude oil from Ai Berta transported to Superior, Wisconsin, although most of the remaining construction work was in Minnesota.

The Minnesota Court of Appeals ruled by a score of 2 to 1, that despite the error in the permitting process, a large amount of evidence supports the need to replace the pipeline, and the court should follow the Minnesota Public Utilities Commission's expertise project that approved the pipeline.

After US President Joe Biden revoked the license to compete for the Keystone XL pipeline formally terminated by TC Energy last week, the Line 3 project became a top pipeline expansion project aimed at alleviating the bottleneck of the Canadian pipeline and slowing down the flow of heavy oil into the United States. However, despite hundreds of people protesting and trying to push Biden to take action, the White House has always stayed out of the line 3 debate.

After two months of suspension in the spring, Minnesota's heavy oil pipeline has completed more than 60%, but construction was recently resumed on June 1. The plan to start in the fourth quarter of this year is still in progress.

More appeals and other lawsuits against Line 3 will continue, but the Minnesota Court of Appeals decision is considered to be the biggest potential obstacle to Line 3. If the regulatory process needs to be restarted, construction may be delayed for about a year.

"After six years of community involvement, environmental review, regulatory and legal review, it is great to see that the previous decision regarding the replacement of Line 3 project has been confirmed," Enbridge Executive Vice President Vern Yu said in a statement. "From the very beginning, the project has been committed to improving the safety and reliability of the community and protecting the environment."

After going live, Enbridge will also increase the output of its recently expanded Wisconsin-Illinois Southern Passage crude oil pipeline, which will increase its production capacity from 996,000 barrels per day to 1.2 million barrels per day.

Canadian producers in particular are pinning their hopes on the Line 3 project to help export more crude oil to the United States and reduce partial reliance on railroad crude oil. Manufacturers are also looking forward to the expansion of the Canadian government's Trans-Mountain Pipeline, which is scheduled to be completed by the end of 2022.

The court's positive ruling on Enbridge has been reflected in WCS crude oil prices, so the market reaction on June 14 was flat.

According to S&P Global Platts Analytics, the line 3 replacement project is an important infrastructure to support Canadian production growth.

Canadian production is expected to reach a new high in the fourth quarter of 2021, so the launch of the pipeline will absorb the increasing production in due course. Platts Analytics stated that as the capacity of new pipelines increases, WCS should be priced based on pipeline economy, so as to keep the price differential tight before 2022 and reduce its reliance on railway crude oil exports.

Data from Platts Analytics shows that Western Canada's supply including diluents is expected to increase by an average of 410,000 barrels/day in 2021 and 110,000 barrels/day in 2022.

The plaintiff in the Line 3 case argued that the Public Utilities Commission did not consider the risk of oil spills and did not properly weigh the need to replace pipelines, especially considering the energy transition from fossil fuels.

But the majority of the three judges ultimately disagreed.

The court ruling concluded: “Although reasonable ideas may differ on the core issue of replacing line 3, a large amount of evidence supports the committee’s decision to issue a proof of need.” “Finally, the committee made reasonable choices on the basis of respecting tribal sovereignty. The route to replace the pipeline is minimized while minimizing the impact on the environment."

However, the ruling made it clear that this was not an easy decision.

The court ruled that: "Because of the existing, deteriorating pipeline transporting crude oil through Minnesota, there is no choice without environmental consequences." "Challenge: balance these hazards. There is no option that does not affect the rights of indigenous peoples. Challenge: minimize as much as possible. These hazards. And there is no crystal ball that can predict the demand for crude oil in this situation-changing the environment."

In the dissenting opinion, Judge Peter Reyes Jr. stated that the Public Utilities Commission made a legal error and took arbitrary actions in its permission in favor of Enbridge.

Reyes pointed out that the pipeline project traverses 340 miles of Minnesota land, affecting the environment, Native American tribes, and hunting and fishing activities, and "does no benefit to Minnesota."

"Such a decision cannot be established," Reyes argued. "Enbridge's new pipeline requires Minnesota. But Enbridge did not indicate that Minnesota needs this pipeline."

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