By the end of 2016, Enbridge Inc. pipeline expects to bring into service projects that will open up approximately 1.7 million barrels per day of incremental crude oil capacity. Enbridge massive Line 3 oil sands pipeline replacement is a key component of capacity growth

In a move that could spare the Obama administration another divisive public controversy over a major oil sands pipeline, the State Department has determined that Enbridge Inc.'s massive Line 3 replacement project that will allow the company to import 760,000 barrels per day of heavy Canadian crude does not need a new Presidential permit.

Although the State Department recently declined to discuss the determination, Enbridge's statement would appear to confirm a decision that green groups are challenging because the original 1960s-era pipeline has never been through an environmental review.

Underscoring its opposition to the Line 3 replacement project, the Sierra Club said it has filed a Freedom of Information Act request asking the State Department to release documents related to the pipeline's permit, saying issues surrounding the permitting process for the Line 3 replacement-at $7.1 billion, the largest project in Enbridge history-have not been subject to any public review.

Enbridge has proposed replacing pipes and upgrading compressor stations along the existing 1,031 miles of the Line 3 pipeline from Hardisty, Alberta, across the U.S.-Canada border near Neche, N.D., and on to the company's shipping terminal at Superior, Wis. From there, the heavy crude could be moved to refineries near Chicago and into the Enbridge system that, through the expanded Flanagan South and Seaway pipelines, can reach Gulf Coast refineries and port facilities.

Due to pressure constraints, the existing Line 3 pipeline-which in 1968 received a Presidential permit to cross the US/Canada border-can currently carry about 410,000 barrels per day (bpd) of crude oil, but the replacement project would return the line to its original capacity of 760,000 bpd, a bit less than the 830,000 bpd of TransCanada's controversial proposed Keystone XL pipeline.

Enbridge has maintained that the project does not need a new Presidential permit because it simply will return Line 3 to its original capacity and improve the pipeline's integrity and reliability.

In March, the State Department said the issue of whether the Line 3 replacement would need a new Presidential permit was "under review." But in early August, Enbridge spokesman Lorraine Little told IHS The Energy Daily that the State Department has confirmed that Line 3 may move forward without the permit. However, a State Department official told IHS The Energy Daily the next day that "it's not our practice to discuss such determinations publicly."

The Line 3 replacement comes as Enbridge's plan to expand its Alberta Clipper pipeline along the same route from 450,000 bpd to 800,000 bpd has run into unexpected delays-much like Keystone XL-in securing a Presidential permit from the Obama administration to cross the border.

The administration so far has avoided making decisions on Keystone XL and Alberta Clipper which, if denied, could undermine the tight re-election campaigns of key Democratic lawmakers, including Senate Energy and Natural Resources Committee Chairman Mary Landrieu (La.), who supports construction of the pipeline. By determining that Line 3 does not need a Presidential permit, the administration may be hoping that a large oil sands pipeline project can move forward without major controversy at the federal level. However, given the energy with which Keystone XL opponents have fought that project, it is all but inevitable that greens will fight the Line 3 replacement project aggressively.

Line 3 has never undergone an environmental review because the original permit was granted before the National Environmental Policy Act was enacted in 1969.

Elizabeth Ward, the conservation programs coordinator for the Sierra Club's Wisconsin chapter, said environmental groups are gearing up to oppose the Line 3 permit, in part because it will feed oil sands crude into Enbridge pipelines that border on Lake Superior and another that runs beneath the Straits of Mackinac separating Lake Michigan from Lake Huron.

Enbridge plans to invest more than $21 billion in a variety of pipeline expansions including Line 3 and the Alberta Clipper. Enbridge President and Chief Executive Officer Al Monaco said "Our strategy is driven by our customers' need for incremental pipeline capacity and new market access to accommodate the continued strong growth of North American supply," "By the end of 2016, we expect to bring into service projects that will open up approximately 1.7 million barrels per day of incremental capacity." Enbridge hopes to complete the Line 3 replacement in 2017.

Learn more about The Energy Daily which provided this article.

This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.