Enbridge Inc. is delaying the date when it expects its replacement Line 3 crude oil pipeline to be in expanded service, in what is being called a "major blow" to the oil industry in Canada. According to Bloomberg, the project had previously been set to begin shipping crude in Q4 2019. But now the company is pushing back construction due to slow permitting in Minnesota.
Enbridge expects the pipeline to begin service in the second half of 2020 now, as its Minnesota permits won't be complete until November of this year. Federal permits won't be received until as long as 60 days after that.
This pipeline was of importance because the government of Alberta was planning on using it to end mandated production cuts that were implemented to deal with a supply glut of crude oil. The glut has been a result of a lack of pipeline space, making it difficult to ship supply to refineries.
The Line 3 expansion is set to cost $6.8 billion and help add 370,000 barrels of daily shipping capacity. Its delay is the latest of several blows for the Canadian energy industry, including the stalled Keystone XL pipeline and the stalled Trans Mountain expansion. In addition, the industry has suffered from the cancellation of TransCanada's Energy East pipeline and the Canadian government's rejection of the Northern Gateway conduit, which was also proposed by Enbridge.
This delay flies in the face of the company's expectation of having the Line 3 expansion finished this year, a timeline that Enbridge reiterated as recently as February 15. The expansion would help ship crude along a 1031 mile route from Alberta's oil hub to Superior, Wisconsin, where construction is already completed.
Back in January, we reported as to why we thought Canada's crude oil production cuts were "unsustainable". We concluded:
Even if the Albertan government re-evaluates the present mid-2019 expiration date for the current stricter production cuts, extending the production caps could have enduring negative consequences in the region’s oil industry. Keeping a long-term cap on production in Alberta would potentially discourage investment in future production as well as in the infrastructure the local industry so sorely needs. According to some reporting, the cuts will not be able to control the gap between Canadian and U.S. oil for much longer anyway, just another downside to drawing out what should be a short-term solution. The government will need to weigh the possible outcomes very carefully as the expiration date approaches, when the and the pipeline shortage is still a long way from being solved and the price of oil remains dangerously variable.