PUC Adds Conditions to Enbridge’s Line 3 Approval, But Only Those Acceptable to Enbridge

The current Line 3 is blue, the proposed reroute is in red. Light green shaded area reflects the “ceded lands” where bands retain rights to hunt, fish and gather.

The Minnesota Public Utilities Commission (PUC) added conditions to Enbridge Line 3 pipeline permits, but they could amount to a Band Aid on a skull fracture.

Probably good to have a Band Aid. Just not really all that good.

The PUC had a strong position to negotiate permit language for the new Enbridge Line 3 tar sands pipeline. The PUC failed to use its power and act in the best interests of Minnesotans.

For starters, the PUC never should have approved Line 3’s Certificate of Need. The PUC overrode the recommendations of the Administrative Law Judge and the Minnesota Department of Commerce. If the PUC was going to approve Line 3, however, it should have imposed stronger conditions. As it is, the PUC seemed to rubber stamp Enbridge’s last-minute offer.

The final language will be released when the PUC files the final orders approving the pipeline (late July at the earliest). On July 11, the PUC released a memo outlining the conditions: Proposed Modifications Required for Commission to Grant Certificate of Need for Line 3 Replacement Project.

Here are six problems with the PUC’s process and decision: 1) It allowed Enbridge to change its proposal after the official record was closed; 2) Neither the public nor the state got a chance to analyze and critique the PUC’s/Enbridge’s conditions; 3) The parental guaranty doesn’t appear to protect the state against a fast oil market collapse; 4) the PUC failed to use its strong negotiating position to benefit Minnesota; 5) The PUC completely ignored the central issue of treaty rights, and 6) It provided a vague commitment around addressing issues of sex trafficking and drug enforcement.

The public packed overflow rooms to attend PUC hearings.

1. Enbridge changed its proposal after the record closed

In the lead-up to the PUC’s final deliberations in June, Enbridge was throwing out deal sweeteners like candy from a July 4 parade float. It was an indication that Enbridge was nervous it didn’t have the votes.

In a surprising development, the PUC commissioners allowed Enbridge to modify its proposal after the contested case hearing had closed. It wasn’t supposed to allow new evidence into the record.\

Comment: The Sierra Club filed a complaint.

2. Enbridge’s “Parental Guaranty” lacked scrutiny

The PUC made Line 3’s Certificate of Need conditioned on getting a “parental guaranty from Enbridge, Inc. to pay for environmental damages arising from the construction or operation of the Line 3 Replacement Project.” Enbridge had pushed for a parental guaranty based on the one negotiated for the earlier Sandpiper Pipeline (which never got built.) A June 26 Star Tribune article captured the concerns about that option.

“If it was adequate in the Sandpiper case, why isn’t it adequate here?” PUC Commissioner Dan Lipschultz asked the commerce department’s Bill Grant.

In retrospect, “there were a lot of things in the Sandpiper case where we were babes in the woods,” said Grant, deputy commissioner of energy and telecommunications.

Grant said his department does not believe the Sandpiper provisions for corporate succession — what happens if Enbridge is sold or goes out of business — would be adequate for a new Line 3.

He also noted the last-minute nature of Enbridge’s financial guarantee has not given parties — the state, tribes and environmental groups — enough time to respond to Enbridge’s proposal. “This is an issue of utmost importance to protect the state of Minnesota and landowners along the route.”

Comment: Grant’s comment that Commerce was a “babe in the woods” during the Sandpiper negotiations seems to indicate the state got hoodwinked in the earlier negotiations.

Further, the public participated in the Line 3 debate by the thousands over several years. People overwhelmingly opposed this pipeline. Enbridge offered its new concessions to the PUC on June 22. The public had a right to debate its proposal. The PUC’s decision to allow Enbridge to change its proposal at the last minute undermined public participation and confidence in the process.

Minnesota sales of refined petroleum products has been on the decline.

3. The Parental Guaranty won’t work if the fossil fuel market crashes quickly

What happens if Enbridge files all the right “parental guaranty” paperwork today and goes bankrupt in a decade with a major spill in Minnesota?

The PUC memo says if Enbridge’s “at the ready” finances and insurance coverage fall short of the money needed to clean up “a full-bore spill,” the State “shall have the ability to require a financial assurance account or mechanism in addition to the guarantee to cover any identified deficit.”

Comment: File that under “wishful thinking.” If the market drop is fast, it doesn’t matter if the state has the ability to require additional financial assurance. We could be left with the proverbial Band Aid on the skull fracture.

4. The PUC was in a strong negotiating position but didn’t use it

Enbridge has a debt problem. In the past year, the company has been selling assets. Recently, it sold its natural gas collecting and processing business. It’s business plan includes focusing on its long-haul pipelines, such as Line 3. This business decision made the PUC vote even more important to Enbridge’s future survival.

Some details of Enbridge’s financial dealings can be found in the Financial Post’s July 4 story headlined: Enbridge sells assets worth $4.3 billion to Brookfield consortium in bid to reduce $61-billion debt pile and a World Pipelines story headlined: Enbridge announces sale of natural gas gathering and processing businesses.)

Comment: The PUC had strong leverage, yet only approved those conditions that Enbridge agreed to in advance. For instance, the PUC could have required more time to negotiate stronger financial assurances and it could have required more protections for indigenous rights. It did not.

5. The PUC ignored the treaty rights issues central to this case: The Anishinaabe bands repeatedly raised issues of their treaty rights to hunt, fish and gather along Line 3’s new route. The PUC wasn’t the right venue to litigate treaty rights, which are a federal issue. But the PUC could have put conditions on Line 3’s approval that would have given tribes a window of opportunity to file their legal appeals and be heard in court. As it is, the PUC ignored this issue altogether and is allowing the project to begin with this major issue unresolved.

6. The PUC acknowledged the issue of sex and drug trafficking that follows large transient workforce construction projects, but the financial commitment to address that problem is anyone’s guess. The PUC memo states Enbridge is required to deposit in an escrow account:

“an amount determined to be appropriate to enhance existing human trafficking and drug enforcement law enforcement and social services task forces to be distributed prior to construction along the route to address the anticipated impacts of a large influx of workers. The Executive Secretary shall make the determination of the overall amount and distribution plan upon consultation with Public Safety Liaison and the Tribal Liaison, who shall have conferred with law enforcement agencies and social services of affected LUGs [local units of government] and Tribal Governments.

Comment: To deal with sex and drug trafficking, the PUC is requiring Enbridge to commit: “an amount determined to be appropriate.” Doesn’t get much more vague than that. Putting the decision in the hands of the PUC Executive Secretary is not promising, as the PUC staff has shown itself to be deferential to Enbridge. The fact that this language requires the PUC Executive Secretary to consult with a tribal liaison is not reassuring, either. Tribal consultation made little difference on the PUC’s Line 3 deliberation.

Meanwhile in Wisconsin, people are fighting for a “spill cleanup” guarantee but Enbridge is pushing back. Enbridge has oil pipeline running through Wisconsin, too. In 2016, Dane County officials tried to secure a $25 million spill clean-up insurance requirement, according to a July 10 story in the Sun Prairie Star. This issue has been through the wringer in the courts. Dane County won the latest round, and now Enbridge is trying to take the case to the Wisconsin Supreme Court.

Comment: Makes you wonder how serious Enbridge is about providing Minnesota with a legitimate backstop to pay for needed cleanup.

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