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Proposed Oil Pipelines in Canada

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 physically disconnecting it, and finally continuing monitoring it.[iv]

Economic Benefits

In Canada the Enbridge Line 3 Replacement project will add an estimated 24,000 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 bring $100M in development/employment opportunity 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:

  1. Alberta
  2. Saskatchewan (The pipeline travels through Regina)
  3. Manitoba (Exits Canada through Gretna)
  4. North Dakota (Enters USA through Neche) (13 miles)
  5. Minnesota (337 miles)
  6. Wisconsin (14 miles)[xi]

[xii]

Regulatory hurdles

The Minnesota Public Utilities Commission 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 Public Utilities Minnesota regulators confirmed their approval.[xiii] Enbridge expects the permitting process to be complete in November 2019 and receive federal permits 60 days after. [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 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 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 the 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 31st, 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]

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 Canada collecting $21.6B.

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

Products Carried

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

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.[xxv]

Provinces/States

1,150 km pipeline travelling through:

  1. Alberta
  2. British Columbia

[xxvi]

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.[xxvii]

In February 2019, the National Energy Board once again recommended the approval of the project, subject to 156 conditions and 16 recommendations.[xxviii] The recommendations are now sent to Prime Minister Trudeau and the federal government. The federal government has stated that it will take more than 90 days to review the latest report.[xxix]

FID (Final Investment Decision)

The project has been approved.

Commercial Operation Date

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

Keystone XL

Quick Facts/Overview

  • Owner: TransCanada
  • 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.[xxxi]

Existing Pipeline

The Keystone system transports products from Alberta to refineries in Texas, Illinois, and Oklahoma. The Keystone XL pipeline is a more direct route to these refineries [xxxii] as it bypasses the need to move East from Alberta to Manitoba before being able to travel south to Steele City, Nebraska.[xxxiii]

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 bring more produce more than $5.2B of property tax revenue during its lifetime.[xxxiv]

Products Carried

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

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 total 20-year commitment of a combined 500,000 bbl./day.[xxxvi]

 Provinces/States

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

  1. Alberta (Hardisty)
  2. Saskatchewan (Exits Canada through Val Marie)
  3. Montana (Enters USA through) Morgan.
    1. The pipeline goes through Baker (American-produced oil would be added)
  4. South Dakota
  5. Nebraska (Steele city)[xxxvii]
  6. [xxxviii]
  7. [xxxix]

[xl]

Regulatory hurdles

TransCanada has been granted permits from all three states the route crosses permits have been granted. However, Trans Canada is awaiting for federal permits to cross fed lands & waterway permits.

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

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

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.[xliii]

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.[xliv]

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

FID (Final Investment Decision)

As of April 2019, TransCanada has not made final investment decision[xlvi], citing that it will first continue to seek additional long-term shipping contracts.[xlvii]

Commercial Operation Date

Although TransCanada states that construction is expected to start Summer 2019, permits may not hold up in court. An expected two-year build time results in a COD of Summer 2021.[xlviii]

[i]  https://www.enbridge.com/projects-and-infrastructure/projects/line-3-replacement-program-us

[ii] https://www.enbridge.com/Line3ReplacementProgram.aspx

[iii] https://www.cbc.ca/news/canada/calgary/enbridge-line-3-pipeline-delayed-1.5040611

[iv] https://www.enbridge.com/projects-and-infrastructure/public-awareness/minnesota-projects/line-3-deactivation

[v] https://www.enbridge.com/projects-and-infrastructure/projects/line-3-replacement-program-canada/economic-benefits

[vi] https://www.enbridge.com/~/media/Enb/Documents/Factsheets/FS_L3RP_Canada_Quickfacts.pdf?la=en

[vii] https://www.enbridge.com/~/media/Enb/Documents/Public%20Awareness/Minnesota%20projects/20171106%20L3R%20US%20infographic%20updated.pdf

[viii] https://www.enbridge.com/~/media/Enb/Documents/Public%20Awareness/Minnesota%20projects/ENBLine3QFactsJUN2015L04.pdf?la=en

[ix] https://www.enbridge.com/projects-and-infrastructure/projects/line-3-replacement-program-canada

[x] https://www.suncor.com/investor-centre/business-overview/market-access

[xi] https://www.enbridge.com/~/media/Enb/Documents/Factsheets/FS_L3RP_Canada_Quickfacts.pdf?la=en

[xii] https://energi.news/canada/enbridge-line-3-replacement-project-okd-but-preferred-route-rejected/

[xiii] https://www.bnnbloomberg.ca/enbridge-s-line-3-gets-green-light-from-minnesota-regulators-1.1235608

[xiv] https://www.reuters.com/article/us-enbridge-inc-results/enbridge-not-surprised-by-minnesota-governors-pipeline-appeal-ceo-idUSKCN1Q41I9

[xv] https://www.enbridge.com/projects-and-infrastructure/projects/line-3-replacement-program-Canada

[xvi] https://www.enbridge.com/projects-and-infrastructure/public-awareness/minnesota-projects/line-3-replacement-project

[xvii] https://www.bloomberg.com/news/articles/2019-03-02/enbridge-pipeline-delayed-a-year-in-hit-to-canadian-oil-industry

[xviii] https://www.cbc.ca/news/canada/calgary/kinder-morgan-trans-mountain-pipeline-costs-could-rise-completion-delayed-1.4776643

[xix] https://www.transmountain.com/pipeline-system

[xx] https://napipelines.com/2019-canadian-oil-pipeline-report-supply-outpaces-pipeline-capacity/

[xxi] https://business.financialpost.com/pmn/business-pmn/timeline-key-dates-in-the-history-of-the-trans-mountain-pipeline-2

[xxii] https://www.washingtonpost.com/world/canadian-government-to-buy-troubled-trans-mountain-pipeline/2018/05/29/f3a485ae-6359-11e8-81ca-bb14593acaa6_story.html

[xxiii] https://www.transmountain.com/benefits

[xxiv] https://www.transmountain.com/product

[xxv] https://www.transmountain.com/project-overview

[xxvi] https://www.neb-one.gc.ca/pplctnflng/mjrpp/trnsmntnxpnsn/mps-eng.html?=undefined&wbdisable=false

[xxvii] https://globalnews.ca/news/4673297/peter-watts-neb-trans-mountain-review/

[xxviii] https://www.transmountain.com/regulatory-process

[xxix] https://www.knkx.org/post/canadas-energy-regulator-again-approves-trans-mountain-pipeline-expansion

[xxx] https://vancouversun.com/news/local-news/trans-mountain-ceo-says-pipeline-construction-could-restart-in-2019-on-neb-timeline

[xxxi] https://oilprice.com/Latest-Energy-News/World-News/TransCanada-Looks-To-Asset-Sales-JVs-To-Fund-8B-Keystone-XL.html

[xxxii] https://www.investopedia.com/terms/k/keystone-xl-pipeline.asp

[xxxiii] https://www.keystone-xl.com/kxl-101/maps/

[xxxiv] https://www.globalenergyinstitute.org/benefits-keystone-xl

[xxxv] https://www.investopedia.com/terms/k/keystone-xl-pipeline.asp

[xxxvi] https://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/alberta-pumps-up-keystone-xl-sparking-ire-of-rival-enbridge/article37654046/

[xxxvii] https://www.keystone-xl.com/kxl-101/maps/

[xxxviii] http://www.neb-one.gc.ca/pplctnflng/mjrpp/kstnxl2/prjctnf-eng.html

[xxxix] http://www.neb-one.gc.ca/pplctnflng/mjrpp/kstnxl2/prjctnf-eng.html

[xl] http://www.neb-one.gc.ca/pplctnflng/mjrpp/kstnxl2/prjctnf-eng.html

[xli] https://www.estevanmercury.ca/news/business-energy/trump-grants-new-presidential-permit-to-keystone-xl-1.23781149

[xlii] https://business.financialpost.com/commodities/energy/trump-doubles-down-on-keystone-oil-pipeline-with-new-permit

[xliii] https://ktvq.com/news/local-news/2019/04/05/environmental-groups-sue-to-block-new-trump-permit-allowing-keystone-xl-pipeline-construction/

[xliv] https://earther.gizmodo.com/trump-s-unprecedented-plan-to-restart-the-keystone-xl-1833723790

[xlv] https://www.grandforksherald.com/business/energy-and-mining/4564371-transcanada-seeks-water-permits-keystone-xl-construction-south

[xlvi] https://business.financialpost.com/commodities/energy/trump-doubles-down-on-keystone-oil-pipeline-with-new-permit

[xlvii] https://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/alberta-pumps-up-keystone-xl-sparking-ire-of-rival-enbridge/article37654046/

[xlviii] https://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/alberta-pumps-up-keystone-xl-sparking-ire-of-rival-enbridge/article37654046/

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Chayten Hansra
Chayten Hansra
Chayten is a student at UBC entering his final year in September. He is currently working with EY’s Transaction Advisory Services team as a Real Estate Analyst (Co-op). Prior to that, Chayten was an Acquisitions/Investment Management Analyst (Co-op) at Bentall Kennedy. He is also pursuing the CFA Level 1 exam in June. Outside of academics and work, Chayten enjoys skiing, cheesecake, and fantasy sports with his friends.

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