Pipeline operator Enbridge Energy on Tuesday defended its proposal to build a northern Minnesota crude oil pipeline in the face of persistent suggestions by state agencies that another route, farther south, might be better.
Company executives testified during the first day of a trial-like evidentiary hearing before a regulatory judge in St. Paul. Critics of the $2.6 billion project have questioned whether the line needs to be built Up North, an idea that Paul Eberth, Enbridge's project director, disputed on the witness stand.
He said the project, known as Sandpiper, would allow shippers to carry North Dakota crude oil to a terminal in Clearbrook, Minn., and then on to Enbridge's storage terminal and other pipelines in Superior, Wis. Rerouting the pipeline without reaching those destinations wouldn't serve shippers' needs, he said. "I am not sure the project would proceed," Eberth said when asked if Enbridge would consider alternate routes proposed by environmental groups and a state agency.
State officials have raised concerns about the risk of a major oil spill like the 2010 rupture of an older Enbridge pipeline in Marshall, Mich. It sent crude oil into the Kalamazoo River and has cost more than $1 billion to clean up. Enbridge has since replaced that line with new pipe.
"If we have incidents like that I don't know that we could continue to stay in business," Eberth said under questioning. "It is hugely important for Enbridge to prevent those kind of incidents."
Eberth said another big spill and the resulting "lack of trust" in the company could make it impossible to do business. He said the company does have the financial capacity to clean up a major release. He earlier testified in writing that the company has $700 million in liability insurance.
The hearing, before Administrative Law Judge Eric Lipman, is focused on whether the project is needed and, if so, whether the company's preferred route or an alternate one would meet the need. Lipman is expected to issue findings in April to the Minnesota Public Utilities Commission, which regulates crude oil pipeline development in the state.
Enbridge, a Calgary-based company that has operated crude oil pipelines in northern Minnesota for 66 years, came to the hearing with key support from the state Commerce Department. The agency's energy unit said in written comments that the Sandpiper line is needed and — agreeing with Enbridge — that it should terminate in Superior to tie into pipelines serving refineries in the Midwest and East.
Yet the Commerce Department, whose recommendations often carry weight with regulators, said the line doesn't need to go to Clearbrook, as Enbridge proposed. Instead, a new terminal could be built near the North Dakota border, with a connecting line to Clearbrook, the agency said. That's significant because such a change would tee up a possible alternate southern route backed by two state environmental agencies.
The alternate, first suggested by the Minnesota Pollution Control Agency (MPCA), would follow an existing natural gas pipeline south of many northern lakes and isolated wetlands.
On Friday, the MPCA and the Minnesota Department of Natural Resources urged regulators to consider that southern route option, which would pass through the Detroit Lakes area on a southeast course before turning northeast at North Branch.
William Sierks, manager of the MPCA energy and environment section, filed written comments declaring that route "a reasonable and prudent alternative … with fewer potential impacts to the highest quality surface waters and other natural resources." The DNR took a similar position.
Enbridge opposes that route, saying it is 70 miles longer, poses its own environmental risks and would cost an additional $210 million to build. Shippers and federal regulators who approved the pipeline rate structure likely would balk at the estimated 33 cents per barrel in additional charges, company officials testified.
Five other alternates also remain on the table, supported by some of the environmental groups. Three of the alternates don't go anywhere near Enbridge's Superior terminal. The other two would take an even longer path to reach Superior.
Lorraine Little, a spokeswoman for Enbridge, said the project received strong support during recent public hearings. "Landowners and elected officials along the route, labor, agriculture, business and other industries came out en masse demonstrating the need for Sandpiper," she said in a statement. "During this week's evidentiary hearings we will continue to demonstrate why this project is needed and how it will benefit the state of Minnesota and the Midwest."
The hearings run through Friday, but this won't be the last regulatory proceeding. If regulators decide the line should be built on Enbridge's preferred route, another round of hearings would be scheduled to consider course corrections requested by landowners and others.