Michigan is trying to force operator Enbridge Inc (ENB.TO) to shut down the major oil export pipeline. Canada says Enbridge is entitled to run the pipeline according to the 1977 Transit Pipelines treaty between Ottawa and Washington.
Legal experts who have studied the treaty told Reuters that Ottawa has a strong case.
Here is the link to the treaty: https://www.treaty-accord.gc.ca/text-texte.aspx?id=101884
Below are details on what is at stake, and what could happen next:
WHAT IS LINE 5?
Line 5 is a key link in Enbridge’s Mainline system, which ships the bulk of Canadian crude exports to the United States.
The pipeline, built in 1953, carries 540,000 barrels per day of Canadian crude and refined products from Superior, Wisconsin, to Sarnia, Ontario. A four-mile underwater section crosses the Straits of Mackinac between Lakes Huron and Michigan, splitting into twin pipes that run along the lake bed.
WHAT IS THE DISPUTE?
Last November Michigan Governor Gretchen Whitmer revoked Enbridge’s right to operate the pipeline and ordered the company to halt the flow of oil by May. Enbridge ignored that order and Line 5 continues to ship crude.
Michigan officials are worried the aging pipeline could leak oil into the Straits of Mackinac. Calgary-based Enbridge says the pipeline is safe, but has proposed building a $500 million tunnel to house Line 5. The tunnel project would take at least until 2024 to complete, pending permits. read more
Ottawa has said a Line 5 shutdown would bring massive disruption to Canada, and warned it could undermine relations with the United States, Canada’s closest ally and biggest trading partner.
So far the Biden administration has avoided getting involved. In May, Canada threatened to invoke the treaty. read more U.S. Secretary of Energy Jennifer Granholm said then that the matter would be decided in court.
WHAT IS THE LEGAL SITUATION?
Michigan sued Enbridge in state court in November to enforce its order to halt Line 5 operations. Enbridge bumped the case to U.S. federal court, a move Michigan is contesting, arguing pipeline permits are a state matter.
Judge Janet Neff, of the U.S. District Court for the Western District of Michigan, is being asked to rule on which court should hear the case.
Enbridge and Michigan were taking part in court-ordered mediation until Michigan told the mediator the process was unproductive and it had no desire to continue, according to a Sept. 15 letter filed by state Attorney General Dana Nessel.
WHAT DOES INVOKING THE TREATY MEAN?
By invoking the treaty, Canada triggers an arbitration process, essentially forcing the Biden administration to negotiate.
The treaty guarantees uninterrupted flow of petroleum products between the United States and Canada. It states that any disputes should be settled by negotiation as far as possible, and if that fails either the United States or Canada can request arbitration. The first step would be to appoint three arbitrators, according to the terms of the treaty. Kristen van de Biezenbos, a law professor at the University of Calgary, said the whole process could easily take months.
“The arbitrators appointed…shall decide any dispute, including appropriate remedies, by majority. Their decision shall be binding on the Parties,” Article Nine of the treaty states.
Canada also asked the court to halt any proceedings relating to the shutdown order while negotiations are ongoing.
WHAT HAPPENS NEXT?
The federal judge is likely stay the case until there is a resolution, said Biezenbos. Washington might step in and urge Michigan’s governor Whitmer, a Biden ally, to allow Line 5 to continue operating.
Lawrence Herman, legal counsel at Herman & Associates in Toronto, and senior fellow at the C.D. Howe Institute think-tank, said Canada has the stronger case because the treaty is intended to keep pipelines flowing.
“It’s highly probable that Canada would win under the arbitration process,” Herman said.