Enbridge expert’s report fuels debate over true impact of Line 5 shutdown in Canada

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A U.S. energy industry consultant hired by Enbridge Inc. ENB-T estimates that a shutdown of the Line 5 petroleum pipeline would lead to a rise of one to two cents a litre in gasoline prices for Ontarians and Quebeckers.

Environmental Defence, a group seeking the shutdown of the Line 5 pipeline – a key energy conduit for Central Canada – said in a statement on Wednesday that this report by Neil Earnest, president of Muse, Stancil & Co., backs up its assertion that the impact of closing the line would be negligible for consumers in Central Canada.

Enbridge, however, responded that Environmental Defence is selectively quoting from the report, which the company said was prepared before Russia’s war on Ukraine caused an increase in energy prices.

Estimates of what it would cost Canadian consumers if Line 5 were shut down go to the heart of the debate over efforts by Michigan’s government, and separately, a Wisconsin Indigenous band, to stop the pipeline’s operations. The Canadian government has said the continued operation of Line 5 is non-negotiable and that ceasing its flow would be a threat to this country’s energy security.

The opinion of Mr. Earnest was entered earlier this year as evidence in a case that represents one of two continuing threats to the future of Line 5, which transports up to 540,000 barrels of petroleum a day – mostly from Western Canada – through Great Lakes states before re-entering Canada at Sarnia, Ont.

His report is part of the court record in the legal battle arising from a request by the Bad River Band of the Lake Superior Tribe of Chippewa for a ruling to evict the pipeline from its land.

The band, which filed its application earlier this year, is asking a U.S. federal court for a permanent injunction that would require Enbridge to “cease operation of the pipeline and to safely decommission and remove it.”

Michigan Governor Gretchen Whitmer is also attempting to halt the pipeline’s operations, over fear of an oil spill in the Great Lakes. The matter is the subject of negotiations between Canada and the United States.

In the report, Mr. Earnest said “the estimated impact of a Line 5 shutdown on Ontario consumers of gasoline, jet fuel and diesel is a price increase of 5 cents per gallon.” His report, dated Jan. 31, 2022, uses U.S. dollars, and the estimate translates into a price increase of more than one cent a litre in Canadian currency.

Michelle Woodhouse, water program manager for Toronto-based Environmental Defence, said in the group’s statement that the report is more proof that a shutdown would not cause a major spike in gas prices.

“International energy markets control oil prices, not any one single pipeline. And Enbridge knows this,” Ms. Woodhouse said.

Enbridge said there is a lot more information in Mr. Earnest’s report that underlines how damaging a shutdown would be.

“Reports from activists have cherry-picked selective portions of Neil Earnest’s analysis to present an inaccurate view of the impacts associated with shutting down Line 5,” Enbridge spokesperson Jesse Semko said in a statement.

He noted that in the same report, Mr. Earnest characterizes the impact on Michigan and Ontario propane markets as “extreme” and the effects to all crude oil refiners as significant, ”leaving regional consumers facing volatile markets and incurring higher prices for gasoline, jet fuel, and diesel.”

Mr. Semko said it’s a terrible time to be talking about closing a pipeline.

“The impact of ongoing inflationary pressures and the Ukraine war’s disruption to global energy markets has made this a particularly fraught time to be considering the closure of any oil pipelines, much less one as significant to the U.S. and Canadian economies as Line 5,” he said.

He noted that closing Line 5 would shift petroleum transportation to rail and road and put an estimated 2,100 additional trucks on Michigan and Ontario roads, “creating a traffic congestion issue, safety concerns and higher emissions.” It would require approximately 800 rail cars daily to move the product Line 5 carries and this would also require additional rail lines to be constructed.

Mr. Earnest’s report said the shutdown of Line 5 would reduce Enbridge’s crude deliveries by an estimated 334,700 barrels a day. “The estimated crude oil supply impact on refineries in western Pennsylvania and Ontario would be severe” and it would lead to shortages of refined products such as gasoline, jet fuel, diesel and asphalt.

He said the aggregate cost to Ontario consumers of higher gasoline prices would be US$300-million annually.

Mr. Semko said Mr. Earnest’s report is premised on a scenario where replacement infrastructure has already been built and is in service, including additional rail and barge infrastructure.

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