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Enbridge says that new requirements expected to come out of a Minnesota environmental impact statement for work on two major U.S. pipeline projects could lead to the delay of some $5 billion in capital expenditure.
At stake are the Sand Piper light crude oil pipeline and the Line 3 Replacement Project, both running through the state of Minnesota and projected to costs a total of $2.6 billion.
The problem for Enbridge is a new requirement that makes it necessary to receive a final environment impact (EIS) statement before a company can even start the process of obtaining a route permit.
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Enbridge says the new requirement is both “unprecedented” and “contrary to Minnesota law”, as reported by the Financial Post. At the end of the day, Enbridge says the new procedures will result in a two-year delay and all the costs associated with that.
The two pipelines will now likely be pushed back to 2019, but the delay will also allow Enbridge to cut its 2016 capital budget by some 20 percent as costs are deferred.
The hold up in Minnesota is pressured by opposition to the pipelines by environmental groups and Native American tribes who fear potential oil leaks.
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In 2015, Enbridge spent $1.14 billion on new pipelines, expansion and maintenance, while this year that figure is expected to come in around $900 million.
The Sand Piper pipeline, which will run from North Dakota’s Bakken to Wisconsin, passing through Minnesota. This is the larger of the two pipeline projects, and a joint venture with Marathon Petroleum. The Line 3 Replacement is a reconstruction of a 1960s pipeline from Edmonton in Alberta to Wisconsin.
Enbridge has already invested $195 million into Sand Piper and $65 million into the Line 3 Replacement.
By Charles Kennedy of Oilprice.com
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Charles is a writer for Oilprice.com