ENB Enbridge Inc

By Vipal Monga and Paul Vieira 

TORONTO -- Canada is fighting to stop U.S. officials from closing a vital cross-border oil and gas pipeline as a deadline to shut it looms.

The dispute erupted in November, when Michigan Gov. Gretchen Whitmer announced she was revoking a permit that allows Enbridge Inc.'s Line 5 pipeline to run along the bottom of the Straits of Mackinac, between Lake Michigan and Lake Huron. She gave the company until May 12 to shut the pipeline.

The 645-mile conduit carries more than a half million barrels of oil and natural gas liquids each day from Superior, Wis., to refineries in Michigan, Ohio, Pennsylvania, Ontario and Quebec.

Canadian officials and Enbridge say closing the pipeline would choke off almost half of the supply used to make gasoline, jet fuel and home-heating oil for Ontario and Quebec, the most populous parts of the country. The closure could lead to higher fuel costs and thousands of job losses in the refineries that process the oil, officials say.

Enbridge has sued Michigan in federal court to stop the revocation, arguing the state has no authority to do so, and said it won't shut the pipeline down unless ordered by a court.

Michigan cited "the unreasonable risk that continued operation of the dual pipelines poses to the Great Lakes," in justifying the decision.

The issue has become the biggest irritant between Canada and the U.S. since President Biden's election. Canadian Prime Minister Justin Trudeau brought up Line 5 during a virtual summit in February with Mr. Biden, who in January had revoked a permit for Canadian operator TC Energy Corp.'s Keystone XL pipeline.

The White House has given no sign that it is prepared to step into the middle of the dispute, but Canada has continued to press officials in the Biden administration. Canada's Natural Resources Minister Seamus O'Regan, who spoke with U.S. Energy Secretary Jennifer Granholm about the situation, has said the Line 5 pipeline is "nonnegotiable."

The White House declined to comment.

Canada's U.S. ambassador, Kirsten Hillman, has met with Ms. Whitmer. She has also spoken to senior Biden administration officials about the stakes involved should Line 5 shut down, such as the future of refineries in Midwestern states and billions in lost annual output. "The regional consequences of shutting down Line 5 are profound," she said.

So far, the entreaties have had little effect.

"These oil pipelines in the Straits of Mackinac are a ticking time bomb, and their continued presence violates the public trust and poses a grave threat to Michigan's environment and economy. The governor fully stands behind her decision to revoke and terminate the 1953 easement, while securing Michigan's energy needs," a spokesman for Ms. Whitmer's office said.

Former Canadian diplomats and officials say Ottawa hasn't yet been able to persuade the Biden administration to stop Michigan's government under the terms of a 1977 U.S.-Canada treaty that prohibits authorities in either country from blocking pipelines that ship oil and gas across the border unless there is an emergency.

"We really want the state of Michigan and Enbridge to find a solution, without going to court or going through another process," Michael Grant, a senior official in Canada's foreign department, said in March at a special parliamentary committee meeting looking at U.S.-Canada relations. "That said, we're well aware that we have other options, including the 1977 agreement."

The Biden administration could issue an order that the pipeline treaty applies in this case and Michigan's governor cannot interrupt the flow of oil through Line 5, said Kristen van de Biezenbos, a law professor at the University of Calgary and a specialist in energy regulation. But that option depends on the White House's willingness to enforce the treaty, she said.

"If Biden refuses to intervene altogether, Canada would not have a way to stop the revocation and would have to rely on Enbridge's success in court," she said.

A U.S. court will have to decide whether the 44-year-old treaty -- which neither the U.S. nor Canada has invoked -- can be enforced without the need for a U.S. government directive, she said.

Enbridge is now engaged with Michigan in mediation that was ordered by U.S. District Judge Janet Neff of the Western District of Michigan. Judge Neff will decide whether Enbridge's lawsuit will be heard in state or federal court but wants to offer the parties a chance to resolve their differences first.

It is unclear what will happen on May 12. One person who is working with Canadian officials as an adviser said the state could seek an injunction to stop the pipeline on that date.

Calgary-based Enbridge said that section of the 68-year-old pipeline has never leaked and that it is taking steps to further protect the lakes after negotiating a plan with former Gov. Rick Snyder to encase the pipes in a tunnel below the lake bed.

The pipeline was damaged in 2018, when a ship dragged its anchor along the bottom of the straits, according to a report by the Michigan Pipeline Safety Advisory Board that was commissioned by Mr. Snyder.

The tunnel "eliminates the possibility of a vessel anchor strike to Line 5, improves safety and environmental protections, and continues to provide Michiganders and neighboring states with the transportation fuel, propane and other energy on which they depend," said Mike Fernandez, a senior vice president for Enbridge, in an emailed statement.

During the state election campaign in 2018, Ms. Whitmer and the state attorney general, Dana Nessel, won on a platform that included the closure of the pipeline. Both said shutting down Line 5 would avoid the risk of a potentially environmentally catastrophic rupture and spill.

"For them to relent is to require them to step back from an overt commitment that they probably feel the people of Michigan endorsed in the voting for them," said Roy Norton, Canada's consul-general in Detroit between 2010 and 2014 and now an adjunct politics professor at the University of Waterloo in Ontario.

Mr. Norton added that Mr. Biden and Ms. Whitmer are close political allies, and for that reason he doesn't anticipate the White House getting involved.

Mr. Biden nominated Ms. Whitmer as vice chairwoman of the Democratic National Committee after her involvement in the president's successful election campaign, in which she helped deliver Michigan to the Democrats. "Whether he's keen to roll her on this issue is dubious," said Mr. Norton. "As is often the case in the United States, I think [the White House] may be content to let this play out in a court of law."

Write to Vipal Monga at vipal.monga@wsj.com and Paul Vieira at paul.vieira@wsj.com

(END) Dow Jones Newswires

May 05, 2021 08:14 ET (12:14 GMT)

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