Court Rejects Environmental Assessment for Enbridge Line 3 Pipeline

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(Reuters) – A Minnesota court ruled on Monday that Enbridge Inc’s environmental impact statement for replacement of its Line 3 oil pipeline is inadequate, raising the possibility of further delays.

The Line 3 project would double current capacity to 760,000 bpd of Canadian crude from Alberta to Wisconsin, providing much-needed relief from congestion on existing Canadian pipelines.

It is the furthest advanced of three proposed pipeline expansions – along with the Canadian government-owned Trans Mountain and TC Energy Corp’s Keystone XL – that would ease Alberta’s oil glut. All three have faced long delays.

In a decision posted online, the Minnesota Court of Appeals ruled that the Minnesota Public Utilities Commission, a state regulator that approved the Line 3 project last year, acted in a manner that was unsupported by “substantial evidence” when it determined the impact statement was adequate.

The impact statement specifically failed to address how an oil spill from the line would affect Lake Superior and its watershed, the court said.

Enbridge shares fell 4.1% on the Toronto Stock Exchange to C$47.73, touching a three-month low.

Enbridge is analyzing the court’s decision and consulting the commission and other state agencies about next steps, the company said in a statement.

It is disappointed in the ruling, since the impact statement was based on the most extensive environment study of a pipeline in Minnesota’s history, the Calgary, Alberta-based company said.

“I think they’re going to have to take (a potential spill) much more seriously than just some hypothetical modeling and really be conscious about the headwaters of the Great Lakes,” said Frank Bibeau, lawyer for the Honor the Earth environmental group.

A blast and a fire at a Husky Energy refinery in Superior, Wisconsin, in April 2018, two months before the commission approved Line 3, highlighted the potential dangers of moving oil near water bodies and illustrates why a closer look at Line 3 is necessary, he said.

Line 3, which began service in 1968 and is corroded, delivers oil to Superior.

“We believe that the market will negatively view the court decision that casts uncertainty with respect to the timeline for the Line 3 Replacement (L3R) project and specifically the ability to bring L3R into service in H2/20,” RBC Capital Markets analyst Robert Kwan said in a note.

In March, Enbridge said Line 3 would be delayed until the second half of 2020 because of permitting delays in Minnesota, and the prospect of further holdups is another blow to the beleaguered Canadian energy industry.

The Alberta government imposed mandatory production curtailments on producers effective Jan. 1 this year because of congestion on export pipelines.

RBC’s Kwan said at this stage it was not clear whether the environmental impact statement could be amended or if a new one would be required.

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