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Enbridge topping up Mainline oil capacity as shipments drive Q3 results record

Oil export options for western Canadian producers continue to expand in small increments as delays persist for major proposed pipeline projects.

On Friday, Calgary-based Enbridge Inc. said an optimization program on its Mainline system, which accounts for about 70% of Canadian oil exports into the United States, is expected to add 100,000 barrels per day of additional capacity by year-end.

That’s at the top end of its original target of 50,000 to 100,000 bpd and a 15,000 bpd increase over the 85,000 bpd expected by Canadian Natural Resources Ltd.

Enbridge added it plans to bring on another 50,000 bpd of capacity in a smaller pipeline expansion early next year. Last summer, rival TC Energy Corp. held an open season to assign 50,000 bpd of added incremental capacity on its existing Keystone pipeline system into the U.S.

On a conference call, Enbridge CEO Al Monaco said having the Canadian side of its Line 3 replacement pipeline in service by Dec. 1 will help meet producer demand on a Mainline system that has been operating at near maximum capacity, clocking in at over 2.7 million bpd in the third quarter.

“On the Mainline, we expect to bring in about 100,000 barrels per day of incremental capacity by year-end. That extra 100,000 comes from capacity recovery, optimization of receipt and delivery windows, as well as leveraging Line 3 Canada,” he said.

“We’re also moving forward with a 50,000-barrel-per-day expansion of Express to serve PADD 4 (U.S. Rockies region). That should be ready in Q1.”

The American part of the $9-billion Line 3 project could still be in service in 2020, as previously predicted, but timing is unclear after state utility regulators in Minnesota in October ordered further study on the potential effects of oil spills in the Lake Superior watershed.

“Once we have timelines from the PUC (Minnesota public utilities commission) and agencies, we will be able to provide the next key milestones toward the start of construction,” said Monaco.

Completion of Line 3 would add 370,000 bpd of oil export capacity. Meanwhile, construction is proceeding on the Trans Mountain pipeline expansion to the Canadian West Coast but the Keystone XL pipeline has been delayed by court challenges in the U.S.

The failure of pipeline expansions to keep up with growth in oilsands production has been blamed for steep oil price discounts in Alberta.

Enbridge shares rose on the Toronto Stock Exchange after it reported record third-quarter adjusted earnings and distributable cash flow driven by high levels of oil transported on the Mainline and input from new capital projects placed in service

The company says it earned $949 million in the third quarter, up from a loss of $90 million in the same quarter last year caused by a number of one-time charges.

The Calgary-based company says adjusted earnings worked out to $1.12 billion, or 56 cents per share, for the quarter ending Sept. 30, up from $933 million, or 55 cents per share last year.

Analysts had expected adjusted earnings of $1.09 billion, or 53 cents per share according to financial markets data firm Refinitiv.

In a report, analysts at Tudor Pickering Holt & Co. welcomed the company’s expectation to finish the year above the midpoint of financial guidance following a “steady quarter” ended Sept. 30 and despite delays in its Line 3 project.


Wisconsin tribe sues Enbridge to force pipeline removal

Members of a Native American tribe in Wisconsin filed a federal lawsuit in July in hopes of forcing Enbridge Inc. to remove sections of a major pipeline that runs across their reservation, arguing it’s becoming more likely the aging line will rupture and cause catastrophic environmental damage.

Enbridge’s 66-year-old Line 5 carries 23 million gallons of crude oil and propane daily from Canada to eastern Michigan. The line runs across 12 miles of the Bad River Band of Lake Superior Chippewa’s swampy reservation in far northern Wisconsin.

The 7,000-member tribe argues that Enbridge’s easements for the line expired in 2013 but the Canadian company has continued to pump oil and gas through Line 5 across the reservation regardless. The tribe in 2017 decided not to renew the easements.

Meanwhile, the threat of a rupture has been growing, the lawsuit contends. The Bad River has been eroding the earth around a portion of the pipeline and could soon carve a new channel across the pipeline’s route, washing away the soil that covers and supports it. That will subject the line to stresses it wasn’t designed to withstand, including swaying under its own weight and impacts from falling trees and other objects.

The lawsuit goes on to allege corrosion and defects in the line’s materials and installation become more apparent as pipelines age.

“Should it fail, then, Line 5 is positioned to discharge crude oil to the Sloughs and into Lake Superior, endangering the staggering profusion of flora and fauna that members of the Band and their forbears have protected and utilized since long before European contact,” the lawsuit says.

Enbridge spokeswoman Juli Kellner said in a statement that the company had just received the lawsuit and needs time to review it. She added that Enbridge has been trying to negotiate easement renewals with the tribe but most of the company’s reservation right of way is covered by either perpetual easements on private land or a 50-year agreement with the tribe that doesn’t expire until 2043.

Enbridge has been under scrutiny since 2010, when its Line 6B pipeline ruptured in southern Michigan, releasing 800,000 gallons of oil into the Kalamazoo River system. Michigan’s Democratic attorney general, Dana Nessel, filed a lawsuit in June seeking to shut down twin portions of Line 5 that run beneath the Straits of Mackinac, narrow waterways that connect Lake Michigan and Lake Huron. Nessel argued that anchor strikes could rupture the line, resulting in a devastating spill.

Enbridge responded to that lawsuit by insisting the dual pipes are in good condition and could operate indefinitely. Duffy said decommissioning the two portions of the line would disrupt the energy market, pointing out that the line meets 55% of Michigan’s propane needs.

The company said it is willing to install a tunnel beneath the lakebed to protect the pipeline and foot the $500 million bill. Nessel said the state can’t wait five or 10 years for Enbridge to build the tunnel.