Enbridge Line 3 Replacement Project

Quick Facts/Overview

Owner: Enbridge
Throughput Capacity: 760,000 bbl./day[i]
Start: Hardisty, Alberta
End: Superior, Wisconsin

Cost

The project will cost $5.3B CAD in Canada and $2.9B USD in America.[ii]

Existing Pipeline

The Enbridge Line 3 began operating in 1968 running from Edmonton, Alberta through to Superior, Wisconsin with a capacity of 760,000 bbl./day. However, over its life the pipeline has sustained frequent structural faults and therefore can only ship 370,000 bbl./day as of 2019. [iii] When the Line 3 Replacement Project is completed, the current line will be deactivated. This process starts the removing the remaining oil, cleaning the pipeline, disconnecting it, and finally continuing to monitor it.[iv]

Economic Benefits

In Canada the Enbridge Line 3 Replacement project will add an estimated 23,800 temporary full-time jobs (11,000 in Alberta, 9,000 in Saskatchewan, and 3,800 jobs in Manitoba) and an estimated $514.3M in tax revenue during the construction phase.[v][vi]

As for the Unites States, the project will create $76.5M in state tax revenue with North Dakota claiming $8M, Wisconsin receiving $34.5M, and Minnesota receiving $34M.[vii] Minnesota will benefit the most out of the three states with an economic impact of over $2B over the lifetime of the project. The project will also bring an ongoing reliable supply of crude oil to Minnesota refineries. The project will also bring $100M in development/employment opportunities for Indigenous Minnesota communities.[viii]

Products Carried

The pipeline will be a mixed-service line carrying a wide variety of crude oil (sweets, light/high sour, and light synthetics). Shippers are also able to ship crude blends.[ix]

Committed Shippers

As of April 2019, Suncor appears to be the only committed shipper.[x]

Provinces/States

1,660 km pipeline travelling through:

Alberta
Saskatchewan (The pipeline travels through Regina)
Manitoba (Exits Canada through Gretna)
North Dakota (Enters USA through Neche-13 miles)
Minnesota (337 miles)
Wisconsin (14 miles)[xi]

[xii]

Regulatory hurdles

The Minnesota Public Utilities Commission (PUC) approved the project in June 2018, however the decision was appealed by Minnesota’s governor in February 2019. The Governor (Tim Walz) and the State’s commerce department requested the Minnesota PUC to reconsider its approval of Line 3. In March 2019, Minnesota PUC regulators reconfirmed their approval.[xiii]

Two state agencies, the Minnesota Pollution Control Agency (PCA) and the Minnesota Department of Natural Resources (DNR), have said the permitting schedule would need to be revised. Officials stated that environmental review was inadequate and therefore limited the permitting process. Key shortcomings included inadequate studies on potential impacts of an oil spill in the Lake Superior watershed. The Minnesota PCA and DNR have stated they will not act on the permit applications until the environmental review is revised and approved. This process is estimated to take six months.[xiv]

FID (Final Investment Decision)

The project is finalized. Construction began in Summer 2017 in Canada. Construction has already been completed in the following areas:

Hardisty, AB to Cactus Lake, SK.
Milden, SK to Bethune, SK.
Cromer, MB
Gretna, MB[xv]
Wisconsin[xvi]

Commercial Operation Date

The replacement project was expected to be complete in late 2019, however considering recent delays analysts are expecting (at the earliest) a completion date of late 2020.[xvii]

Trans Mountain Pipeline Expansion Project

Quick Facts/Overview

Owner: Canadian Development Investment Corporation (Canadian Federal Government)
Throughput Capacity: 690,000 bbl./day
Start: Strathcona County (Edmonton), Alberta
End: Burnaby, British Columbia

Cost

Kinder Morgan has said the project will cost $7.4B CAD. However, Kinder Morgan Canada financial documents suggest the project may cost $9.3B, an increase of $1.9B.[xviii]

Existing Pipeline

The current Trans Mountain Pipeline system began operating in 1953 and spans 1,150 km. The pipeline moves crude oil and semi-refined products from Edmonton, Alberta to Burnaby, BC. The pipeline has a capacity of 300k bbl./day.[xix]

Prior to 2008, the pipeline had a capacity of 260,000 bbl./day. In 2004, Kinder Morgan, the previous owners of the Trans Mountain System began constructing a second pipeline (known as the Anchor Loop) running between Hinton, Alberta, and Hargreaves, British Columbia. This increased capacity from 260,000 bbl./day to 300,000 bbl./day[xx][xxi]. The Trans Mountain Pipeline Expansion will increase the capacity an additional 690,000 bbl./day to 890,000 bbl./day.

In March 2018, the Canadian Federal Government announced it was acquiring the Trans Mountain Pipeline from Kinder Morgan for $4.5B. As of August 31^st, the project is owned by the Trans Mountain Corporation, a subsidiary of the Canada Development Investment Corporation. The government ultimately intends to sell the project project/seek outside investors to complete the project. [xxii]

Natural Resources Minister Amarjeet Sohi has said that although Ottawa will consider bids from Indigenous groups, they are not facing any time constraints[xxiii]. Project Reconciliation, an Indigenous-led group, has announced it will be making a $6.9B bid to purchase a 51% stake in the pipeline ($2.3B would go towards a 51% stake in the existing pipeline and $4.6B would be attributed to the expansion project). Project Reconciliation prefers the Federal Government maintains a 49 per cent stake to ensure both groups have “skin in the game”. The offer could land on the Prime Minster’s desk Tuesday July 16^{th [xxiv]}.

Economic Benefits

The combined revenue impact for construction and first 20 years of operations is $46.7B in provincial and federal taxes with BC collecting $5.7B, Alberta collecting $19.4B, and the Canadian Federal Government collecting $21.6B.

Canada will also generate extra revenue of $3.7B more per year in oil sales as a result of a stronger ability to sell to international markets. Finally, this will crease 15,000 temporary construction jobs [xxv] and 37,000 full-time operation jobs (direct, indirect, and induced jobs).[xxvi]

Products Carried

The Trans Mountain Pipeline system will carry refined petroleum, synthetic crude, light crude, heavy crude. These products can be blended.[xxvii]

Committed Shippers

Athabasca Oil Corporation
BP Canada Energy Trading Company
Brion Energy Corporation
Canadian Natural Resources Limited
Cenovus Energy Inc.
Devon Canada Corporation
Husky Energy Marketing Inc.
Imperial Oil Limited
MEG Energy Corp.
Suncor Energy Marketing Inc.
Teck Canadian Energy Sales Ltd.
Tesoro Canada Supply and Distribution Ltd.
Total E&P Canada Ltd.[xxviii]

Provinces/States

1,150 km pipeline travelling through:

Alberta
British Columbia

[xxix]

Regulatory hurdles

In August 2018 the project was delayed as the Federal Court of Appeal required the National Energy Board to review its earlier approval. The court stated that there was not enough information regarding potential marine impacts of the pipeline and increased tanker traffic. In addition, the Federal Court of Appeal said the project needed more consultation with First Nation communities.[xxx]

In February 2019, the National Energy Board once again recommended the approval of the project, subject to 156 conditions and 16 recommendations.[xxxi] The recommendations were sent to Prime Minister Trudeau and the Federal Government. On June 18^th the Federal Government approved the project. Shovels are expected to break ground this construction season [xxxii].

FID (Final Investment Decision)

The project has been approved.[xxxiii]

Commercial Operation Date

Although there is no firm date set, analysts are expecting a potential 2022 commercial operation date.[xxxiv]

Keystone XL

Quick Facts/Overview

Owner: TransCanada (TC Energy)
Throughput Capacity: 830,000 bbl./day
Start Point: Hardisty, Alberta
End Point: Steele City, Nebraska

Cost

The Keystone XL pipeline was originally projected to cost $7B USD. However, factoring in delays, the cost has now jumped 14% to $8B USD.[xxxv]

Existing Pipeline

The Keystone system transports products from Alberta to refineries in Texas, Illinois, and Oklahoma. The Keystone XL pipeline offers a more direct route to these refineries [xxxvi] .The new route prevents the need to move east from Alberta to Manitoba before being able to travel south to Steele City, Nebraska.[xxxvii]

Economic Benefits

The project is expected to produce 20,000 construction and manufacturing jobs and in addition, bring 42,000 indirect jobs. The project will also bring $585M of tax revenue to states and communities along the pipeline route. Finally, the project will produce more than $5.2B of property tax revenue during its lifetime.[xxxviii]

Products Carried

The pipeline will ship diluted bitumen and synthetic crude oil.[xxxix]

Committed Shippers

Keystone XL committed shippers include Canadian Natural Resources, Suncor Energy, Cenovous Energy, and the Province of Alberta (Alberta receives a small portion of crude in lieu of a cash royalty). So far, this amounts to a 20-year commitment of a combined 500,000 bbl./day.[xl]

Provinces/States

1,179 mile /1,8975km pipeline travelling through:

Alberta (Hardisty)
Saskatchewan (Exits Canada through Val Marie)
Montana (Enters USA through) Morgan.
1. The pipeline goes through Baker (American-produced oil would be added here)
South Dakota
Nebraska (Steele city)[xli]

[xlii]

Regulatory hurdles

TransCanada has been granted permits from all three states the route crosses permits. However, TransCanada is waiting for federal permits to cross federal lands and waterway permits.

In 2015, President Obama denied a presidential permit. After the 2016 election, President Trump invited TransCanada to resubmit their application and approved the application in Spring 2017. In November 2018 the Montana Federal Court (Judge Brian Morris) ruled the project required further review and subsequently blocked the project/halted construction. In February 2019, Judge Morris also blocked TransCanada’s request to begin constructing worker camps. On March 29^th, President Trump revoked the March 2017 permit and issued a new one, effectively restarting the process.[xliii]

The previous permit was issued after an environmental analysis as required under the National Environmental Policy Act (NEPA). This new permit is not contingent on any type of environmental review. Since 1968 the State Department has vetted permit applications for oil pipelines. However, the President retains the authority to issue permits him/herself. The NEPA statute that requires an environmental study of energy projects does not apply to the President.[xliv]

It should be noted that conservation groups filed suits in the Grate Falls, Montana federal court arguing that President Trump acted illegally and does not have the authority to issue permits on land managed by the Bureau of Land Management as it is overseen by Congress. This suit was filed with Judge Brian Morris.[xlv]

In Nebraska the project is currently contested before the state Supreme Court in a separate lawsuit over the state’s approval of the route. The results are expected to be released shortly.[xlvi]

Issues in South Dakota include multiple water quality permits which were submitted in October 2018.[xlvii]

FID (Final Investment Decision)

As of July 2019, TC Energy has not made final investment decision[xlviii], citing that it will first continue to seek additional long-term shipping contracts[xlix], as well as a stable permit environment[l].