Geoffrey Morgan

Published:May 7, 2021

-Financial Post

CALGARY — With days to go before Michigan Governor Gretchen Whitmer’s order to shut down Line 5 pipeline takes effect, Enbridge Inc. president and CEO Al Monaco warned the decision would have a “very bad outcome” for consumers.

Whitmer has consistently opposed the operation of Line 5 since taking office in Lansing, Mich., in 2019 and has called the 540,000-barrels-per-day pipeline that runs through the Straits of Mackinac in the Great Lakes a “ticking time bomb.” She issued an order in November cancelling the pipeline’s easement across the straits and gave the company a deadline to shut it down by May 12.

Monaco said on an earnings call Friday that the company was re-engaged in discussions with the state government as a result of a court-ordered mediation process ahead of key court dates later this month and the shutdown order taking effect next week.

Line 5 supplies oil to Michigan, Ontario, Quebec, Ohio and as far away as Pennsylvania, and there are limited alternatives for supplying those markets if the pipeline is closed, Monaco said.

“That whole area in the corridor is pretty full up when you look at capacity maximization on all the lines. You just can’t take 540,000 barrels a day out of the market and not have bad things happen ultimately to consumers and petrochemicals and refineries,” he said, adding that Enbridge, which is North America’s largest pipeline company, would not shut the line down unless ordered to do so by a judge.

Whitmer’s office did not respond to a request for comment as the Financial Post went to press on what actions it would take if Enbridge defied its order.

The company is fighting the order in state and federal courts in the U.S. and has repeatedly told investors the likelihood of a shutdown is low.

“You just can’t take 540,000 barrels a day out of the market and not have bad things happen”


“We believe the pipeline is safe — that’s been reaffirmed by PHMSA (the U.S. Pipelines Hazardous Materials Safety Assocaition) and the state court last year,” said Vern Yu, Enbridge executive vice-president and president of the company’s liquids pipelines.

“A shutdown would be very impactful for the energy security of the region. We do have a little bit of capacity that we can provide through Line 78, but it’s not going to be enough to provide the energy needs of the Great Lakes region,” Yu said.

The issue led to an emergency debate in the House of Commons in Ottawa on Thursday night and has turned the 63-year-old pipeline into a source of controversy in Canada, despite all major political parties in Ottawa backing its continued operations.

To avert a shutdown and resultant fuel shortages in Ontario, Canada could invoke the 1977 Transit Pipelines Treaty to demand the line continues to operate, but a number of First Nations groups have warned that doing so would be “hypocritical.”

“This is a slap in the face of treaty rights holders across Canada. Canada is fighting to uphold a pipeline treaty from 1977 while continually ignoring historical treaty commitments to First Nations people right across Canada,” Batchewana First Nation Chief Dean Sayers said in a release Friday.

While opposition to the pipeline’s operation remains entrenched, Monaco said the company has received support from “affected parties, including surrounding states and industries” in its fight against Michigan.

He said Enbridge continues to advance a replacement project for Line 5. The Calgary-based pipeline giant has proposed boring a tunnel beneath the straits, encasing the tunnel in concrete and running a replacement pipeline through the tunnel “to reduce the risk (of a spill) to as near zero as humanly possible.”

Line 5 is part of Enbridge’s Mainline, which is the largest network of oil export pipelines from Western Canada to Central Canada and the U.S. Midwest and can collectively ship 2.9 million bpd.

Enbridge said Friday that it expected to ship 2.6 million bpd through the Mainline system between April and June as multiple oilsands upgraders and downstream refineries will be offline for scheduled maintenance. However, the company expects average volumes over the course of the year of 2.8 million bpd as oil demand recovers.

Like most energy sector companies, Enbridge reversed last year’s losses with strong results in its first quarter. The company recorded net earnings of $1.9 billion in the first quarter of 2021, up sharply from a loss of $1.4 billion during the same period a year earlier.

The financial results beat analysts’ targets, though many warned the company continues to face regulatory risk in the form of challenges to Line 5, another court challenge for its Line 3 replacement project in Minnesota and Canada Energy Regulator hearings on tolls for its Mainline pipeline later this year.

“Overall, positive earnings release reflecting the utility-like business model and adding new ESG-friendly growth to the backlog, though the outcome of the Line 3 court decision in June will be closely watched,” Tudor, Pickering, Holt analysts wrote in a research note Friday.