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Nick Cunningham

Nick Cunningham

Nick Cunningham is a freelance writer on oil and gas, renewable energy, climate change, energy policy and geopolitics. He is based in Pittsburgh, PA.

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Canada’s Most Crucial Pipeline Comes Under Fire

Police and private security contractors have been quietly preparing to head off protests of a key oil pipeline in the U.S. Midwest in an effort to avoid another Standing Rock.

According to The Intercept, Minnesota police have been planning for 18 months in case protestors try to block construction of the Line 3 pipeline. Police and private security contractors have tracked and identified potential protestors and have consulted with law enforcement in North Dakota who busted up the Standing Rock protests. It’s not clear why law enforcement is siding with industry, or why they are surveilling environmental and indigenous groups, but they clearly fear a rerun of the Dakota Access protests that garnered international attention in 2016.

The Line 3 replacement, at least to date, has not received nearly as much attention as the Dakota Access Pipeline, Keystone XL, or the Trans Mountain Expansion, for that matter. But the Line 3 replacement is absolutely vital to Enbridge, its owner, and to the Canadian oil sands industry as a whole.

The pipeline runs through Ojibwe lands in Minnesota. Opposition has been strong, but so far limited to Ojibwe and local environmental groups. But the issue could yet blow up into another Standing Rock. Private security contractors themselves have “singled out Line 3 as the next likely flashpoint of opposition to a U.S. pipeline project,” according to The Intercept.

For good reason. Not only would Line 3 present a threat to indigenous tribes in Minnesota, but it is also a critical project to Canada’s oil industry. Alberta and the Canadian oil industry have struggled for years to push through a single major pipeline project.

TransCanada’s Keystone XL has been in limbo for more than a decade. The company’s Energy East pipeline, which would have run across much of North America from Alberta to Canada’s East Coast, was scrapped two years ago. Related: Oil Rises 18% In Best January On Record

The Trans Mountain Expansion was supposed to be the project with the highest odds for completion, particularly since it was a twin line along an existing pipeline and not a greenfield project. But that project ran into a brick wall last year when Kinder Morgan threatened to shelve it, only to have the Canadian government bailout the company by essentially nationalizing the project. As of now, the pipeline’s fortunes are still unclear.

That puts incredible importance on Line 3 as the salvation for Canada’s oil sands. Because of the pipeline bottlenecks, Western Canada Select (WCS), an oil benchmark that tracks heavy oil from Canada, suffered enormous price discounts. Late last year, WCS temporarily traded at a greater-than $40-per-barrel discount to WTI, which meant that WCS traded as low as $15 per barrel.

With pipelines maxed out and WCS prices crashing, the provincial government in Alberta instituted mandatory production cuts. Just days ago, Alberta partially lifted the mandatory curtailments because WCS prices have rebounded. A surge in crude-by-rail shipments have helped – rail shipments were up 88 percent in October compared to a year earlier, according to the Wall Street Journal. The crisis in Venezuela and the U.S. government’s efforts at regime change have also pushed up heavy crude prices in Canada.

However, rail is costly and ultimately is only a partial and temporary solution. Alberta needs a new pipeline if the province is to see its oil industry grow. 

The Line 3 replacement project is a roughly $C9 billion overhaul of an aging existing line. Replacing the more than 1,000-mile pipeline would restore its capacity to 760,000 bpd. As such, it’s hard to overstate the importance of the project to Canada’s oil industry. With Energy East dead, Trans Mountain Expansion on life support, and Keystone XL still up in the air, the Line 3 pipeline is the only significant increase in midstream capacity for the next few years at least.

With much of the construction already completed, the replacement – including construction through Minnesota – is expected to be completed later this year. It’s no wonder that the industry, and apparently its allies in U.S. law enforcement, are desperate to avoid any delays that might crop up from a sudden outburst of protests.

By Nick Cunningham of Oilprice.com

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