Vol. 26, No.11 Week of March 14, 2021
Providing coverage of Alaska and northern Canada's oil and gas industry

‘Special bond’ under stress

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Canada ready to do battle over future of Line 5, citing energy security threat

Gary Park

for Petroleum News

Canadian Prime Minister Justin Trudeau ended a one-hour phone conversation with President Joe Biden on Feb. 23 telling the world he had a new and trusted friend in the White House.

It’s possible the return to “normal,” after four years of Trudeau’s sniping with Donald Trump, may last as long as a ceasefire in Afghanistan.

The “special bond” the Canadian leader apparently believed he had established is about to be tested, with Biden holding the key - if he even believes that is necessary - to persuading his close ally, Michigan Gov. Gretchen Whitmer, to drop her plans to shut down Enbridge’s Line 5 on May 13.

The new president is seen in Canada as its only hope of resolving this dispute, regardless of Michigan’s state control over the pipeline.

Christopher Sands, director of the Canada Institute at the Wilson Center in Washington, D.C., said that Biden can settle matters even if he can’t legally override Whitmer’s move to legislate the effective end of Line 5’s role in delivering 540,000 barrels per day of light crude and natural gas liquids to refineries and vital infrastructure in Ontario, Quebec, Ohio and other U.S. refineries and meet two thirds of Michigan’s propane needs.

But Sands said Line 5 has not yet made an appearance on Biden’s public agenda and is not likely to make one.

“We may have to re-examine whether Biden and Trudeau really do have this special relationship we’ve heard about, because so far it’s all talk, no action,” he told the Canadian Broadcasting Corp.

A spokesman for Alberta Energy Minister Sonya Savage said Alberta is engaged with lawmakers on both side of the Canada-U.S. border, reinforcing the importance of Line 5 as a responsible source of energy.

Unlike its lukewarm response to Biden’s cancellation of permits for Keystone XL, the Trudeau government shows signs it is ready to wade into Line 5.

In the strongest language the government has yet applied to the dispute, Natural Resources Minister Seamus O’Regan said the continued operation of Line 5 is “non-negotiable” for Canada.

He vowed Canada takes threats “to our energy security very seriously” and would do whatever it could to scuttle Whitmer’s plan.

“We are watching it on a minute-by-minute basis and we will be absolutely prepared to intervene at exactly the precise moment,” O’Regan said.

At stake is the continued movement of crude oil and natural gas from Canada into the U.S., easily the largest source of export revenue for Canada.

Enbridge view

Enbridge has argued that there is no credible basis to revoke approvals to replace and reinforce a segment of Line 5 that runs under the Straits of Mackinac, which connects Lake Huron and Lake Michigan.

A go-ahead to build twin concrete tunnels under Mackinac was approved in 2018 by then-Gov. Rick Snyder and given a green light in January by Michigan environmental regulators. Even so, Enbridge still needs other federal and state approvals before proceeding.

The existing link has had no spills since it was completed in 1953.

It doesn’t help the company’s case that Whitmer is a close ally of Biden, who reportedly put her on a short list of four as his vice presidential running mate, then offered her a cabinet post, which she turned down in favor of remaining governor, and finally nominated her to serve as vice chair of the Democratic National Committee.

That has to be weighed against the importance of prolonging the life of Line 5, which meets 65% of Michigan’s propane needs in the state’s Upper Peninsula - far beyond Whitmer’s voting base - and 55% of statewide needs.

Challenged to explain how Michigan would replace those feedstock supplies, Whitmer insisted the state has a number of options, without offering any specifics.

While vague on her alternatives, she was forced to sign an executive order on Feb. 20 declaring an “energy emergency to ensure adequate propane” supplies for Michigan for the foreseeable future.

“While I am confident that our state has the energy supply we need to get through these cold winter days, we aren’t taking any chances after what happened in Texas this week,” she said.

The order temporarily suspended restrictions on commercial driver hours to allow the immediate delivery of energy to homes and businesses “without delay or interruption.”

Pressure building

Pressure to head off the looming Line 5 crisis is building on the Ontario government from companies which rely heavily on the pipeline for refinery feedstock and 100% of the jet fuel used at Toronto International Airport.

Enbridge estimated that if Line 5 is shut down, Ontario and Quebec, with a combined population of 23 million, will be unable to meet 45% of their crude needs.

Michael Grant, a senior official in the Department of Global Affairs told a committee of the Canadian Parliament on March 2, that the Trudeau government has reserved the right to invoke a 1977 bilateral pipeline treaty which allows Canada to request negotiations with the U.S. and, if necessary, resort to binding arbitration to resolve a dispute.

But, for now, Grant said the government is hoping that Enbridge, Ontario and Quebec can press U.S. officials “to find a solution.”

Lawrence Herman, a Toronto-based international trade attorney, said the 1977 treaty set an objective of ensuring “uninterrupted transmission” of fuel sources.

Analysts say a shutdown of Line 5 would force Ontario and Quebec to import petroleum by rail, truck or tanker, a potentially more dangerous and environmentally damaging method of transport.

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