Oil
market analysis indicates that Enbridge has not established a need for the
proposed project; the pipeline would primarily benefit areas outside Minnesota;
and serious environmental and socioeconomic risks and effects outweigh limited
benefits
For Immediate Release
SAINT PAUL – Today, the Minnesota
Department of Commerce submitted testimony to the Minnesota Public Utilities
Commission (PUC) on Enbridge’s certificate of need application for
its proposed new Line 3 oil pipeline project.
Supplemented by an oil market
analysis from an independent energy consultant and a study of potential
insurance coverage issues from an insurance expert, the comprehensive 338-page testimony concludes that Enbridge has not established a need for the
proposed project in Minnesota as required under state rules.
The Commerce Department testimony, oil
market analysis and insurance study are intended to inform the PUC’s
decision-making on Enbridge’s proposed project. All documents are
available on the Commerce Department’s Line
3 webpage.
Minnesota rules define specific
criteria required to demonstrate the need for a large energy project such as the
proposed new Line 3 project. These criteria include whether the project is
needed for the “future adequacy, reliability and efficiency of energy supply.”
Among the factors to be considered is the accuracy of the applicant’s forecast
of demand for oil that would be supplied by the proposed pipeline, as well as
the ability of current and planned facilities to meet future demand.
The oil market analysis prepared by
London Economics International, a global energy economics consulting firm,
finds that refineries in Minnesota and the Upper Midwest “have been operating
at high levels of utilization, which indicates both they are not short of
physical supplies of crude oil, and that they have little room to increase
total crude runs.” The analysis also notes that Enbridge did not provide a
sufficient analysis of future demand, and independently finds that
“Minnesota demand for refined products appears unlikely to increase in the long
term.”
Noting the recent expansions of
Enbridge’s Line 67 pipeline, the Commerce Department testimony also points out
that the “increased capacity on Line 67 is equivalent to Enbridge’s stated need
to increase capacity on Line 3.” The testimony states that “it appears that the
increases in the capacity of Enbridge’s Line 67, which were granted
certificates of need, are already meeting that need.”
The testimony also reviews other
existing and planned pipelines in Canada and the U.S. and finds that they
might be reasonable alternatives to a new Line 3, if a need is demonstrated.
The testimony goes on to say that,
“in light of the serious risks and effects on the natural and socioeconomic
environments of the existing Line 3 and the limited benefit that the existing
Line 3 provides to Minnesota refineries, it is reasonable to conclude that
Minnesota would be better off if Enbridge proposed to cease operations of the
existing Line 3, without any new pipeline being built.”
In addition, the testimony analyzes
what conditions the PUC should require if it does issue a certificate of need.
These include a stronger emergency response plan; a more secure backup control
center; thicker pipe throughout the length of the route; back-up power for shut-off
valves; and insurance coverage and financial protections for clean-up of a
major release and for decommissioning the pipeline at the end of its useful
life.
The testimony also recommends that
if a certificate of need is issued, regardless of its decision about removal of
the existing Line 3 for its entire right-of-way, the PUC should (where it has
regulatory authority) require Enbridge to remove all 223 segments (8,496 feet) of
exposed pipeline in Minnesota.
The testimony draws on a wide range
of information sources. These include Enbridge’s own project application with
expert testimony and responses to information requests, as well as the
independent oil market analysis, the insurance study and the environmental
impact statement prepared for the proposed project.
Next Steps in Process
Minnesotans will have the
opportunity to offer input on the proposed Line 3 project during a public
comment period this fall, including a series of public hearings presided over
by an administrative law judge (ALJ) from the Office of Administrative Hearings.
At the public hearings, the public will be able to submit comments, present
evidence and ask questions about the proposed project. A formal notice of the
public comment period, with hearing dates and locations, is posted on the PUC website.
In November, the ALJ will also hold
an evidentiary hearing in Saint Paul for testimony and cross-examination of
witnesses by the official parties to the proceeding.
After these hearings, the ALJ will
submit a report to the PUC with findings of facts, conclusions of law and
recommendations about issuing a certificate of need and a route permit for the
proposed project.
To issue the certificate of need,
the PUC determines if the project is in the state’s best interest. If the PUC
grants the certificate of need, it then determines the most appropriate route
for the project.
Based on its current schedule, the
PUC is expected to decide on Enbridge’s certificate of need and route permit
applications in the spring of 2018.
Enbridge is also required to secure
other permits from federal and state entities, as well as approvals from
various tribal and local entities for activities, related to constructing and
operating the project.
Background of Expert Witnesses
David Dybdahl, Jr., is President of American Risk Management
Resource Network, LLC. Dybdahl has extensive experience as an expert in
environmental risk management and insurance, which includes advising and
providing technical information on environmental insurance to the U.S.
Department of Defense, U.S. Environmental Protection Agency, U.S. Department of
Justice and U.S. Department of Energy.
Dybdahl holds
bachelor’s and master’s degrees in risk management and insurance from the
University of Wisconsin, where he has been a guest lecturer on environmental
risk management and insurance for over 35 years.
Marie Fagan is Managing Consultant and Lead Economist at London Economics
International, LLC. Fagin has over 25 years of experience in research and
consulting for the energy sector, spanning international upstream and
downstream oil and gas, global coal, North American gas markets, and North
American power markets. Fagan leads LEI’s oil and natural gas market analyses,
directing pipeline modeling efforts based on a sophisticated network model.
Fagan received a bachelor’s degree
in finance from the University of Connecticut and a Ph.D. in economics from
American University in Washington, DC. She is the author of original research
with publications in academic and industry journals.
Kate O’Connell serves as Manager of the Energy Regulation and Planning
Unit for the Minnesota Department of Commerce’s Division of Energy Resources. O’Connell
has master’s degrees in applied economics and statistics, both from the
University of Minnesota. She began working for the Commerce Department in 1985
as a Public Utilities Statistical Analyst, later becoming a Public Utilities
Rates Analyst. In 1999, O’Connell became a Public Utilities Rates
Evaluation Supervisor and was promoted to Public Utility Regulation Unit
Manager – the position she holds today.
For more than 30 years, O’Connell
has worked on a wide range of energy regulatory financial and rates issues in the
natural gas, electricity and petroleum industries. She has extensive experience
providing expert witness testimony in numerous energy matters, including significant
involvement in the Commerce Department’s analysis and testimony in recent crude
oil pipeline projects.
Background on Enbridge’s Proposed
Line 3 Project
Enbridge is proposing to construct a
new oil pipeline in Minnesota that would follow the existing Line 3 pipeline
from the North Dakota border near Hallock to an Enbridge terminal in
Clearbrook. From Clearbrook eastward, the proposed pipeline would follow a new
right-of-way, south of the existing Line 3, ending at an existing terminal in
Superior, Wisconsin. Enbridge has proposed that the existing Line 3 would be
decommissioned and left in place after the new pipeline is installed and
operational.
The existing Line 3 operates at an
annual average capacity of 390,000 barrels per day. The proposed new Line 3
would have a capacity of 844,000 barrels per day.
Media Contact
Ross Corson
Director of Communications
Minnesota Department of Commerce
p: 651-539-1463 | c: 651-368-5050 | ross.corson@state.mn.us
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