Another Setback for Line 3

The saga continues for Line 3 pipeline replacement project. It is pushing now Enbridge delay to one year was announced by the company that could threaten to extend the shortage of pipeline space that has made it difficult to ship their crude to refineries. This set back has caused last year a crisis sending local oil prices record lows and prompting the government of Alberta to embark on an unprecedented intervention in the market.

When Line 3 comes to operate it would help move 370,000 more bbl of crude out of Alberta, which could relieve the mandated production cuts in the province. The delay might change the plans for drillers who were counting on the new pipeline and shift investors focus to efforts by producers and Alberta’s government to move more crude by rail.

“Until the pipeline is operational the plan is to move more oil by rail” per Michael McKinnon Alberta Energy Ministry Statement. It was anticipated some uncertainty will come upon Line 3.

The government last year announced the producer will have to cut about 325,000 bopd, roughly 9% of the province’s output. To lower down storage tank that filled up as new oil-sands projects came online.

The plan was to slow the production cut as the year went on and more rail capacity become available, hoping they have Line 3 operational this year. With the latest development it is expected it might be the second half of 2020 Enbridge stated.

The construction of the line has been pushed back due to Minnesota permitting process won’t be completed until November and the federal permits wont’ be received until as long as 60 days after that.

The postponement of the C$9 billion Line 3 expansion is the latest setback for the Canadian energy industry. TransCanada is facing its own issues with Keystone XLS. Trans Mountain expansion that was bought by the Canadian Government from Kinder Morgan to avoid cancelation of the project is currently on hold pending legal challenges.

The industry has faced in the recent years stronger opposition; However, the replacement and expansion of Line 3 is critical. Older pipelines should be in services for a few decades, pushing a higher risk for the current pipeline that is in service to malfunction and causes another catastrophic environmental pollution.