Enbridge says Minnesota regulators applied "unlawful" process to its Sandpiper pipeline review

Pipeline operator Enbridge Energy and its labor and business allies accused Minnesota regulators Monday of imposing unlawful procedures that will unfairly delay the company's plan to build a $2.6 billion pipeline to carry North Dakota crude oil across northern Minnesota.

It is the latest challenge to the Minnesota Public Utilities Commission's review of the pipeline, a contentious process that's been underway for 26 months. In September, after a challenge by environmental groups, the Minnesota Appeals Court faulted regulators' initial environmental-review procedures.

That ruling led the five-member commission to revise the process in December. But in a regulatory filing Monday, Enbridge said the PUC got it wrong again by imposing "unreasonable and unlawful" procedural steps that would delay the project four to six more months until as late as September 2017. That would be nearly four years after the application was filed.

"We are hopeful that the PUC will look hard at the legal argument … because they have made a mistake before in deviating from their process," Paul Eberth, director of the Sandpiper project for Enbridge, said in an interview.

The pipeline is opposed by environmental groups and Indian tribes who fear that a crude oil leak could damaged pristine northern waters, including wild rice lakes and the Mississippi River headwaters. The groups also are fighting Enbridge's plans for another pipeline on the same route to carry Canadian oil.

To speed up the process, Enbridge and its supporters want state regulators to reconsider their requirement that a final environmental study be submitted before launching the formal review of the pipeline route permit and certificate of need. The Calgary-based company argued that the process violates a state law calling for state agencies to coordinate environmental studies and permit reviews.

The company argues that the permit review, including a trial-like process before an administrative judge, should begin earlier, when a draft, rather than a final, environmental study is finished. The final environmental report would be finished before the PUC took a final vote on the pipeline.

The Minnesota Chamber of Commerce, the United Association (of pipe fitters) and the Laborers District Council of Minnesota and North Dakota supported Enbridge's challenge. The unions stand to get many of the expected 2,500 construction jobs.

Kathryn Hoffman, an attorney for Friends of the Headwaters, said the Park Rapids, Minn.-based group initially supported the position Enbridge is taking. But the PUC had reservations about that approach — and ultimately rejected it. Hoffman said the PUC made the right procedural decision — and Enbridge is misreading state law in its challenge.

"It was the commission itself that persuaded us," Hoffman said in an interview. "They wanted to keep them separate. They have the discretion to do that."

The challenge puts Enbridge in a difficult spot. The commission rarely reverses itself, which leaves challengers with the option of filing a court challenge — and a guarantee of more delay. Eberth said the pipeline company is "not today planning to head down a path of lawsuits."

In its regulatory filing, Enbridge cited 17 prior energy projects since 2003 in which the PUC addressed environmental risks in tandem with the permit review. "We are unaware of any prior case where the commission completely separated the environmental review and permitting process," Enbridge attorney Christina Brusven wrote in the filing.

The Sandpiper pipeline is proposed on 299-mile path across Minnesota from North Dakota to Enbridge's Clearbrook, Minn., oil terminal, then southeast toward Park Rapids, and then east to Superior, Wis., where Enbridge has storage tanks and other connecting pipelines.

On that same route Enbridge also is planning to build a replacement for a 1960s-era pipeline with a history of leaks. That line, known as Line 3, carries oil from Alberta.

David Shaffer • 612-673-7090 • @ShafferStrib