Enbridge Fined $3M for Environmental Violations
In recent developments involving the replacement of the Line 3 crude oil pipeline, reports indicate that the Minnesota Department of Natural Resources has ordered Enbridge Energy to pay $3.32 million for failure to follow environmental laws.
The fine regards a portion of construction conducted on the company’s $2.9 billion project earlier this year.
Line 3 History
Extending from Edmonton, Alberta, to Superior, Wisconsin, the Line 3 crude oil pipeline stretches approximately 1,097 miles and was built in the 1960s. The pipeline was originally built to transport 760,000 barrels per day of light, medium and heavy crudes. In 2010, Enbridge voluntarily limited the line to 390,000 barrels per day of light crude only.
As the infrastructure has aged, however, putting it at risk for corrosion due to failures in its protective coatings, Enbridge first announced its plans to replace the infrastructure back in 2017.
According to Enbridge officials at the time, Line 3, unlike a number of the company’s other pipelines, was protected with a tapecoat, which has since been found to have disbonded from the pipeline steel. Enbridge says the coating failure has sped corrosion rates, causing concerns over deterioration in the line.
Enbridge intends to replace the existing 34-inch diameter pipeline with a new 36-inch diameter pipeline for 13 miles in North Dakota, 337 miles in Minnesota, and 14 miles in Wisconsin. The project is expected to help maintain Enbridge’s high safety standards, reduce future maintenance activities and create fewer disruptions to landowners and the environment, as well as restore the historical operating capabilities of Line 3.
Permit application documentation also revealed that Enbridge planned to construct the new pipeline of high-strength GX-70 steel, with a nominal wall thickness of 0.515 inches (with stretches made of thicker pipeline when necessary, such as segments installed via road bore or horizontal directional drilling).
Additionally, the mainline would be coated with 14 mils of epoxy bonding and stretches installed via trenchless methods would be coated with 50 mils. The new pipeline is expected to initially transport 760,000 barrels per day again, although its full design capacity will be capable of transporting 844,000 barrels per day.
When the replacement project was announced in August 2017, Enbridge reported that the first segment would be built in the Canadian section of the project, comprising about a quarter of the total length, starting at the line’s origin in Alberta.
Only a month after it was announced that construction on the project would be launching, Line 3 hit its first hurdles in Minnesota, where some state officials said that Enbridge hadn’t established a need for its Line 3 Replacement Project.
At the time, the project still required two approvals from the state of Minnesota: a certificate of need and a route permit. In parts of Minnesota and Wisconsin, Enbridge planned to reroute the line along existing pipeline and electric transmission line rights-of-way.
Enbridge fined $3.32 million for failings in Line 3 replacement project https://t.co/0G9cPkkSq4— BOE Report (@BOEReport) September 17, 2021
According to the Minnesota Department of Commerce, a market analysis conducted by London Economics International indicated that Minnesota refineries and those elsewhere in the region had been operating at high utilization, meaning that the limitations on Line 3 are not adversely affecting operations in the region. The analysis at the time predicted that demands in the region weren’t likely to grow in the long term.
In October, Enbridge filed with Minnesota's Public Utilities Commission, calling the state’s assessment of the situation “flawed,” and that it "failed to account for the negative economic impact to Minnesota if Line 3 were to be shut down."
By April of the following year, Minnesota administrative law Judge Ann O’Reilly recommended that, if the Enbridge Line 3 replacement were to move forward, the new pipeline follows the route of the old, rather than the company’s preferred route, as that way travels near the headwaters of Mississippi River.
The judge’s recommendation that the line replacement follow its current course—which shares space with five other lines from Alberta—would lower the environmental risks, along with preventing the abandonment of nearly 300 miles of pipeline.
At the time, Enbridge had already begun construction in Canada and Wisconsin.
In June, Minnesota’s Public Utilities Commission voted unanimously to approve the Line 3 replacement project a day after questioning company officials about the necessity of the project.
Opponents of the pipeline project gathered at the PUC meetings to call for its rejection, though an administrative law judge and PUC staff had already recommended its approval, with certain stipulations. The PUC’s five commissioners implied early in a meeting that they would approve a certificate of need, but the permit could come with strings attached.
The permit arrived with stipulations that Enbridge establish a trust fund to bankroll the proper decommissioning of the new pipeline when it reaches the end of its service life decades from now, and that the company remove the old pipeline where property owners request that it do so, a concession the company had already promised.
By August, a pair of environmental groups challenged the approval of the Line 3, arguing that the environmental impact statement approved earlier that spring was insufficient. Specifically, the two groups argued that the EIS for the project did not adequately account for potential spills and did not take into account a survey related to tribal matters. Some tribal leaders in Minnesota also expressed concerns about the possibility of the pipeline being routed on tribal lands.
Two years later, in November 2020, the United States Army Corps of Engineers and PUC granted a construction stormwater permit for the Enbridge Energy’s Line 3 crude oil pipeline replacement, marking what was believed to be the last hurdle in launching construction on the $2.6 billion project.
However, the Red Lake and White Earth Bands of Chippewa tribes requested that the PUC stay its approval of the project, pointing out that the influx of construction workers would put residents along the route at higher risk of COVID-19. A consolidated appeal made by environmental and tribal groups was pending before the Minnesota Court of Appeals.
According to Enbridge, during construction the pipeline will bring a $2 billion boost to the Minnesota economy, with $1.5 billion of that in Enbridge spending alone. Additionally, the project is also slated to bring about $334 million in payroll to workers (about 50% of that to local workers), and a $162 million construction-related gain for local economies, as a result of non-local workers in Minnesota, through purchase of local products/materials and use of local hotels, restaurants and services.
Following the granted permit in November, the stay filed by Red Lake Band of Chippewa, White Earth Band of Ojibwe, the Sierra Club, and the Native American-led environmental group Honor the Earth, was denied by the PUC on Dec. 9, 2020. A petition to reconsider the stay was also denied on Dec. 23, 2020.
The groups also requested an injunction to suspend construction until their lawsuit could be heard, citing “irreparable harm” if work on the project continued.
Following this attempt, U.S. District Court Judge Colleen Kollar-Kotelly denied the request at the beginning of the month. In her ruling, Kollar-Kotelly pointed out that the plaintiffs failed “to demonstrate a likelihood of success on the merits and that they will suffer irreparable harm.”
At the beginning of February this year, prior to Kollar-Kotelly’s rejection of work suspension, the PUC also voted 3-1 to approve an updated, court-ordered environmental impact statement that officials report successfully addresses the impacts of a potential spill in the Lake Superior watershed.
In the same 3-1 vote, the utility regulators agreed to reissue a certificate of need and a route permit that had been vacated by an earlier court decision.
Commissioner Valerie Means, Chairwoman Katie Sieben and Commissioner John Tuma all voted to approve the revised environmental impact statement, while Commissioner Matt Schuerger was still in opposition of the project.
Both approvals cleared the way for Enbridge to obtain two remaining major state and federal permits and some minor permits.
Thet same month, Enbridge’s 2020 earnings report revealed that the price tag for its Line 3 replacement project increased from CA$8.2 billion to CA$9.3 billion. At the time, Enbridge President and CEO Al Monaco released several comments on the matter, saying that the new cost was updated to reflect winter construction, increases to environmental protections, regulatory and permitting delays and COVID-19 protocols, among other things.
An in-service date was originally slated for 2018, and is now set for the fourth quarter of this year. That service date brings with it an estimated $200 million in EBITDA this year.
In the report, the company also noted that work on its Line 5 project is continuing after it received environmental permits at the end of January. However, legal battles on the project remain.
Earlier this year Enbridge was reported to have launched work at its Clearbrook, Minnesota, site. However, in a statement from the DNR, the Department found that the company had failed to follow construction plans previously submitted regarding the work being carried out.
According to reports, the plans called for the use of traditional trench construction methods at a depth of 8–10 feet. The company instead constructed the trench at a depth of approximately 18 feet with sheet piling installed to a depth of 28 feet.
As a result of the changes, the DNR reported that Enbridge breached the confining layer of an artesian aquifer, resulting in an unauthorized groundwater appropriation near the project’s Clearbrook Terminal. In addition to failing to notify the Department of the construction plan changes, Enbridge also failed to notify DNR of the groundwater situation.
DNR’s civil enforcement orders require Enbridge to pay mitigation and penalty funds of $3.32 million which includes a restoration order requiring $300,000 in initial mitigation funds to pay for the loss of groundwater resources, $250,000 for DNR monitoring of calcareous fen wetlands near the area of the aquifer breach and a $20,000 administrative penalty order (the maximum allowed under state law).
The DNR has also ordered Enbridge to place $2.75 million in escrow for restoration and mitigation of any damage to the calcareous fen wetlands. DNR will determine what restoration and mitigation is required.
In addition, Enbridge is also required to implement a restoration plan to stop the unauthorized groundwater flow within 30 days. The order requires the company to conduct additional groundwater and site monitoring and report the results, as well as to develop a Calcareous Fen Management Plan. DNR is also requiring Enbridge to fund a reinspection of any and all areas along the entire route where construction depths deviated from plans (as they did at the Clearbrook Terminal site) to ensure that there are no additional violations.
The DNR has referred the matter to the Clearwater County Attorney for criminal prosecution, finding that Enbridge violated Minnesota Statute 103G.141, subdivision 1, which makes it a crime to appropriate “waters of the state without previously obtaining a permit from the commissioner.”
“DNR is committed to its role as a regulator on this project and is taking seriously our responsibility to protect and manage natural resources within existing state law,” said DNR Commissioner Sarah Strommen. “Enbridge’s actions are clear violations of state law and also of public trust. This never should have happened, and we are holding the company fully accountable.”
As a result of the charges, an Enbridge communications specialist, Juli Kellner told reporters that “Enbridge has been working with the DNR since June to provide the required site information and approval of a corrective action plan, which is currently being implemented.
“We share a strong desire to protect Minnesota waters and the environment, and we are committed to restoration. We will continue to work closely with the agency on the resolution of this matter.”