Enbridge hits back against state report against pipeline project

Enbridge says its oil pipelines across northern Minnesota are so full that its customers' demands aren't being met, rejecting a recent state report that found no need for a new, $2 billion-plus pipeline proposed by the company.

Enbridge made its rebuttal in a filing Wednesday with state utility regulators, the latest salvo in a battle over the company's plans to replace its aging and corroding "Line 3" with a new 340-mile pipeline. Line 3 is one of six Enbridge pipelines that transport Canadian oil from the northwestern corner of Minnesota to a large terminal in Superior, Wis.

"The system is essentially full today, and demand for pipeline capacity will grow under even the most conservative estimates," Guy Jarvis, Enbridge's liquids pipeline president, said Wednesday in a conference call with reporters.

Last month, the Minnesota Department of Commerce concluded that Enbridge's pipeline corridor, which moves about 2.5 million barrels of oil daily across Minnesota, has enough capacity to meet the state's long-term oil needs without a new Line 3. The report could be a major roadblock for Calgary-based Enbridge, as the department represents the public interest in matters before the Minnesota Public Utilities Commission (PUC), which is scheduled to decide Line 3's fate in April.

The Commerce Department declined to comment on Enbridge's new PUC filings, saying it plans to file a formal response to Enbridge's rebuttal.

Enbridge's pipelines provide most of the oil used by Minnesota's two refineries, and they serve Great Lakes refinery markets as well as the Gulf Coast, to a lesser extent. Already, Enbridge is rationing Minnesota pipeline capacity, meaning the company is unable to meet oil shippers' full demand, Jarvis said.

The current Line 3 is operating at 390,000 barrels per day — well short of its 760,000-barrel capacity — because of safety concerns. Enbridge says the replacement line would not only provide a needed safety upgrade from the current 1960s-vintage pipeline but also restore the flow to an average of 760,000 barrels per day.

The replacement line would have a maximum capacity of 844,000 barrels. Enbridge says it will close the current Line 3 after a replacement is built.

The new Line 3 would follow Enbridge's current pipeline corridor to Clearbrook, Minn., but then jog south to Park Rapids before heading east to Superior. Opponents say it could further threaten the region's water sources, while contributing to global greenhouse gas emissions.

Line 3 starts in the oil fields of northern Alberta, and Enbridge plans to replace the entire pipeline, an $8.2 billion project. The U.S. portion, most of which is in Minnesota, alone would cost $2.9 billion.

The state's Commerce Department has concluded that "the high socioeconomic costs [of a new Line 3] outweigh the minimal benefits to Minnesota of the proposed project."

The department found that oil refineries in Minnesota and the Upper Midwest are operating near top capacity, while Minnesota's demand for gasoline and other refined products isn't likely to increase.

But Enbridge Wednesday criticized the Commerce Department's supply-demand analysis. Line 3 would be fully used even if gasoline demand was substantially reduced, according to testimony filed with the PUC by Neil Earnest, president of Muse, Stencil & Company, an energy consultant working for Enbridge.

Also, oil is being rationed — or "apportioned" — to Minnesota's two refineries, including the huge Flint Hills Resources facility in Rosemount. That's a trend that will continue without a new Line 3, Enbridge said.

Flint Hills, owned by Koch Industries, has supported a new Line 3, as has Marathon Petroleum, a large refiner in the Midwest. In a filing with the PUC, Flint Hills said it "disagrees with critical aspects" of the Commerce Department's conclusions on a new Line 3.

"For instance, the Department's analysis incorrectly concludes that the Flint Hills Resources Pine Bend refinery [in Rosemount] is at or near full utilization."

The refinery last year was operating at about 85 percent of its 339,000 barrel per day capacity, the company said.

The Commerce Department also found that Line 67 — another Enbridge pipeline in Minnesota — will take care of the company's and its shippers' needs. In 2012 and 2013, the PUC allowed Enbridge to expand shipments on Line 67 by 350,000 barrels per day, and the pipeline now has a capacity of 800,000 barrels per day.

Enbridge says it's still not meeting shippers' needs, even with the approved increases.

Mike Hughlett • 612-673-7003