‘Uncertainty’ on climate, carbon regulations could shorten economic life of Enbridge pipelines

A study filed by the Federal Energy Regulatory Commission in May examining the economic life of the Lakehead pipeline system — a system of pipelines that begin in Canada and pass through Minnesota, Wisconsin and Michigan — outlines ways in which the company believes the economic life of the system could be shortened.

Past studies listed a 30-year life from the time the study was completed (a 2015 study predicted a 2045 “truncation” date — the end of its useful life — and a 2005 study predicted 2035).

But the filing made in May 2021 with the Federal Energy Regulatory Commission went through 2020 and only puts the system’s economic life at 20 years ahead, to Dec. 31, 2040.

A pipeline company can charge the oil shippers using its pipelines additional money to ensure it can recover its investment in the pipeline before it becomes fully depreciated.

The new Line 3, which went into service Oct. 1 and is part of the mainline system, was not included in the report because it covered through 2020, when the pipeline was still under construction, Enbridge spokesperson Juli Kellner said in an emailed statement to the Duluth News Tribune.

Kellner said the new Line 3 had a depreciable life of 30 years. Additionally, pipelines can continue operating beyond that time frame.

“The mere fact that an asset is fully depreciated does not mean that that asset has reached the end of its useful life and should be retired,” Kellner said. “Enbridge has many, many examples of assets which, often through their sheer longevity of service, have become fully depreciated, but which remain fully operational and continue to provide service to Lakehead system shippers.”

Last week, Honor the Earth, an Indigenous-led environmental group that has long fought Line 3, petitioned the Minnesota Public Utilities Commision to open a docket that would establish a abandonment trust fund for the new Line 3, which was a condition of its approval.

The group cited Enbridge’s May 2021 depreciation study in the petition and urged the Public Utilities Commission to establish an abandonment trust fund “as soon as possible to ensure that new Line 3, once abandoned, does not become a financial burden on private as well as state and local government landowners.”

The filing now appears in a new docket created Dec. 6.

In May’s report, Enbridge cited several fossil fuel and environmental issues that have emerged since its last report.

It said it is unclear what will happen to crude oil demand under a Canadian tax scheme aimed at reducing the country’s carbon dioxide emissions by one third by 2030. Enbridge also said it’s unclear how the U.S. will meet the targets laid out in the Paris Climate Agreement that President Joe Biden rejoined.

Additionally, it now faces significant legal challenges to its Line 5 pipeline as it passes through Wisconsin, then through Michigan and the Straits of Mackinac.

“The fact that Enbridge must go to court to protect its operating assets is evidence of the emergence of a new risk not faced by Enbridge Energy at the time of the 2015 Depreciation Study,” the company said.

In public comments responding to the study, the Canadian Association of Petroleum Producers said Enbridge failed to support its claims in the study and urged the Federal Energy Regulatory Commission to investigate the study.

“The claim that the Lakehead system will be out of business in 18 years is remarkable given the entirety of the factual circumstances,” the group wrote.