Bloomberg News

Keystone-Like Fight Looms in Enbridge’s Plan to Double Oil Flow

May 02, 2013

Keystone-Like Fight Looms in Enbridge’s Plan to Double Oil Flow

Tar sands, or oil sands, in Alberta, Canada. Photographer: Veronqiue de Viguerie/Getty Images

A new front may soon open in the battle over pipelines that transport Canadian oil to the U.S.

And this one involves a line that would carry even more oil derived from Alberta’s tar sands than TransCanada Corp. (TRP)’s proposed Keystone XL, a project that has inflamed environmentalists who say it would exacerbate climate change.

Enbridge Inc. (ENB)’s request for a permit to boost the volume of oil on an existing pipeline from Alberta to Wisconsin has so far escaped controversy. That may change as the State Department begins to review the plan, which would almost double the line’s capacity to 880,000 barrels a day -- more than the proposed capacity of Keystone.

“We’re very concerned this has flown under the public’s radar,” said Peter LaFontaine, an energy policy advocate for the National Wildlife Federation, which is fighting both projects. “The public doesn’t seem to have the same sort of attention for pipeline expansions as they do for pipeline construction. But we’re talking about a lot of crude.”

Pipeline companies are proposing new ways to export oil from Canada to the south, east and west as rising production overwhelms existing lines and depresses prices. Output from Canada’s oil sands will more than double by 2021 to 3.38 million barrels a day, according to the Canadian Association of Petroleum Producers.

Comments Sought

In March, the State Department asked for public comment about what it should consider as it updates a 2009 environmental impact statement for the U.S. permit granted to Enbridge’s original pipeline, known as the Alberta Clipper or Line 67. The Calgary-based company, Canada’s largest transporter of crude oil, is seeking permission to double the flow through the line that starts in Hardisty, Alberta, and ends at a terminal in Superior, Wisconsin. From there, the oil is shipped to U.S. Midwestern and Gulf Coast markets by other pipelines.

The State Department is accepting comments until May 13. It must complete its environment assessment before it can consider whether the project is in U.S. national interest. The department has jurisdiction over Keystone and the Alberta Clipper because they cross the international border with Canada.

“We will continue to review Enbridge’s application in a rigorous, transparent and efficient manner,” said Jane Gamble, a State Department spokeswoman.

Increasing the flow of crude through the Clipper would pose “little incremental environmental impact” and the risk of a spill “is very small,” Larry Springer, a spokesman for Enbridge’s U.S. affiliate, said in a phone interview yesterday. “We expect that following the supplemental EIS that the permit will be amended as requested.”

Clipper Expansion

Steven Paget, a Calgary-based analyst at FirstEnergy Capital Corp., said in a phone interview yesterday that Enbridge’s Clipper expansion faces an increased risk of U.S. rejection as opposition to pipelines grows.

“There was pushback against the first Clipper and now you’ve seen what happened on Keystone and there’s no reason to believe that’s going to change,” Paget said.

LaFontaine said environmentalists are also worried that companies including Enbridge and Exxon Mobil Corp. (XOM:US) will try to reverse the flow of pipeline system that now runs from Maine to Montreal as another way to send oil sands fuel to the U.S. Enbridge scrapped that plan in 2009 because of lack of commercial support, Springer said. Exxon Mobil is shareholder of the Portland-Montreal Pipe Line System.

Montreal Pipeline

U.S. lawmakers from New Hampshire, including Democratic Senator Jeanne Shaheen, wrote Secretary of State John Kerry last month urging the department to review the project if it does go forward. The line crosses the state.

“Now we have groups that are against pipelines that aren’t even on the table anymore,” Paget said.

Some of the opposition to Keystone has come from ranchers and farmers in Nebraska whose land the pipeline would traverse. Their opposition led President Barack Obama to block TransCanada’s first route for Keystone.

The company resubmitted a permit application with a new pathway further east that according to the state Department of Environmental Quality avoids the Sand Hills wetlands that lie above the Ogallala aquifer.

Enbridge by contrast is seeking to expand an existing line that already carries as much as 450,000 barrels a day without laying new pipe. Paget said that fact may mute some of the opposition.

Climate Concerns

Even so, the climate concerns with Keystone also apply to the Alberta Clipper, said Daniel Kessler, a spokesman for 350.org, which promotes public policies to mitigate the risks of climate change.

“Enabling tars sands expansion is a legacy and moral question for the president,” Kessler said in an e-mail. “This is why Keystone has become so contentious.”

Enbridge’s proposal is “just as bad as Keystone,” Eddie Scher, a spokesman for the Sierra Club, said in an interview yesterday. The expansion carries the additional risk of polluting the Great Lakes, he said. “This stuff is going to end up in Lake Superior.”

Calumet Specialty Products Partners LP (CLMT:US), which processes crude from Canada and North Dakota at its refinery in Superior, Wisconsin, is considering adding a barge loading dock on Lake Superior so it can ship oil to refineries on the East Coast and Gulf Coast.

Sierra Club

Scher said the Sierra Club planned to urge the State Department to consider the climate-change impacts of the pipeline’s expansion as it updates its environmental assessment. The development and processing of bitumen from the oil sands releases more carbon dioxide than does the production and use of more conventional forms of crude.

The State Department draft environmental analysis found Keystone would have a minimal impact on greenhouse gas emissions because Alberta’s oil sands would probably be developed whether the pipeline was built or not.

The Environmental Protection Agency subsequently criticized the department’s review as insufficient.

Canadian politicians and oil executives say the climate impact of the oil sands is overstated.

“The oil sands accounted for less than 8 percent of Canada’s total emissions in 2011,” Joe Oliver, Canada’s natural resources minister, said in an April 23 speech at the Center for Strategic and International Studies in Washington. “Globally, GHG emissions from oil sands production in 2011 represent 0.1 percent, or one one-thousandth, of total emissions.”

Pumping Stations

Enbridge’s application seeks permission to operate its 36- inch pipeline at full capacity, about 880,000 barrels a day, by mid-2015, Springer said. Initially the expansion would allow the company to transport about 570,000 barrels a day by mid-2014.

Enbridge’s full expansion plan would require adding more power and units to existing pumping stations in Minnesota, two new storage tanks in Wisconsin without laying new pipe. The company has sought state approvals, Springer said.

While the Clipper is behind Keystone in terms of the State Department’s review, it would be operational before the $5.3 billion TransCanada line if approved. TransCanada pushed back its estimated startup for Keystone XL last week to the second half of 2015, citing delays in the U.S. review of the project.

Enbridge Plan

Clipper is part of a broader plan by Enbridge to boost its entire oil system to move Canadian crude to points in the U.S., alleviating a bottleneck in western Canada, Paget said.

Line 67 traverses about 327 miles (526 kilometers) in North Dakota, Minnesota and Wisconsin to the Superior Terminal, from which its dispersed to other markets, including in the U.S. Midwest and Gulf Coast. Keystone would carry oil from Canada to the Gulf Coast across six U.S. states.

Enbridge has already earned the ire of environmental groups for its response to a July 2010 spill in Michigan after its oil pipeline ruptured.

In October, the U.S. EPA said the company must do more to clean up the spill, which polluted Michigan’s Kalamazoo River and coated birds, muskrats, and turtles in an oily residue.

The price of Canadian heavy crude fell 12 percent from a year earlier to average $66.99 a barrel in the first quarter, according to data compiled by Bloomberg. Oil-sands benchmark Western Canada Select was a record $42.50 a barrel less than the main U.S. grade in December.

To contact the reporters on this story: Jim Snyder in Washington at jsnyder24@bloomberg.net; Rebecca Penty in Calgary at rpenty@bloomberg.net

To contact the editor responsible for this story: Jon Morgan at jmorgan97@bloomberg.net


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  • CLMT
    (Calumet Specialty Products Partners LP)
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