U.S. Pipelines Shut Down: Will This Impact Canada?

Posted by on Jul 13, 2020 in Blog | 0 comments

Recent decisions in the United States (U.S.) regarding transporting petroleum via pipelines have again opened the debate on pipelines and their potential environmental impact.  These decisions are also a reminder that legal and regulatory decisions in either country can affect their neighbours.

Enbridge Line 5

For years, “Line 5” (owned by Enbridge and runs under the Straits of Mackinac) has been targeted by environmental groups as posing too great a risk to the Great Lakes.  The nearly-70-year old petroleum pipeline runs 645 miles (1,038 kilometres) from Superior, Wisconsin, across the Upper Peninsula of Michigan and eventually to Sarina, Ontario, where the oil is refined.  The pipeline also carries natural gas back to the residents of the Upper Peninsula.

Since being elected, both Michigan Governor Gretchen Whitmer and Attorney General Dana Nessel have been taking steps to shut down Line 5.  Their efforts were successful (at least temporarily) due to a recent court decision.

As reported by the Detroit Free Press, “Circuit Judge James Jamo held a more than five-hour hearing Tuesday about the dual pipeline’s continued closure, which he ordered shuttered June 25 due to damage to one of the anchor supports holding the pipeline in place on the bottomlands of the Straits of Mackinac.”

Enbridge voluntary shut the pipeline after discovering the damage but reopened the west line after inspection.  Both the west and east lines are now closed.

Notably, Enbridge continues to proceed with plans to build a $500-million pipeline tunnel below the lakebed that will be encased with cement.  Enbridge has filed a joint permit application with Michigan regulators and the U.S. Army Corps of Engineers.

Economic Impact to Canada

Jon Harding (Imperial Oil) said the decision, “…will likely result in shortfalls of gasoline, diesel and jet fuel in our distribution points in southern Ontario.”

According to Oil and Gas 360, “Shutting down Line 5 has serious implications, for residents of Ontario and Quebec, as well as Michigan itself. Line 5 transports 540,000 barrels per day of oil and natural gas liquids into the Sarnia area (about half of the pipeline capacity to Ontario).  Facing a potential supply cut, anxiety has been rising in southern Ontario.  If Line 5 is shut down the lack of supply and Ontario’s returning demand for refined products could have a drastic effect on gasoline prices in the region.”

Hopefully agreements between the parties can be reached that both protect the environment and do not interrupt product delivery… especially as both Canada and the US look to recover from the pandemic.

Dakota Pipeline Shut Down

The Dakota Pipeline was the focus of organized protests by Native Americans but has remained operational since 2017.  The 1,900-kilometre-long pipeline can transport 570,000 barrels of crude oil a day across four states, from North Dakota to a terminal in Illinois, where it is shipped to refineries.

However, recently, Judge James Boasberg ruled that the pipeline has to be shut down and emptied within 30 days while the Army Corps of Engineers works to prepare an environmental impact statement for a rule relaxation that allowed it to cross the Missouri river.

Closed Pipelines Mean More Petroleum will Move by Rail

With US Pipelines being shutdown by court decisions, more product will move by rail.

Canadian Executive Surprised by Decision

While not directly impacting Canadians (such as Line 5), this action has the attention of some Canadian energy companies.  The CBC reported that Alex Pourbaix, president and chief executive of Calgary-based Cenovus, said he ”was surprised by the decision to halt a pipeline (Dakota) that had been operating for three years, suggesting the impact could ripple out into future development of a variety of infrastructure projects in the United States.”

The same report quoted Mr. Poubaix:  “My general observation of it is that going forward, if that would be the new standard, I think it’s going to be incredibly difficult for anybody to invest in any kind of infrastructure… not just pipeline infrastructure, high-voltage power lines, highways, you name it.  If there’s an opportunity to come back on that, those regulatory decisions, years after the fact, I think that’s a real significant problem.”

Pipelines or Rail

With at least two existing pipelines now being idled, the question is how to get raw product to market.  The default is likely rail, which also has environmental risks.

In 2016, the University of Alberta reported that, “Pipelines are more environmentally friendly than rail when hauling oil and bitumen long distances, and probably the best way to export Alberta oil.”

The report also stated, “After comparing the energy consumption in construction and operation for both transportation methods, researchers in the Faculty of Engineering discovered that pipeline transportation produced between 61 and 77 per cent fewer greenhouse gas emissions than rail.”

“If you’re looking at shorter transportation distances and smaller capacities, rail is probably more efficient, but most of the crude and bitumen exported from Alberta goes to U.S. refineries, which are long distances and at a large scale.”

Fraser Report

The Fraser Institute says, “transporting oil and gas by pipeline or rail is in general quite safe.  But when the safety of transporting oil and gas by pipelines and rail is compared, taking into consideration the amount of product moved, pipelines are found to be the much safer transportation method.”

The balance of economic growth and environmental protection are both important for citizens in Canada and the U.S.  This is an especially-important balance as we continue to live with a global pandemic and the economic consequences.

Do you need help with an environmental issue?  We can help.  And if you are looking for ways to save money on your environmental remediation efforts, we have some ideas for you.  Please contact me (519-979-7300, Ext.114), and I’ll provide some insight and ideas.

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