Enbridge vows to defy order that comes into force next week in move lawyers say will make case more difficult to argue in courts
Author of the article: Geoffrey Morgan
Publishing date:May 05, 2021 •
A signpost marks the presence of Enbridge's Line 5 pipeline, which Michigan Governor Gretchen Whitmer ordered shut down in May 2021, in Sarnia, Ont. PHOTO BY CARLOS OSORIO/REUTERS
CALGARY — For Mike Bradley, the mayor of Sarnia, the impending shutdown of a pipeline that supplies fuel to his city’s biggest employers has been “hovering” for seven months.
That anxiety has been steadily building ahead of a deadline this month imposed by Michigan Governor Gretchen Whitmer for Enbridge Inc. to shut down its Line 5 pipeline, which crosses through Michigan, where it delivers more than half of the state’s propane needs, en route to deliver oil to Ontario, Ohio and Pennsylvania.
In November, Whitmer cancelled the easement that allows Enbridge’s pipeline to pass under the straits and provided a deadline of May 12 to shut the line down. Enbridge, for its part, has vowed to defy the order that comes into force next week in a move that lawyers say will make its case more difficult to argue in state and federal courts.
The two sides are currently in mediation and there is the potential that this fight turns into a national dispute between Canada and the U.S., leaving communities like Sarnia largely powerless in an entrenched environmental fight that could imperil thousands of existing jobs.
The Ontario government believes 4,900 jobs in Sarnia, a city of 71,500, are in jeopardy if the line is shut down next week, but Bradley said there’s a broader economic impact in his city.
“Anytime there’s uncertainty about the source of what drives a particular economy, it does have an impact when you’re trying to recruit companies and industries into the area,” he said. “When you’re in the economic development game, you’re always trying to eliminate anything that could be an impediment and the longer this goes on, the more of that anxiety is there.”
Whitmer’s Democratic administration has attempted to shut the line down twice previously on environmental grounds because the pipeline runs under the Straits of Mackinac, which divides Lake Huron and Lake Michigan. Whitmer has also opposed an Enbridge plan to bore a tunnel under the straits, encase the tunnel in concrete and put a replacement for the 65-year-old pipeline through the tunnel.
The urgency of the situation has led to the formation of a House of Commons committee in Canada, a flurry of diplomatic calls and meetings between Ottawa and Washington, D.C., advertising campaigns in Ontario and Michigan as well as legal filings, some of which are due in U.S. federal court on May 11, the day before Line 5 is required to shut down.
Experts say the fight over Line 5 is also indicative of a broader and evolving fight over oil and gas pipelines in North America. Previously, pipeline opponents would vigorously fight new pipeline proposals — like the Keystone XL pipeline project — and in the process deal a major blow to the growth aspirations of upstream oil and gas companies. Now, the fight has moved from new pipelines to existing ones including Line 5 and the Dakota Access Pipeline and the effect of targeting existing pipelines is that more people and more industries are affected, even outside of the oil and gas industry.
“This is a natural evolution of the anti-pipeline movement,” said James Coleman, associate professor of law at Southern Methodist University Dedman School of Law in Dallas, adding that politicians have been willing to shut down existing pipelines particularly when there is a repair, replacement or new easement needed.
This is a natural evolution of the anti-pipeline movementJAMES COLEMAN, ASSOCIATE PROFESSOR OF LAW, SOUTHERN METHODIST UNIVERSITY DEDMAN SCHOOL OF LAW
“Frankly, it has gotten much harder to build pipelines over time. Sometimes people say that means we don’t need increased capacity but what it also means is we don’t shut down old pipelines,” Coleman said.
Alberta Energy Minister Sonya Savage said the Line 5 pipeline dispute, as well as the Dakota Access Pipeline, are some of the first examples of groups opposed to oil and gas development targeting existing pipelines and their efforts to shut the lines down “hurts people,” in addition to the oil and gas industry.
“People can understand it, they can relate to it, whereas a future pipeline doesn’t impact them in the same way and it doesn’t resonate with people in the way they live their life everyday,” Savage said.
In Michigan, home to the Big Three automakers, the Michigan Manufacturers Association said in a letter supporting Enbridge and Line 5, that the supply of energy “underpins all aspects of manufacturing.” The association threw its weight behind the pipeline, saying its members drive the state’s economy and provide jobs for 628,800 residents and 20 per cent of the state’s GDP.
“Energy costs affect not just the manufacturing process but also the transportation of raw materials to our manufacturing facilities and finished products made in Michigan to their markets within Michigan and beyond,” Caroline Liethen, the association’s director of environmental and regulatory policy, said in a letter to the Michigan Public Service Commission on April 12.
United Auto Workers members leave the Fiat Chrysler Automobiles Warren Truck Plant in Warren, Michigan. PHOTO BY GREGORY SHAMUS/GETTY IMAGES FILES
She added that “energy costs are also a major contributing factor in Michigan’s ability to retain a strong, globally competitive manufacturing sector and attract new investment by manufacturers looking to site new facilities.”
Industry groups in Michigan opposed to the shutdown of the line have launched TV, radio, billboard and social media advertising campaign “to explain just how vital this piece of infrastructure is,” said Derek Dalling, executive director of the Michigan Propane Gas Association.
Michigan is the largest consuming market for propane in the U.S. and Dalling said his association’s member companies are preparing contingency plans in case the line is shut down, including looking for truck drivers that would go as far afield as Indiana and New England to source propane and investing in new railway infrastructure.
“If Line 5 were to go down, by our calculations, we are the smallest piece of the fuels that go through Line 5,” Dalling said, adding that small piece accounts for 55 per cent of all propane demand in Michigan. “Our small piece does account for over 400 million gallons per year diverted from Line 5. That would be almost 10,000 propane rail cars to account for what’s going through Line 5,” he said in an interview with the Financial Post.
In an effort to avoid the line shutting down, Minister Savage has been working with her counterparts in Ontario and Saskatchewan as well as federal Natural Resources Minister Seamus O’Regan to coordinate a legal response to the impending shut down of the line. Alberta has also recruited its Washington, D.C. envoy James Rajotte to make the case for Line 5 in the U.S. Capitol.
O’Regan has also raised the issue directly with U.S. Energy Secretary Jennifer Granholm, while Kirsten Hillman, Canada’s ambassador to the U.S., has met with Governor Whitmer to discuss the issue.
“As the minister has repeatedly made clear, the continued safe operation of Line 5 is vital for energy security on both sides of the border,” said Ian Cameron, spokesperson for O’Regan.
Legal experts contacted by the Financial Post say the best case scenario for Canada is to reach a diplomatic resolution to the problem, but the federal government does have additional legal options including recourse to the 1977 Transit Pipelines Treaty between the two countries if diplomatic talks fail.
The treaty states that “no public authority in the territory of either party shall institute any measures… which are intended to, or which would have the effect of, impeding, diverting, redirecting or interfering with in any way the transmission of hydrocarbon in transit.”
Calgary-based Enbridge, which owns and operates Line 5 and also plans to bore a tunnel underneath the Straits of Mackinac to encase a replacement for the pipeline, references the treaty in its legal filings opposing Michigan’s demands to shut the line down.
“We argued that the state is prohibited from interfering with the operation of an international pipeline, like Line 5, because that operation is a matter reserved for the federal government,” Enbridge spokesperson Tracie Kenyon said in an emailed statement
She added that “energy costs are also a major contributing factor in Michigan’s ability to retain a strong, globally competitive manufacturing sector and attract new investment by manufacturers looking to site new facilities.”
Industry groups in Michigan opposed to the shutdown of the line have launched TV, radio, billboard and social media advertising campaign “to explain just how vital this piece of infrastructure is,” said Derek Dalling, executive director of the Michigan Propane Gas Association.
Michigan is the largest consuming market for propane in the U.S. and Dalling said his association’s member companies are preparing contingency plans in case the line is shut down, including looking for truck drivers that would go as far afield as Indiana and New England to source propane and investing in new railway infrastructure.
“If Line 5 were to go down, by our calculations, we are the smallest piece of the fuels that go through Line 5,” Dalling said, adding that small piece accounts for 55 per cent of all propane demand in Michigan. “Our small piece does account for over 400 million gallons per year diverted from Line 5. That would be almost 10,000 propane rail cars to account for what’s going through Line 5,” he said in an interview with the Financial Post.
In an effort to avoid the line shutting down, Minister Savage has been working with her counterparts in Ontario and Saskatchewan as well as federal Natural Resources Minister Seamus O’Regan to coordinate a legal response to the impending shut down of the line. Alberta has also recruited its Washington, D.C. envoy James Rajotte to make the case for Line 5 in the U.S. Capitol.
O’Regan has also raised the issue directly with U.S. Energy Secretary Jennifer Granholm, while Kirsten Hillman, Canada’s ambassador to the U.S., has met with Governor Whitmer to discuss the issue.
“As the minister has repeatedly made clear, the continued safe operation of Line 5 is vital for energy security on both sides of the border,” said Ian Cameron, spokesperson for O’Regan.
Legal experts contacted by the Financial Post say the best case scenario for Canada is to reach a diplomatic resolution to the problem, but the federal government does have additional legal options including recourse to the 1977 Transit Pipelines Treaty between the two countries if diplomatic talks fail.
The treaty states that “no public authority in the territory of either party shall institute any measures… which are intended to, or which would have the effect of, impeding, diverting, redirecting or interfering with in any way the transmission of hydrocarbon in transit.”
Calgary-based Enbridge, which owns and operates Line 5 and also plans to bore a tunnel underneath the Straits of Mackinac to encase a replacement for the pipeline, references the treaty in its legal filings opposing Michigan’s demands to shut the line down.
“We argued that the state is prohibited from interfering with the operation of an international pipeline, like Line 5, because that operation is a matter reserved for the federal government,” Enbridge spokesperson Tracie Kenyon said in an emailed statement
.
A tank farm at the Enbridge pipelines terminal in Sarnia.
PHOTO BY PAUL MORDEN/THE OBSERVER/POSTMEDIA NETWORK FILES
“We will not stop operating the pipeline unless we are ordered by a court or our regulator to do so, which we view as highly unlikely,” Kenyon said.
Enbridge is currently in mediation with Michigan over the issue, but lawyers in the U.S. do not expect a negotiated solution to the problem.
“That judge orders mediation in every case — always,” said Margrethe Kearney, Grand Rapids, Michigan-based senior attorney at the Environmental Law and Policy Centre, adding that the likelihood of an agreement is lower than if Enbridge and Michigan had embarked on mediation on their own initiative.
Kearney’s group is opposed to Line 5 and the replacement project and she argues that there are exceptions in the 1977 treaty that would allow Michigan to demand the pipeline cease operations.
Article 4 of the treaty also notes that the transit pipeline will be subject to regulations by the “appropriate governmental authorities,” including on pipeline safety, technical pipeline construction and operation standards and environmental protection. Kearney said she questions whether the treaty applies to Line 5 in this situation.
In addition, she said Enbridge’s plan to continue operating the pipeline despite the state government’s order to shut the line down will hurt the company’s ability to argue that it is a responsible pipeline operator.
“I have represented a lot of very large companies and I never advised them to ignore a government order. It never, in the long run, was the right way to go,” she said. “I think it’s a very risky and dangerous thing that Enbridge is doing by refusing to comply with the state’s order.”
“We will not stop operating the pipeline unless we are ordered by a court or our regulator to do so, which we view as highly unlikely,” Kenyon said.
Enbridge is currently in mediation with Michigan over the issue, but lawyers in the U.S. do not expect a negotiated solution to the problem.
“That judge orders mediation in every case — always,” said Margrethe Kearney, Grand Rapids, Michigan-based senior attorney at the Environmental Law and Policy Centre, adding that the likelihood of an agreement is lower than if Enbridge and Michigan had embarked on mediation on their own initiative.
Kearney’s group is opposed to Line 5 and the replacement project and she argues that there are exceptions in the 1977 treaty that would allow Michigan to demand the pipeline cease operations.
Article 4 of the treaty also notes that the transit pipeline will be subject to regulations by the “appropriate governmental authorities,” including on pipeline safety, technical pipeline construction and operation standards and environmental protection. Kearney said she questions whether the treaty applies to Line 5 in this situation.
In addition, she said Enbridge’s plan to continue operating the pipeline despite the state government’s order to shut the line down will hurt the company’s ability to argue that it is a responsible pipeline operator.
“I have represented a lot of very large companies and I never advised them to ignore a government order. It never, in the long run, was the right way to go,” she said. “I think it’s a very risky and dangerous thing that Enbridge is doing by refusing to comply with the state’s order.”
I think it’s a very risky and dangerous thing that Enbridge
is doing by refusing to comply with the state’s orderMARGRETHE KEARNEY, SENIOR ATTORNEY, ENVIRONMENTAL LAW AND POLICY CENTRE
For Ottawa, invoking the treaty would set off a round of arbitration with U.S. President Joe Biden’s administration, which has so far shown some antipathy towards Canadian pipelines carrying oilsands crude into the U.S., as evidenced by his cancellation of the Keystone XL project on his first day in office.
“Typically, in a situation like this, the government would expect that the company would be taking the lead in exhausting all of its legal options,” said Sander Duncanson, partner in Calgary at Osler, Hosking & Harcourt LLP.
“Once you’re into a dispute mechanism, you’re acknowledging that there is now a formal legal dispute between the two countries and I can imagine that the federal government would prefer not to do that if they can avoid it,” Duncanson said.
Despite the cancellation of Keystone XL, legal experts say the Biden administration has taken a more nuanced approach to existing pipelines and has even taken the Trump’s administration position in court to support two separate pipelines through the U.S., which are the Dakota Access Pipeline and the PennEast Pipeline through Pennsylvania.
Enbridge owns a stake in both of those pipeline projects.
A protest against the Dakota Access pipeline in California, in 2016.
PHOTO BY LUCY NICHOLSON/REUTERS FILES
“The Biden administration did not reverse the Trump position that was filed in that court case and so I saw that as a positive development,” said Mark Warner, principal at MAAW Law in Toronto.
Though Biden has taken a softer, more nuanced stance on existing pipelines in the U.S., Warner said that forcing the U.S. government into arbitration over the Line 5 issue could have the unintended consequence of forcing the president into a corner.
“I think it is a threat,” Warner said of the potential invocation of the treaty. “If you’re going to make a threat, you better be prepared to live with it.”
In Sarnia, Mayor Bradley said he believes the Line 5 dispute has highlighted the need for Canadian governments to safeguard existing trade with the U.S.
Bradley said the ad-hoc House of Commons committee dealing with this issue should be turned into a permanent standing committee and Canadian diplomats need to take lessons from the Line 5 event to prepare for potential future trade challenges.
“The Biden administration did not reverse the Trump position that was filed in that court case and so I saw that as a positive development,” said Mark Warner, principal at MAAW Law in Toronto.
Though Biden has taken a softer, more nuanced stance on existing pipelines in the U.S., Warner said that forcing the U.S. government into arbitration over the Line 5 issue could have the unintended consequence of forcing the president into a corner.
“I think it is a threat,” Warner said of the potential invocation of the treaty. “If you’re going to make a threat, you better be prepared to live with it.”
In Sarnia, Mayor Bradley said he believes the Line 5 dispute has highlighted the need for Canadian governments to safeguard existing trade with the U.S.
Bradley said the ad-hoc House of Commons committee dealing with this issue should be turned into a permanent standing committee and Canadian diplomats need to take lessons from the Line 5 event to prepare for potential future trade challenges.
“Do we want to get into trying to stop trade in certain sectors? I don’t think so,” Bradley said, noting that if the Line 5 precedent is allowed to stand, there could be other parts of the Canadian economy targeted in the future, whether in Ontario or in other provinces.
“This issue won’t go away with just a solution on Line 5,” Bradley said
“This issue won’t go away with just a solution on Line 5,” Bradley said
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