Line 3 delay a setback for Enbridge, Canadian oil industry
Enbridge’s quiet announcement March 1 that construction of its Line 3 oil pipeline through northern Minnesota would be pushed back a year caused shares of the Calgary-based oil transportation company to fall.
Enbridge share values dropped nearly 6.5 percent March 4. The price slowly recovered throughout last week.
Through February, Enbridge maintained that the 340-mile-long segment of pipeline through the state would be completed in 2019, replacing the existing 50-year-old Line 3. But on March 1, Enbridge CEO Al Monaco said that was pushed back to 2020, noting a state and federal permitting timeline that would wrap up later than expected.
“Ultimately, the delay of this project is an additional 12-month headwind for the Canadian energy sector,” Scotiabank’s commodity team wrote in a pre-market note March 4.
Permitting timelines provided by the Minnesota Pollution Control Agency and Department of Natural Resources show final decisions expected by October and November, respectively. The project must also earn a separate water permit from the U.S. Army Corps of Engineers.
When complete, the pipeline will carry 760,000 barrels of oil per day from Alberta to its terminal in Superior.
In a separate commodity note Tuesday, Rory Johnston, a commodity economist at Scotiabank, said Line 3’s delay, along with two other proposed Canadian pipelines sitting in the regulatory process — Keystone XL and the Trans Mountain Expansion Project — would increase the amount of Canadian crude oil moved by rail.
“Though (Line 3’s) delay is particularly painful given that the project was previously seen as a relatively solid bet for the end of the year,” Johnston wrote.
According to data kept by the Canada National Energy Board, a record 353,789 barrels of Canadian crude oil per day were exported in December 2018, the last month of data available. In December 2017, 151,940 barrels per day were exported.
Earlier this week, Gov. Tim Walz, a Democrat, said Enbridge’s target for 2019 completion was “optimistic” and “aggressive.”
In an interview with the News Tribune on Thursday, Walz said the company should not have been so surprised by the permitting process lasting through 2019 as the state’s timelines had been provided to the company all along.
“The timelines for the permitting process are known and have been known,” Walz said. “And the Corps of Engineers water crossing permit? They knew when that was going to come out probably in November of ’19. So I just think maybe there was a false sense of optimism there.”
Enbridge did not directly answer a question from News Tribune on Friday on whether the state had provided the company with a permitting timeline prior to its March 1 delay announcement.
“Enbridge is focused on the process of finalizing the remaining permits,” Juli Kellner, an Enbridge spokesperson, said Friday. “We now have a firm schedule from the state on the timing of the remaining permits and we will continue to work closely with state officials during this process.”