CALGARY -- Energy shipper Enbridge is spending $7-billion to overhaul a 46-year-old oil pipeline between Alberta and Wisconsin -- a project it says won't have to go through the same U.S. federal process that has bogged down a rival's Keystone XL proposal.
In the largest project in its history, Calgary-based Enbridge Inc. (TSX:ENB) and its U.S. affiliate will be replacing Line 3 using improved steel and coating.
Enbridge and its customers concluded that replacing the line entirely was a more cost-effective option than maintaining it in the long term. Shippers have agreed to pay a toll surcharge over a 15-year span.
The upgrade will enable the line to pump a maximum of 760,000 barrels per day, up from the 390,000 that is currently able to move, according to Enbridge's own engineering analysis. The revamped Line 3 is expected to be up and running in the later half of 2017.
The upgrade is meant to assure producers and refiners that rely on Enbridge's network that their crude won't have trouble finding its way to market.
"You can think of this project as a buffer to deal with unplanned disruptions and maintenance and additional scheduling flexibility that shippers need," CEO Al Monaco said Tuesday.
Line 3 already has a Presidential Permit, a required green-light from the U.S. administration for cross-border infrastructure, he added.
"What we're doing here is restoring Line 3 to its original condition. So there's no permit required," Monaco said.
But Doug Hayes, staff attorney at environmental group the Sierra Club, disagrees with Enbridge's view that the process can be avoided.
"And the same climate test that the president set for the Keystone XL pipeline will apply. Will this new pipeline significantly exacerbate carbon pollution? Of course it will," Hayes said in an emailed statement.
He said the Line 3 project will face the "same level of scrutiny and opposition" as other proposed oilsands pipelines.
Officials at the U.S. State Department were not immediately available for comment.
Fellow Canadian pipeline giant TransCanada Corp. (TSX:TRP) has faced a long and frustrating process in trying to obtain a Presidential Permit for its Keystone XL pipeline, which would connect 830,000 barrels per day of mostly oilsands crude to Texas refineries. The U.S. regulatory process for that project began some five and a half years ago.
An expansion to Enbridge's Alberta Clipper pipeline, which also runs between Alberta and Wisconsin, has been held up by the process as well. It obtained a Presidential Permit in 2009 for the first 450,000 barrel per day phase, but the U.S. State Department requires an amendment for a two-phase expansion up to 800,000 per day. That's taking longer than Enbridge had expected, but the company is still confident the Alberta Clipper expansion will be in service by mid-2015.
Line 3 is one of six arteries that make up Enbridge's Canadian mainline -- a key piece of infrastructure that moves Alberta crude east.
A different pipeline ruptured in southern Michigan in 2010, spilling three million litres of crude and fouling the Kalamazoo River.
Enbridge shares rose more than four per cent to $48.85 in afternoon trading Tuesday on the Toronto Stock Exchange.
