By Nia Williams
CALGARY, Alberta (Reuters) -Enbridge Inc said on Wednesday its Line 3 pipeline replacement project will begin operating on Oct. 1, the first successful major expansion of Canadian crude export capacity in six years, clearing hurdles that other projects were unable to overcome.
Its completion is welcome news for the Canadian energy sector after a number of proposed pipelines, including TC Energy's Keystone XL, were scrapped due to environmental opposition and regulatory delays.
The $8.2 billion project allows Enbridge to roughly double its capacity to 760,000 barrels per day on the 1,765 km-long (1097 mile-long) pipeline.
Line 3, built in the 1960s, carries oil from Edmonton, Alberta, to refineries in the U.S. Midwest, but for years was transporting less than its capacity because of age and corrosion. The project was opposed by environmental and Native American groups, particularly in Minnesota, the last stage of the expansion.
Construction in both the United States and Canada took more than seven years to finish, but the project succeeded where other projects have run aground because it was replacing an old line, rather than one starting from scratch, Leo Golden, Enbridge’s vice president of Line 3 Project Execution, told Reuters in an interview.
"This was a safety driven project about replacing existing, aging infrastructure so that set it apart from some of those other projects," Golden said.
The 542-kilometre Minnesota section of Line 3 is the last part of the pipeline to come in service, following already-completed segments in Canada, North Dakota and Wisconsin.
Golden said Enbridge will start filling the line on Oct. 1 and offer full capacity of 760,000 barrels per day in November. Earlier this month, the company told shippers it would offer 620,000 bpd of crude capacity in October.
He said in future adding capacity through optimizing and expanding existing pipelines would likely be the way the industry goes, given the challenges around building new infrastructure, a view echoed by trade union leaders in the United States.
"The maintenance industry is our future, the lifeline of the oil and gas (pipeline) industry," said Phillip Wallace, business representative for Pipeliners Union 798, which worked on the proejct in Minnesota. "Line 3 was the big boy that needed replacing badly."
The finished project assures Canadian producers their growing oil sands crude output will have access to U.S. markets and global exports via the U.S. Gulf Coast.
Line 3 is the first major Canadian oil pipeline expansion to be completed since Enbridge's Alberta Clipper project, finished in 2015. However, since 2019 Enbridge has also optimized parts of its existing Mainline system, adding roughly 150,000 bpd of capacity.
HUGE BOOST
The Line 3 replacement project was first announced in 2014 but ran into fierce opposition from environmental groups and Native American tribes, particularly in Minnesota.
U.S. President Joe Biden, who revoked a key permit for the Keystone XL pipeline earlier this year, has been criticised by some environmental groups for allowing the project to proceed. They argue the United States should be reducing its dependence on fossil fuels to fight climate change.
"President Biden and the other politicians who chose to do nothing as treaty rights were violated, waterways were polluted, and peaceful protesters were brutalized have placed themselves on the wrong side of history," Sierra Club spokeperson Margaret Levin said in a statement.
However, the project was celebrated by trade unions, whose members benefited from thousands of jobs during construction, and Canada's energy sector, which in the past has struggled with pipeline bottlenecks that depressed the price of Canadian crude and contributed to an exodus of foreign capital.
"This is a huge boost to the industry," said Martin King, an analyst at RBN Energy. He said projected growth in Canada's oil sands suggests the industry will need only one more major pipeline expansion, which will be the Canadian government-owned Trans Mountain expansion to the west coast.
Robert Fitzmartyn, head of energy research at Stifel FirstEnergy (NYSE:FE), said he expected Line 3's completion to have a positive impact on Canadian oil company shares in the long-term.