Does Minnesota really need a new oil pipeline?

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By DAN KRAKER/MRP NEWS

Ever since Enbridge first proposed its $7 billion Line 3 project three years ago – its largest pipeline project ever – the company has touted it as a replacement project.

The Canadian company has operated its existing, 1,000-mile Line 3 for nearly 50 years. But the pipeline is corroding, which necessitates extensive and expensive maintenance, spokeswoman Jennifer Smith said.

“The best way to keep the communities and the environment safe really is to replace it,” she said. “This is a 1960s-era pipeline. We can replace it. We’ve got newer technology on our coating, it’s stronger steel, it would be thicker steel.”

However, the state Commerce Department argues the pipeline isn’t needed. A new round of public hearings for Line 3 began Sept. 26 as state regulators face the question of whether the project is necessary.

The pipeline was originally built to carry 760,000 barrels of oil a day. But the company has had to cut that nearly in half to maintain safety. The proposed new line would boost capacity back up to the original amount.

It would also cut a largely new corridor across northern Minnesota. It would track the original line’s path to Clearbrook, Minn, but then jut south toward Park Rapids, Minn., before cut-ting east to the Wisconsin border south of Duluth.

Line 3 is part of Enbridge’s mainline system, a network of pipelines that trans-ports nearly 3 million barrels of oil every day into the U.S.

That system provides all of the oil used by Minnesota’s largest refinery, the Pine Bend refinery in Rosemount, Minn., south of the Twin Cities metro area.

“We do not take crude by rail or any other means,” said Jake Reint, spokesperson for Flint Hills Resources, which operates the refinery. “Pipelines are truly essential to our ability to meet the needs of Minnesotans and others in the Midwest.”

Pine Bend plans to receive oil from Line 3 if it’s built, Reint said.

But in surprise testimony earlier this month, the state Department of Commerce said Minnesota doesn’t need the pipeline, in part because refineries in the state and the Midwest already receive all the oil they need.

“From [the refineries’] perspective, adding to the mainline is not really going to make much difference to their purchase of crude oil, or the price of crude oil for them,” said Sandy Fielden, director of research for commodities and energy at Morningstar.

Rather, increased oil pipeline capacity would likely serve the Gulf Coast, Fielden said. That’s where more than half the country’s refining capacity is located, and where those refineries are configured to process the heavy crude that’s produced in Canada’s oil sands.

Increased oil shipments from Canada would likely displace oil currently being imported by Gulf Coast refineries from Venezuela and other Latin American countries, Fielden added.

Oil shippers in Canada want to be able to access that market. But there isn’t enough space on the current pipelines for them to ship all the oil they want when they want.

That can add uncertainty for refineries because they never really know how much oil is coming, Fielden added.

“If you have a refinery that relies on supplies from Canada, and they’re subject to these constraints, the thing you’re most concerned about is security of sup-ply,” he said. “Price is one thing, but if you run out of crude oil, your refinery shuts, period.”

The Department of Commerce analysis acknowledged that the new pipeline would help provide oil supplies more efficiently.

But it argued that’s not as important as ensuring reliability or the adequacy of the state’s oil supply, other factors the state is required to consider in making its decision whether to approve the pipeline.

“Their job is to ensure that our state’s energy facilities serve our needs, while impacting the environment and our society in the least harmful way,” said Kevin Lee, senior staff attorney at the Minnesota Center for Environmental Advocacy. “That’s their job. Their job is not to ensure that a private company’s system is working as efficiently as it could be.”

Oil demand in Minnesota has remained flat for the past decade, Lee noted. And many forecast demand will further decline in the future as electric vehicles become more widespread.

“If oil demand is not going to grow for Minnesotans and surrounding states … why should you host a risky, dirty oil pipeline?” asked Lorne Stockman, a senior research analyst at Oil Change International, which filed testimony on behalf of Honor the Earth.

Despite those predictions, oil sands producers are forecasting growth in the next couple years. “The refineries are saying that there’s interest and they need Line 3,” said Enbridge’s Smith. “Whether you like it or not, we need to continue to have a reliable, secure stable source of oil, and an economical source, too.”

It will be up to the state’s Public Utilities Commission to weigh the benefits of the project to the state – including billions of dollars in investment and thousands of construction jobs – versus environmental and social costs including the threat of spills to natural resources, climate change impacts, and significant opposition from many of the state’s American Indian tribes.

The PUC has much discretion in weighing different factors, said Alexandra Klass, a University of Minnesota law professor. The commission is made up of five people appointed by DFL Gov. Mark Dayton.

One thing that’s changed in this proceeding, she said, is that the national debate around pipelines, including the recent protests over the Dakota Access pipeline, has ratcheted up scrutiny on the Line 3 proposal.

“That also means the opposition groups are able to garner more resources in terms of opposing these projects, and also getting more data in front of regulators,” she said. “So it’s not just the industry data and industry economic analysis that’s being done by experts, you’ve got better data on all sides.”

Minnesota Public Radio News can be heard on MPR’s statewide radio network or online at www.mpr.org.