Mackinac Bridge on May 28, 2024 (Photo: Anna Liz Nichols)
Built in 1953, Enbridge’s Line 5 pipeline carries 540,000 barrels of light crude oil, light synthetic crude and natural gas liquids a day through the Straits of Mackinac connecting Lake Michigan and Lake Huron.
Line 5, which stretches from northwestern Wisconsin through Michigan into Sarnia, Ontario, is also at the center of multiple lawsuits aimed at shutting down the more than 70-year-old pipeline in order to avert environmental catastrophe.
Amid litigation, plans to reroute the pipeline in Wisconsin and a proposal to encase the section of the pipeline running through the straits of Mackinac in a concrete tunnel embedded in bedrock of the lake, a new report from the Institute for Energy Economics and Financial Analysis — an international think tank focused on accelerating the transition to sustainable energy sources — says shutting down the pipeline may be a better avenue for the Canadian energy company. The report was not commissioned by an outside entity.
“Enbridge should question whether it makes sense to keep sinking money into an old pipeline-prolonging the ‘carbon lock-in’ effect of the fossil fuel infrastructure when markets for its products are on a declining trajectory. Electrification and other technologies are increasingly competitive with Line 5’s products,” the report reads.
Enbridge agrees to redo key permit for Line 5 tunnel project
Alongside increased competition from renewable energy, the report raised multiple concerns about the viability of the company’s pipeline tunnel project, as well as the cost of a reroute amid ongoing efforts to shut down the pipeline.
Concerns with the Line 5 tunnel
Environmentalists and Native American tribes stand strongly opposed to Line 5 and the tunnel, which is the subject of yearslong litigation.
In 2014, Enbridge identified gaps in the protective coating for Line 5 in the Straits of Mackinac. And in 2018, an anchor strike damaged the pipeline, denting it in three places.
Then-Gov. Rick Snyder, a Republican, signed legislation in December 2018 to create the Mackinac Straits Corridor Authority, which later voted to approve an agreement with Enbridge to build a utility tunnel in the Straits.
Aimed at remediating concerns of a spill into the straits of Mackinac and protecting against future anchor strikes, the tunnel project would relocate the dual pipelines to a concrete-line tunnel embedded beneath the lakebed. In order to move forward the project must receive three permits, one from the Michigan Department of Environment, Great Lakes and Energy (EGLE), one from the Michigan Public Service Commission (MPSC) and another from the U.S. Army Corps of Engineers.
While the project received approval from EGLE in 2019 and the MPSC in 2023, the U.S. Army Corps of Engineers has yet to grant the project its approval, extending its environmental review of the project in 2023, with the Corps expected to issue its draft environmental impact statement this spring.
Additionally, Enbridge has agreed not to act on its permit from EGLE, which is set to expire on Feb. 25, 2026. The company must apply for a new permit which incorporates the results of new wetlands surveys.
The Line 5 tunnel will be about four miles long, with an inside diameter of 21 feet and a one-foot thick concrete liner. The initial estimate for the project from 2018 puts the project cost at $500 million, however the report argues it will likely cost much more, at least three times the initial estimate.
The report notes that Enbridge’s initial 2018 plan for the project suggested the inside diameter of the tunnel would be 10 feet. However, Enbridge has since increased the diameter 11 feet for “long-term tunnel operational reasons and to improve reliability during construction.” This expansion to the tunnel does not simply double the size of the tunnel, the report notes, with the recalculated size of the tunnel’s size coming out to 3.67 times the volume of the originally proposed tunnel.
Reporting from the Detroit News in 2021 later revealed that Enbridge had emailed a state agency staff member the cost would likely be double the initial estimate. In a 2020 email from a contracting unit manager of the Michigan Department of Transportation (MDOT) to the Mackinac Straits Corridor Authority regarding “an impromptu update” from Enbridge, reporting “significant cost creep” with construction costs increasing 90% over the development period. This places the project at $950 million, not accounting for inflation.
In an email, Enbridge spokesperson Ryan Duffy told the Michigan Advance the company did not have any updates on the project cost.
“At each stage of managing a project we make internal assessments and adjustments when it comes to a project’s scope and cost estimate. This is normal,” Duffy said. “While in pursuit of permits, continued changes in the environmental regulatory process have resulted in delays which will extend the Project schedule and cost. At this time we do not have any new cost estimates to provide for the project.”
While other cost estimates were submitted as part of public testimony in the permitting case before the MPSC, the report contends these estimates will likely all be exceeded.
Alongside changes to the size of the tunnel, the report also points to revised plans for where the tunnel would be built in the bedrock below the straits, with the original depth range listed as between 60 to 250 feet and the updated range coming in between 30 to 370 feet.
“The extent to which this change will add to the project costs has not been publicly disclosed,” the report notes.
Updated Authors-Enbridge Should Consider Closing Line 5_Report_January 2025_Final
Additionally, safety requirements, construction mishaps and other concerns about stability and water management during construction could also lead to additional cost increases, the report notes.
In addition to added costs in planning the tunnel project, the report points to a nationwide escalation of pipeline construction costs, with the Oil and Gas Journal, a petroleum industry publication, reporting in 2023 that pipeline construction costs had hit a record of $10.7 million per mile.
The report points to the risk of the pipeline rupturing while the tunnel project is underway, with the MPSC’s decision to approve the tunnel project noting that a spill would cost an estimated $1.37 billion in damages while creating long lasting health, environmental and cultural damage.
However, another independent risk analysis commissioned by the state of Michigan placed the number closer to $2 billion for the worst case scenario.
Yet another estimate from ecological economist Robert Richardson of Michigan State University, commissioned by the environmental group For Love of Water (FLOW), says that a pipeline rupture would have a total economic impact of more than $5.6 billion, impacting commercial fishing, municipal water systems, tourism and coastal property values. Of that $5.6 billion, $697.5 million would be needed to address the damage to natural resources.
As part of Enbridge’s agreement with the state to build the tunnel project, Enbridge must maintain more than $1.8 billion in financial assurances in line with the state-commissioned independent risk assessment.
These assurance requirements, along with the threat of a rupture as the pipeline continues to operate, could last for another four to five years, whereas a non-pipeline alternative could be implemented over a substantially shorter period, the report says.
“Practically speaking, moving expeditiously to a non-tunnel-pipeline alternative would speed shutdown of the old system while also allowing businesses to plan for the change,” the report says.
“Businesses can deal with many changes in supply and demand if they have time to make the adjustments needed to ensure a reliable flow of business. A one-day turn-around resulting from an accident or pipeline failure is very different from a period of a few months to put contracts in place for alternative transport of oil or [natural gas liquid] products,” it says.
It also points to a 2023 report from PLG Consulting — a logistics and supply chain advisory firm — which found the pipeline could be shut down without creating shortages or price increases, suggesting alternative transportation methods including delivering crude oil by rail, utilizing the company’s other pipeline systems, and providing additional shipments using oil tankers.
Enbridge criticized the PLG Consulting report, with Duffy saying its recommendations “defy common sense” with additional oil tankers on the Great Lakes and rail cars across the region putting the environment at risk.
“The best long-term plan to maintain the energy needs of this region is the Great Lakes Tunnel Project, which Enbridge is continuing to advance. It is the safer, smarter, better solution to protecting the environment and protecting our economies,” Duffy previously told the Advance.
The Great Lakes Business Network, a group of more than 200 businesses opposing the pipeline, has also argued the pipeline could be shut down with little to no effect.
Reroute attempts set to face additional challenges
In addition to its Line 5 tunnel project, Enbridge has also been ordered to reroute a section of the pipeline in Wisconsin, after the state’s Western District Court found the company had been trespassing on 12 parcels of land owned partially or wholly by the Bad River Band of Lake Superior Chippewa. The tribe took legal action against Enbridge in 2019 after refusing to renew Enbridge’s easements to operate the pipeline on their land after they expired in 2013.
While Enbridge has been ordered to remove the 12-mile section of the pipeline running through the tribe’s sovereign territory by 2026, the Bad River Band has continued to advocate for the immediate shutdown of the pipeline, raising concerns that Line 5 will rupture as the result of riverbank erosion.
The tribe has also challenged the Wisconsin Department of Natural Resources’ decision to permit a reroute of the pipeline, which no longer trespasses on their territory, but still runs through the Bad River Watershed, citing continued concerns that the pipeline could rupture, damaging the environment and deeply impacting their way of life.
While the reroute is projected to cost about $450 million in 2024 dollars, the Institute for Energy Economics and Financial Analysis argues the reroute will likely cost more.
“It is realistic to presume the project will ultimately cost roughly $500 million or more,” the report said, noting the project’s 12-14 month expected construction period, the need for additional approvals from other agencies and the ongoing opposition from the Bad River Band.
The report also warns that additional risks could arise while seeking to maintain the 70-year-old pipeline, pointing to spills in the company’s other pipelines.
Most recently, Enbridge’s Line 6 spilled more than 69,000 gallons of crude oil in the town of Oakland, Wis.
Over 10 years, the U.S. Pipeline and Hazardous Materials Safety Administration (PHMSA) has taken 53 enforcement actions across Enbridge’s 10 systems, levying a total of $1.9 million in assessed civil penalties.
The report also points to concerns from PHMSA on the difficulty of performing routine maintenance deep within the Line 5 tunnel alongside recovery efforts when a leak or incident occurs.
Threats to demand amid energy transition
Alongside potential construction cost increases and threats of failure, the Institute for Energy Economics and Financial Analysis also pointed to concerns from credit rating agencies and mixed review among stock analysts as it continues to pursue the reroute and tunnel project.
Additionally, pursuing an alternative to Line 5 would allow Enbridge to adapt to declines in demand for fossil fuels, the report said.
According to the International Energy Agency, oil demand is expected to decrease to 97 million barrels per day by 2050 if the world continues with current policies, but if governments meet their goals to reduce carbon emissions on time, that amount drops to 55 million barrels per day.
Additionally improved fuel efficiency in vehicles and growing competition from both electric vehicles and hybrids, alongside federal, state and provincial mandates to blend gasoline with ethanol or biofuels has also led to a drop in demand within the oil market.
Citing data from the U.S. Energy Information Administration, the report notes that total gasoline consumption peaked in 2016 and has fallen more than 6% in the following years, with per capita gasoline demand, adjusted for population growth, dropping by 12% from 2016 to 2023. Electric vehicles are also expected to further cut into this demand.
However, Duffy said energy demand is expected to increase through 2040, according to the International Energy Agency, and that oil and natural gas will be needed for many years.
“At the end of the day, Michiganders will still be using propane to heat their homes and businesses. Our Line 5 carries natural gas liquids (NGLs) that are turned into propane. Line 5 will continue to be vital for Michigan for decades to come,” Duffy said.
However, the Institute for Energy Economics and Financial Analysis report pointed to additional data from the Energy Information Administration which predicted the residential consumption of propane would plummet.
The report also points to electric heat pumps as an alternative for heating homes, with Michigan and Wisconsin both offering grants for home heating and energy efficiency. In Michigan, households with incomes at or below 80% of area median income are eligible for higher percentage rebates on insulation, space heating/cooling heat pumps and water heater heat pumps, with rebates capped at $8,000.
“Even smaller-scale changes, such as conversion of a propane-fired water heater, can have a significant impact. A sizable 18% of propane in homes — nearly one-fifth of a home’s propane consumption—is used just to operate water heaters,” the report notes.
Between the costs, the potential both within and outside of the company’s construction projects, the ongoing legal challenges and a projected drop in demand, the Institute argues a path forward without Line 5 would relieve Enbridge of debt concerns and legal battles, and would provide the company with greater flexibility on energy.
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