CALGARY, Alberta/ WINNIPEG, Manitoba (Reuters) - A Minnesota court ruled on Monday that Enbridge Inc’s environmental impact statement for the replacement of its Line 3 oil pipeline is inadequate, raising the possibility of further delays.
The Line 3 project would double current capacity to 760,000 barrels per day of Canadian crude from Alberta to Wisconsin, providing much-needed relief from congestion on existing Canadian pipelines.
It is the furthest advanced of three proposed pipeline projects - along with the Canadian government-owned Trans Mountain and TC Energy Corp’s Keystone XL - that would ease Alberta’s oil glut. All three have faced long delays.
In a decision posted online, the Minnesota Court of Appeals ruled that the Minnesota Public Utilities Commission, a state regulator that approved the Line 3 project last year, acted in a manner that was unsupported by “substantial evidence” when it determined the impact statement was adequate.
The impact statement specifically failed to address how an oil spill from the line would affect Lake Superior and its watershed, the court said.
Enbridge is analyzing the court’s decision and consulting the commission and other state agencies about next steps, the Calgary-based company said in a statement.
It is disappointed in the ruling, since the impact statement was based on the most extensive environment study of a pipeline in Minnesota’s history, Enbridge added.
“I think they’re going to have to take (a potential spill) much more seriously than just some hypothetical modeling and really be conscious about the headwaters of the Great Lakes,” said Frank Bibeau, lawyer for the Honor the Earth environmental group.
Enbridge shares fell 4.7% to close at C$47.42, a three-month low, on the Toronto Stock Exchange on Monday.
“We believe that the market will negatively view the court decision that casts uncertainty with respect to the timeline for the Line 3 Replacement (L3R) project and specifically the ability to bring L3R into service in H2/20,” RBC Capital Markets analyst Robert Kwan said in a note.
In March, Enbridge said Line 3 would be delayed until the second half of 2020 because of permitting delays in Minnesota, and the prospect of further holdups is another blow to the beleaguered Canadian energy industry.
“We are concerned to see any further delays that this new development may cause to Enbridge’s Line 3 Replacement Project,” said Beth Lau, manager of oil supply and transportation at the Canadian Association of Petroleum Producers.
“Increased transportation capacity in all directions is needed to reach new and growing markets to ensure Canada remains globally competitive.”
The Alberta government imposed mandatory production curtailments on producers effective Jan. 1 this year because of congestion on export pipelines.
RBC’s Kwan said at this stage it was not clear whether the environmental impact statement could be amended or if a new one would be required.
The Canadian government will decide by June 18 whether to proceed with expanding its Trans Mountain pipeline, which would increase the flow of oil from Alberta to the British Columbia coast.
Reporting by Nia Williams in Calgary, ALberta, and Rod Nickel in Winnipeg, Manitoba; Editing by Diane Craft and Matthew Lewis