Minnesota regulators probe Enbridge on Line 3

Hearings on pipeline replacement

CALGARY • Minnesota regulators grilled Enbridge Inc. lawyers Tuesday over the need for, and benefits of, the company’s $7.4-billion Line 3 pipeline replacement.

Calgary-based Enbridge has argued throughout the regulatory process that it needs to replace the aging Line 3 with a new pipeline and roughly double the pipeline’s capacity to carry 760,000 barrels of oil per day from Alberta to refineries in the U.S. Midwest.

With the replacement project, Enbridge said that it would reduce the need to apportion space on its mainline pipe system from Canada and thereby boost supplies to U.S. refineries. Minnesota Public Utilities Commissioners tested to what extent that argument was true on Tuesday as final deliberations on the pipeline began.

“Regardless of what’s happening with apportionment on the system, (refineries) are still getting the oil, clearly,” commissioner Matt Shuerger said at the meeting, noting there was “zero” idle capacity at refineries in the area.

Eric Swanson, a Minneapolis-st. Paul-based attorney and counsel to Enbridge, said that railways were supplying oil to refineries in Minnesota and neighbouring states because the company has been forced to ration space on its pipeline system.

“The oil is getting to market … somehow,” Swanson said.

The support of Flint Hills Resources, a subsidiary of Koch Industries Inc., for the Line 3 replacement project was also cited at as the Minnesota PUC gets closer to making a decision on the project.

Flint Hills said in a May 9 letter to the commission that apportionment “is especially harmful to Minnesota’s land-locked and pipelinedependent refineries where apportionment or the lack of adequate pipeline capacity, if left unremedied, will add unnecessary costs and create greater business risk, stymieing future refinery investments, costing jobs, and potentially leading to less reliable fuel supplies and less competitive prices for Minnesotans at the pump.”

Flint Hills’ operates the Pine Bend refinery in Rosemount, Minn. and produces the majority of the transportation fuels used in the state.

The company also took issue with a recommendation of a Minnesota Administrative Law Judge, which recommended the Minnesota PUC approve the project but not along Enbridge’s preferred route. “This would significantly exacerbate apportionment far beyond current levels and put crude supply to Minnesota refineries at even greater risk,” the company’s letter stated.

The five-person Minnesota PUC — it consists of three Democrats, a Republican and an independent — is the last regulator to issue an approval for the project. The commission is expected to make its decision this week in a series of open meetings the public is entitled to attend.

The commissioners did not tip their hand on the extent to which they would rely on the administrative law judge’s recommendations, but did ask Enbridge lawyers to explain how different routes and different volumes through the line would affect the industry.

“Anything less than 760,000 barrels per day, the apportionment numbers would rise,” Swanson said.

The meetings to render a decision continue Wednesday and, if necessary, Thursday.

Earlier this month, BMO Capital Markets analyst Ben Pham predicted the most likely outcome of the meetings would be an approval of the project along the company’s preferred route, but the Minnesota PUC would also ask Enbridge to dig up an replace the old pipeline. Pham predicted that would add Us$1.2-billion in costs to the project.