Court throws replacement of Enbridge Line 3 into limbo; judges rebuke state agency

The Minnesota Court of Appeals reversed a ruling by state utility regulators on the environmental impact statement for Enbridge's Line 3 pipeline, throwing new uncertainty on the controversial project.

The court ruled Monday that the statement was "inadequate because it did not address the potential impact of an oil spill into the Lake Superior watershed." The decision to omit this issue was "arbitrary and capricious," the Appeals Court ruled.

The court, acting on appeals from two environmental groups and three American Indian tribes, remanded the adequacy decision back to the Minnesota Public Utilities Commission (PUC) and, it would appear, to the Minnesota Department of Commerce, which conducted the environmental impact statement, or EIS.

Redoing even a small part of the voluminous EIS could take months, raising questions about more delays in Enbridge's schedule for Line 3.

The PUC granted Enbridge a "certificate of need" for Line 3 last June, the company's most critical approval. Still, Enbridge needs several other state permits and the blessing of the Army Corps of Engineers.

Those permitting decisions aren't expected until November at the earliest. And the remaining state permits now can't be issued until Line 3's EIS is retooled, the appellate court ruling notes.

Enbridge said it was disappointed with the appellate court's decision, noting that with Line 3, the PUC unanimously approved the "most extensive environmental study of a pipeline project in state history."

Enbridge and the PUC could appeal to the Minnesota Supreme Court, though the high court hears only about one out of 10 petitions it receives each year. The PUC declined to comment.

Monday's decision was reached by a three-member appellate court panel with one judge objecting. Francis J. Connolly wrote in a dissenting opinion that the PUC's approval of the EIS was neither arbitrary nor capricious. The commission sufficiently considered potential impacts to the Lake Superior watershed, Connolly wrote.

All three judges ruled against two other claims by the appellants, which include Honor the Earth, Friends of the Headwaters and the White Earth and Mille Lacs bands of Ojibwe and the Red Lake Band of Chippewa.

The PUC in March 2018 approved the Line 3 EIS, a document that ran for thousands of pages and included input from Minnesota Pollution Control and Natural Resources regulators. The study was conducted by the Department of Commerce because it represents the public in matters before the PUC.

Enbridge's $2.6 billion Line 3 project calls for the construction of a new oil pipeline to replace the old Line 3, which is corroding and poses a safety hazard. The new pipeline would carry Canadian oil across northern Minnesota to Superior, Wis.

Enbridge, based in Calgary, Alberta, initially planned to have all of its state and federal permits in hand by now. But in March, Enbridge announced that the permitting process would take until November, delaying construction even further.

With the new roadblock, Enbridge's certificate of need appears to be in a sort of twilight zone. Until the EIS is settled, "I think the certificate of need is invalid," said Scott Strand, an attorney for Friends of the Headwaters, an environmental group. "I think that's pretty clear in state law."

It's not clear how long it would take for the EIS to be fixed, but it could take several months given that a public comment period — among other procedural matters — might be involved. "It would be a mistake for the PUC to address this without giving the public an opportunity to comment," Strand said.

Honor the Earth, an indigenous environmental group, argued in court that the environmental impact statement was inadequate because it failed to address a spill into the Lake Superior watershed, which Line 3 would cross in its last leg to Enbridge's terminal in Superior.

Environmentalists and tribal groups brought up their concerns about the Lake Superior watershed after a draft of the EIS was released by the state Commerce Department in 2017. But "in spite of these persistent concerns," the issue wasn't addressed, the appellate court ruling said.

The commerce department replied that it had analyzed other sites that were close comparisons and that "modeling in the Lake Superior watershed would not be particularly helpful," the court ruling said.

Despite its concerns, the ruling continued, the PUC found that the final EIS was adequate. "We agree with [Honor the Earth], that the commission's decision is, in this regard, arbitrary and capricious and unsupported by substantial evidence," the court concluded.

Enbridge's stock dropped soon after the appellate court ruling, its price down 4.5% on the day.