Oil and water: The Line 3 debate

MN appeals court hears arguments in Line 3 challenge, asking whether state needs another oil pipeline

PUC commissioners listen during a public hearing.
PUC commissioners from left, John Tuma, Katie Sieben, center, and Matt Schuerger, took in comments and sentiments directly from the public regarding the controversial Line 3 oil pipeline during a hearing at the Senate Office Building, Jan. 31, 2020, in St. Paul.
Elizabeth Flores | Star Tribune via AP 2020

Updated: March 27, 12:30 p.m.

A Minnesota Court of Appeals panel grilled attorneys for Enbridge Energy and the state Public Utilities Commission Tuesday, in a case that challenges the state’s approval of the Line 3 oil pipeline replacement project and questions whether Enbridge proved that there’s demand for the oil that the pipeline would carry.

Enbridge is about halfway through its construction of Line 3, but several Native American tribes and environmental groups, along with the state Department of Commerce, continue to argue that the pipeline isn’t needed.

The Minnesota PUC has already approved Line 3 — twice. The Canadian energy firm Enbridge Energy began building the $4 billion, 338-mile pipeline across the northern third of the state in December, and construction is already half finished.

If plaintiffs prevail in this case, it could bring construction to a standstill, or potentially stop the flow of oil through the pipeline if it’s finished.

A key question that the three-judge panel appeared to grapple with is one that the state has been wrestling with for the past four years: Does Minnesota need another oil pipeline?

Several parties in the case, including, notably, the Minnesota Department of Commerce — which advocates on behalf of consumers and the public interest in matters before the PUC — argue that Enbridge failed to provide a long-term demand forecast for the oil that the pipeline would carry, as required by state statute.

Instead, the Commerce Department argued, Enbridge relied on a supply forecast based in part on testimony from Canadian oil producers who testified that they needed the additional capacity of a replacement Line 3 to transport more oil to U.S. refineries.

“By looking instead at that demand to transport crude oil, instead of the demand for crude oil itself, Enbridge shifts the focus of the analysis from the refineries who will consume the crude oil and produce refined products for us all to use … to the desire of crude oil producers to sell and ship as much crude oil as they can,” Department of Commerce attorney Katherine Hinderlie told the judges.

Attorneys for Enbridge and the Public Utilities Commission argued that the PUC is given discretion to define what constitutes demand in its rules. “And if you look at the definition of demand in the commission’s rules, what Enbridge submitted meets that definition,” argued PUC attorney Jason Marisam.

“That definition refers to how much oil is going to come through” Enbridge’s pipeline, Marisam continued. He said it doesn’t obligate the Public Utilities Commission to look at projected demand from oil refineries, or broader consumer demand for oil.

The appellate panel appeared to push back against that characterization.

“I really struggle with seeing where the forecast for demand is in 15 years,” said presiding Judge Lucinda Jesson. “I expected to see not just supply projections ... or pipeline capacity, but actually the demand.”

Judge Peter Reyes said he shared Jesson’s concern that the forecast seemed to focus on the supply of oil, rather than demand.

“It seems to take the approach of, if we build it, they will come,” he said.

Reyes said a lot has changed since state utility regulators first approved Line 3 in 2018, in terms of state and federal policies addressing climate change, and the COVID-19 pandemic’s impact on oil demand. Should the Public Utilities Commission have asked for an updated analysis, he asked, “instead of relying on what looks like very stale data now?”

Enbridge attorney Christine Brusven replied that the commission did consider those factors when it reaffirmed its approval of the Line 3 project in 2020.

She also said that the company updated its projections to include a scenario in which electric vehicles achieved 75 percent market penetration. She said even then, forecasts showed demand for Line 3.

“This is an administrative action,” Brusven said. “There's always some lag between record development and the final decision. If every new piece of evidence or every new inference could cause a start-over, we’d never get through the process.”

Enbridge has long argued that the Line 3 project is needed largely because of safety and reliability concerns. Line 3 was built in the 1960s and is one of five pipelines Enbridge operates that together deliver nearly 3 million barrels of oil every day across northern Minnesota, and eventually to refineries around the country.

But the pipeline is corroding, and requires extensive maintenance. Enbridge has also had to cut the amount of oil it pumps through the pipeline by half. Replacing the pipeline will also enable the company to double the amount of oil currently shipped on Line 3.

The Public Utilities Commission, which was charged with determining whether the benefits of Line 3 outweighed its costs, ultimately decided that the safety benefits of replacing the aging pipeline with a new one, were more important than concerns expressed by plaintiffs about the project’s impact on climate change, potential oil spills and effects on tribal treaty land.

“A new pipeline with thicker and safer materials, constructed with up-to-date safety standards by skilled laborers operating under prevailing wage laws, is a better outcome than leaving an old pipeline,” PUC chair Katie Sieben said when the commission approved Line 3 last June

Paul Blackburn, attorney for the group Honor the Earth, argued that state regulators acted outside their legal scope by relying so heavily on safety in deciding to approve Line 3.

He argued that if the pipeline was as unsafe as the commission characterized it, then the federal agency that oversees pipeline safety would have shut it down.

“The commission ordered the new pipeline because it is unsafe,” Blackburn said. “That goes beyond the commission’s jurisdiction under state law. It’s outside the commission’s wheelhouse.”

Enbridge attorney Brusven replied that the existing Line 3 is getting steadily worse with time, and that a replacement involves thicker steel and other technological improvements.

“It’s the difference between safe and safer,” she said. “In order to stay ahead of integrity issues, the best way to address it is with replacement.” Otherwise, Brusven said, you’re using multiple band aids to continually patch the pipeline.

The court also heard arguments about the adequacy of the project’s environmental review. A court ruling in 2018 required the state to update that analysis to include consideration of the impacts of a possible oil spill on Lake Superior.

Plaintiffs in the case include the Mille Lacs Band of Ojibwe, the Red Lake Nation and the White Earth Nation; Friends of the Headwaters, Honor the Earth, the Sierra Club and Youth Climate Intervenors; and the Minnesota Department of Commerce.

Several of those groups previously asked the court to temporarily stop construction of Line 3 until the court decided on this legal challenge, arguing that the pipeline would be largely complete by the time judges issued their decision. The court rejected the request.

The court will have 90 days to issue its decision. Pipeline opponents have also sued to overturn permits issued by the Minnesota Pollution Control Agency and the U.S. Army Corps of Engineers.

Enbridge, meanwhile, recently announced it’s reached the halfway point of construction on Line 3. The company plans to stop construction on the pipeline for two months beginning on April 1 — a pause previously agreed to with state environmental regulators during the spring thaw — although work will continue on eight pump stations along the route. The company has said it expects to complete construction later this year.

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