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Hazloc Heaters
Hazloc Heaters

Michigan pipeline replacement setback raises fears for existing conduit

CALGARY — A move by the governor of Michigan to halt work on a project to replace Enbridge Inc.’s 65-year-old Line 5 pipeline is raising fears that the recently elected Democratic administration could also try to shut down the existing pipeline.

Analyst Matthew Taylor of Tudor Pickering Holt & Co. says that could result in crude supply disruptions for refineries in southern Ontario and Quebec and could also reduce oil pipeline takeaway capacity from Western Canada.

On Thursday, Michigan Attorney General Dana Nessel ruled unconstitutional a law enacted by the previous Republican governor late last year authorizing construction of a 6.4-kilometre oil pipeline tunnel beneath the waterway linking Lakes Huron and Michigan.

Democratic Gov. Gretchen Whitmer then ordered state agencies to halt work, a move that Taylor says implies that she may move forward with other election promises, including one to re-examine the existing pipeline’s long-held underwater easements.

He says the loss of the 540,000-barrel-per-day capacity pipeline carrying oil and natural gas liquids between Superior, Wis., and Sarnia, Ont., could affect several refineries and would force Canadian shippers to find new routes to get crude oil to markets.

Calgary-based Enbridge said Thursday it was “surprised and disappointed” by the decision given that the concrete-lined tunnel would enhance the safety and reliability of the pipeline by putting it 30 metres underground, instead of resting on the lakebed.

“It’s no surprise that they found a way to pump the brakes on this tunnel proposal,” Taylor said.

“It’s a bit of a step or leap to then say definitively that they will try to challenge the easements … but it is certainly a consideration investors have to look at.”

Enbridge recently won state approval in Minnesota for its Line 3 oil export pipeline replacement project but said permitting timelines meant it wouldn’t be in service until 2020, almost a year later than expected.

Companies mentioned in this article: (TSX:ENB)

The Canadian Press

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