Today I provide some insights giving more evidence of Enbridge’s unnecessary Line 3 Tar Sands pipeline. At this point, I’m wondering if perhaps even Enbridge execs themselves might appreciate a verdict from the Minnesota Court of Appeal Judges to halt construction. I mean: Quit while you’re behind, boys!!
If a company pays out more in dividends than it earned, then the dividend might become unsustainable – hardly an ideal situation. Last year, Enbridge paid out 327% of its profit to shareholders in the form of dividends. This is not sustainable behaviour and requires a closer look on behalf of the purchaser. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Enbridge paid out more free cash flow than it generated – 172%, to be precise – last year, which we think is concerningly high. We’re curious about why the company paid out more cash than it generated last year, since this can be one of the early signs that a dividend may be unsustainable.
Cash is slightly more important than profit from a dividend perspective, but given Enbridge’s payouts were not well covered by either earnings or cash flow, we would be concerned about the sustainability of this dividend.”
It looks like Enbridge is getting ready to fuck over not just Minnesota, but likely their shareholders too? Maybe that’s why they’re suing Minnesota for back taxes? To help pay those shareholder dividends?
Looking at the industry, Canadian oil and gas extraction is circling the drain.
Capital expenditures (capex) for the Canadian oil and gas extraction industry have dropped a massive 73% since 2014. While this data includes tar sands as well as other conventional and offshore expenses, by far the largest sector in this industry is the tar sands. This indicates no need for a new tar sands pipeline.
As these expenditures include not just those for new projects but also ongoing maintenance costs, the substantial decrease indicates a likelihood of little to no capital spent on new Tar Sands projects in 2020. #NoNeed4Line3
As the global oil industry declines, some speculate new project capex will fall and cash available for maintenance may also fall, but not necessarily equally, as uneconomic and marginally economic companies would likely be those most likely to cut corners. [This dynamic may in part explain the Superior refinery explosion and its delayed reconstruction?]
So why is Enbridge pushing Line 3 and a new tunnel project for Line 5?
Some of the more humorous responses to this question include recognition of Enbridge management as unable to see their own future doom (bury your head in the sand theory) or curb their own incessant greed (making money as you doom children to a horrific future theory) both of which are based on the inane belief in perpetual growth and a fear of what will happen without it.
Meanwhile, Chevron is looking to drop their Canadian oil sands like a hot potato…
Chevron CEO Mike Wirth signaled he would consider selling its 20% stake in a Canadian oil sands mine as its faces investor pressure to do more to curb emissions and fight climate change. …
“We’re not in the kind of fire-sale mentality,” Wirth said. “But if we got what we think is fair value for an asset like that, we’ve been willing to transact on things that are of that scale and kind of relative importance in the portfolio.”
Oil sands are among the most challenged energy assets because of the volume of emissions created when producing crude from mines and from underground wells that require steam injection.
Facing increased pressure to cut carbon emissions, multiple international oil companies including Royal Dutch Shell Plc and ConocoPhillips have divested of their Canadian oil sands holdings in recent years.
Those pressures have only intensified in the past week. Chevron shareholders voted on May 26 in favor of a climate proposal to include emissions from customers’ burning of fuels in future reduction targets, against the wishes of the board.”
Things are looking decidedly murky at a granular level, with environmental activists taking advantage of the clean energy momentum and major policy changes by the world’s governments to turn the screw on Big Oil.
But what happens when you zoom out and look at the bigger picture—Entire nations that depend on oil to power their economies. How will economies that are heavily dependent on oil exports cope with the shift to low-carbon fuels?
In 2019, 40 countries across the globe exported crude worth $1 billion or more, with some like Iraq depending on oil sales to finance upwards of 90% of their budgets. Fossil fuel-dependent economies represent almost one-third of the world’s population and are responsible for a fifth of global greenhouse gas emissions.
And now the International Energy Agency (IEA) has warned that pursuing net-zero emissions target is likely to be catastrophic for many oil exporters. …
For the first time ever, the world’s largest investment banks are backing renewable energy investments more than their fossil fuel brethren.
According to Bloomberg data covering almost 140 financial-service institutions worldwide, at least $203 billion in bonds and loans have gone into renewable projects through May 14, compared with $189 billion to businesses focused on hydrocarbons.
That marks the first time in the history of modern fossil fuels that such a shift is occurring.”
We must admit much of the issue is because there isn’t enough oversight of the powers that be, or outcry against those forces not being accountable to the people… which I reported on last week with the Jessica Intermill piece. Though the outcry seems to be rising as we see today a Treaty People’s Gathering bringing many to the Corridor to express their opposition to this dumb idea.
Meanwhile, we still await a verdict from the Minnesota Court of Appeals on the challenge to the Minnesota Public Utilities Commission approving the project without a true demand forecast and while the Environmental Impact Statement remained clearly inadequate to show the impacts of a spill into Lake Superior (previously remanded by the MN Court of Appeals).
It would seem that verdict might be favorable, based on the comments and questions from Judges Jesson, Reyes, and Kirk. Judge Jesson mentioned that the data on Need appeared to look like a Supply forecast, not a Demand forecast (law requires a Demand forecast). While Judge Reyes questioned if Enbridge created a situation of foregone conclusion that there would be no impact on Lake Superior by picking a site (Little Otter Creek) about 30 miles from the Lake… and only allowing 24 hours for the analysis. I mean, if the water has to travel at more than 60 miles/hour to get to Superior… you gotta admit, Reyes has a good point!
Well, happy may be a bad word… as there is no way to return thousands of decades old trees to the clearcut corridor. There is no way to remove the scars to the land that killed thousands of beings as Enbridge dug through wetlands. But perhaps happy to put the bill on Enbridge instead of us taxpayers to clean up their pipeline mess as the industry goes the way of the buggy whip?
As humans race with track-hoes to pretend they can keep doing what they’ve always done… And the world floods and burns and withers from drought.
As engines beep in movement all around me, building a pipeline for the dirtiest of crude – Tar Sands… it’s hard to pretend we have any notion of saving ourselves.
As we cut down the very beings that provide us oxygen to breathe.
As many grow excited for schools to open… ready to go back to a “normal” economy… [Normal? Are we psychopaths? Apparently so.] … we see the numbers in cases and infections beginning to surge again.
We watch millions focus on dollars and economics… giving not a thought to the water, trees, plants, and bees that make everyday life possible. Will we soon realize how dependent we have become on systems that do not support life but instead bring death?
The fossil fuel industry is taking itself out… as the climate chaos we saw in Texas – and throughout the middle of the country – was a result of the burning we’ve done for centuries now.
And for decades now – longer for those selling the fossil fuels – while we knew exactly what they were delivering… we did nearly nothing? Simply burning fossil fuels faster and faster?
How will our children forgive us? Or rather, will they?
In addition to the fuels and plastics, the oil industry brings death and extinction for life of all kinds. And now – are we realizing… that “life” is ours?
As loads of freight remain in place, unmovable with no electricity to fill tanks with gas, ratios of loads to drivers go to astronomical figures… Indy shoots from 7 loads per driver to 37… while in Cincy reefer trucks, normally around the mid-30s, report their status as not available… with over 200 loads and zero drivers to move them. Watch those store shelves as we “catch up” from the backlog caused by the polar vortex we created?
Or will we get to watch as production lines slow… because there is no shipment of already done freight… and before you can make more, you need to move out what you have?
And will we again have loads of milks and potatoes dumped and buried as we have no way to move food in the massive system we’ve created… so un-localized and heavily reliant on fuels?
Can many of us foresee how much worse 2021 will be in comparison to 2020? Even with the vaccinations… and the talk of environmental justice… and green paths going forward… from the all-hands-on-deck portrayed administration that is calming and encouraging so many?
The new managers don’t calm us. Not those of us who’ve seen that already [!!!] we’re headed for 5-6° warming… with 1.5° being a dream scenario that we lost in decades past.
As we watch a Tar Sands pipeline project proceed across the state of Minnesota… just outside the living room window.
As if we can all just… Go back to “normal”.
The worst of the 1918 Spanish Flu were the deaths in the Spring of 1920. Does this still await?
While some caw about vaccines, we also watch as these quick-whip cures kill with cytokine storm jump starts via injection. I see why some aren’t ready… even if they aren’t on the list… of those who can get the magic elixers.
Every day, we watch… as it seems we lose ground… sacrificing the trees and wetlands of Northern Minnesota… to a Canadian corporation treating this place like it’s their colony.
Bought and paid for agencies beholden to their regulatory captors got us into this mess. Will they have the courage to save us? If not, will the courts?
If not, we will simply keep trudging toward extinction… like the elephants seeking water in African deserts… or polar bears seeking another ice island on which to take a breather?
Or will we be running from the flood as it wipes our house away?
Line 3 project has Enbridge lackeys currently eating through our forests here in Northern Minnesota. If you want to witness the destruction, you can review Facebook pages for RISE Coalition, Shanai Matteson, Ellen Hadley and many others. Lots to see as these Warriors hold the line until we can resolve the legal battles around the project. The Court we hope will rule quickly on filings made. Today I will focus on the various legal filings to the Minnesota Court of Appeals, specifically on their arguments regarding the Certificate of Need – or more precisely, the lack thereof, for this project.
It is clear from MN Statute 7853.0130 that when the PUC grants a Certificate of Need for an oil pipeline, the applicant must provide evidence of a demand forecast.
The Department of Commerce filing notes the PUC’s illegal approval and improper resulting action:
The Commission granted a certificate of need, holding that, although Enbridge did not submit an energy demand forecast, Enbridge’s forecasts on other topics and other evidence provided a sufficient substitute. …
The Department of Commerce consistently challenged Enbridge’s proposed forecasts for failing to account for demand, raising the issue in testimony, in briefing, in exceptions to the administrative law judge’s recommendation, and during Commission hearings. … The Department preserved the issue for review, as required by statute, in reconsideration petitions to the Commission’s orders granting a certificate of need. …
The Commission held that forecasts based on supply were sufficient to show demand for oil and that other parties failed to introduce sufficient evidence to show demand would be reduced in the future. …
The Department initially raised this issue in its exceptions to the administrative law judge’s report. Because the Commission adopted the administrative law judge’s legal position on this issue and reiterated it in its order, the Department raised the issue in reconsideration petitions to the Commission’s three orders granting the certificate of need.”
The DOC filing notes: “In 2016, a federal court in Michigan issued a consent decree that required Enbridge to seek all necessary approvals to replace the existing Line 3.” What this means is that they were ordered by the federal government to try to get a new pipeline for safety concerns on their current line. What it DOES NOT MEAN is that Enbridge gets a free pass to securing permits for a new pipeline.
The DOC lays it out pretty plainly. They explain that the statutes require “a ‘long-range energy demand forecast on which the necessity for the facility is based.’ Minn. Stat. § 216B.243, subd. 3.” More simply put: “To approve the construction of a crude oil pipeline, the Commission must determine that crude oil is needed.” However, Enbridge provided the Muse Stancil Report which projected utilization – NOT DEMAND. This report also noted that oil not used in the US could be exported… So… NOT for the 5-state region Enbridge claims to be supporting? For GLOBAL export?!? And they report that the author of the report “acknowledged that he ignored demand for refined product”!
The PUC failed: “By relying only on a single supply forecast based on oil producers’ expectations, the report ignored external factors affecting pipeline utilization, such as the expansion of other pipelines or the demand for refined products.” The PUC failed to consider either demand or global gluts of refined products (Thanks, Coronavirus!) that we are now seeing as our reality. So, they were WRONG. And in their errors, they violated the law and FAILED to protect Minnesotans from a Canadian corporation running roughshod over us here in the North Country.
the Commission granted the certificate of need, despite the Department’s objections that Enbridge failed to introduce an energy demand forecast.”
They add: “The Commission cited the Muse Stancil Report and evidence of apportionment on Enbridge’s mainline as sufficient bases to substitute for an energy demand forecast. The Commission reached this conclusion despite recognizing that a “key” input into the Muse Stancil Report was a crude oil supply forecast, rather than a demand forecast.” The PUC error seems pretty clear. The DOC filing goes on to reiterate the continued failings of the PUC throughout the process, relying “on the supply forecasts in the record to conclude that the oil supply will continue to increase and future demand will be equal to or exceed that supply”, which is so obviously NOT the case as 2020 has made QUITE clear. The PUC refused to be swayed by science or reason. Again and again. [We could have avoided YEARS of wasted taxpayer dollars if they’d just applied the law and said, Nope.]
Regarding the law, the DOC provides multiple cases that conclude the Court of Appeals is not bound by PUC decisions or required to defer to the PUC’s expertise (or lack thereof in this case). In fact, the DOC notes that the PUC’s shift to burden the opposition parties is another blunder for them to consider. They go on to do just that after explaining – in a way even a 2nd grader can understand it – why the PUC violated the law when not requiring Enbridge to provide a DEMAND forecast for their transportation of tar sands and approving the project anyway. They get pretty detailed… providing an entire paragraph on how various dictionaries define “energy” to confirm the statute details (page 13-14). They do point out the many idiotic ways some Commissioners tried to define the “need” for a new Line 3.
This fun section (starting mid-page 17) explains how Enbridge duped most of the Commissioners [but not us Water Protectors!]. “Even though his report’s model assumed crude oil demand would automatically absorb supply, the Muse report’s author puzzlingly agreed that future demand for crude oil would ultimately drive use of Line 3. … Rather than assisting the Commission in determining whether the crude oil supplied by the proposed project will be needed, the Muse Stancil Report’s assumption of continuous high demand assumes the project is needed.”
If it wasn’t so fun to read of the PUC failings over and over again, you might get sick of how many ways and how thoroughly the DOC explains the Commissioners’ repetitive reliance on the supply forecast – in error. Here’s one more…
Because the Commission committed legal error by failing to evaluate a forecast of demand for the type of energy to be supplied by the proposed facility, and instead relied on the pipeline utilization forecast based on crude oil supply in the Muse Stancil Report, the Court should reverse.”
OK, OK. Thanks for indulging me. The DOC goes on to write about how neither Apportionment nor the Desires of Enbridge’s Customers is a Demand Forecast. [DUH… unless you are one of our four erroneous (idiot/bought?) PUC Commissioners] Then they close with a review of the PUC’s SHIFT, placing the burden on opposition parties to prove the pipeline WASN’T needed, noting this too gives one pause. For Fucks Sake. Statutes require the Applicant to prove a need for their requested relief. [This ain’t Rocket Science! Though this sure reminds of the PUC! Had to stick some recent fun in…]
This says it pretty clearly:
Despite Enbridge’s legal obligation to provide an energy demand forecast to prove need, an erroneous legal standard pervaded the proceeding—that parties other than Enbridge must show that demand for crude oil would be reduced in the future, and therefore the pipeline would not be needed. This shift of the burden of producing a demand forecast and the burden of persuading the decision-maker to show the project would not be needed began with the ALJ. Relying on the Muse Stancil Report’s assumptions that refineries would operate at capacity, the ALJ required intervening parties to quantify how demand for oil would be reduced. …
While the ALJ recognized that global forces reducing demand for oil are ‘very real,’ she nevertheless stated that ‘no party has presented any data actually quantifying this possibility.’ The ALJ went on to find that ‘raw claims alone do not negate [Enbridge’s expert’s] assumption that (at least through 2035) surplus oil can be exported outside the U.S.’ …
In other words, the ALJ required the other parties to prove that crude-oil demand would decrease, instead of requiring Enbridge to forecast the demand for crude oil from Line 3.
The Commission carried through this burden shift to its orders, concluding that intervenors failed to introduce into the record “sufficient evidence of the extent to which … forces could reduce demand during the forecast period.”
The DOC goes on to really hammer the point home… a couple more times. For the real legal/word nerds, the last full paragraph on page 28 is a favorite. 😀
The filing submitted by Red Lake Band, White Earth Band, Honor the Earth and Sierra Club (The Parties) presented on the issue of Need, along with two other considerations that ask the court to reverse the PUC’s decisions. With regard to Need, there is a great explanation of Enbridge’s erroneous reliance on the Canadian Association of Petroleum Producers (CAPP) forecast of “supply” as their proof of “demand” for their product, a new pipeline. (pages 4-6) There follows a rational explanation of why neither Enbridge nor its customers are who drive demand. Don’t we all understand that demand is decided by all of us in how we choose to use the final products? This is driven home by quotes from the Administrative Law Judge who heard the testimony:
It is commonsense that reduced demand for refined products would impact the price, supply, and profitability of crude oil. By ignoring the demand for refined products –and focusing only on the supply of Canadian crude –Mr. Earnest’s analysis ignores an important factor in forecasting the need for additional transportation of crude.”
They further note: “In the Muse Stancil model, “demand for crude oil” is a modelling assumption, not a model output.” & “This forecast assumes that if U.S. demand is not sufficient to consume all supplied Canadian crude oil, then overseas demand would be sufficient in all future years to demand this supply.” (page 9) Which is none of their business really, as the PUC is only authorized to consider the energy needs for citizens in our region, not the whole fucking planet. [my emphasis]
Following the plain language of the law, the Court will reverse this capricious PUC decision. (pages 14-15)
The Arguments made by The Parties are strong and clear, and similar to the DOC filing, include definitions, this time for “demand”, “forecast”, and “accuracy”. They claim:
… the legislature, when it enacted Minn. Stat. § 216B.243, intended for determinations of “need” for energy transportation infrastructure to be based on a forecast of consumer (public) demand for energy, because it is society that demands energy, not the companies that supply it.”
There follows an edifying explanation of energy demand and consumers. And… some additional piling on of how asinine the approving Commissioners have been to obediently lap up Enbridge’s “proof” of “demand” without giving consideration to either A) facts or B) Enbridge’s obvious self-aggrandizement. Personally loved this line: “The CAPP production and supply forecasts should be seen for what they are: the Canadian oil industry’s black box estimates of its own future crude oil production and exports.” [aka Wishful Thinking, Thanks, Paul!]
Bottom line: The Parties ask the court to “remand this matter to the Commission for hearings to allow presentation of a forecast of consumer demand for petroleum supported by adequate disclosure of its underlying data, assumptions, calculations, and methodology”. So mote it be.
And… since I cannot seem to stop myself from reading all these legal documents that give me such hope, and more importantly because I am a HUGE FAN, I’m gonna go on to also read the filing from Friends of the Headwaters’ Scott Strand. Yep. And you know what? I can summarize it in a couple shots of the Table of Contents!! Here we go…
What the PUC did:
Why they were Wrong:
How they were Criminal Assholes about it all:
As you can see from the descriptive titles on each section, Scott eats their fucking lunch legally. But this seems to be where the brashness ends as he cuts to facts and serious arguments for the narrative. I’ve enjoyed watching this guy argue in front of the PUC for YEARS and I gotta give BIG kudos to FOH for paying him to keep doing it. Support them if you can. They’re literally a bunch of old folks down in Park Rapids spending their own time, green, and energy trying to stop a pipeline. And begging for more money to keep doing that. And they’re old now because they been doing this shit for too many fucking years. Seriously, give them some money. Do it today. It’s all I want for Christmas. Really. [OMFG… am I channelling Helen? Did Margaret’s BFF die? Please tell me no because I LOVE that mouthy bitch!]
While the longer narrative is a bit drier, it’s still a joy to read for this nerd. Now go give some money to Friends so we can WIN this Legal Battle once and for all!!
And what can Minnesota expect should the Court fail to adhere to the law and grant a Stay? The results we saw in Pembina County, North Dakota for Enbridge’s short 13-mile stretch there may tell the tale. At 26 times the length they had, our 337-mile project could lead to thousands of deaths, exponentials being what they are…
It appears that the Minnesota Public Utilities Commission will continue to flout basic ethical practices, as well as the law, as they collude to assure Enbridge can continue its massive tar sands pipeline project in northern Minnesota during the surging pandemic. Friday’s Hearing to consider the White Earth and Red Lake Bands’ Motion for Stay was sickening to observe.
If you’re curious to understand what it was like to watch the Treaties being sold by white men stealing everything good from the Natives while pretending they were being “good neighbors”, you can get an earful and an eyeful if you watch what went down at the PUC Friday.
Today, I’m gonna keep the overview brief. [Well, I’m gonna try. And at the end, I’ll review Enbridge’s hypocrisy as they play the same card in two different ways in their games with Michigan and Minnesota. They’re going for a “Heads, we win… Tails, you lose” scenario, which only works with those who aren’t paying attention and listening closely.] Law 360 did a good piece on it – a bit shorter read, almost as fun.
Here’s my SHORT VERSION of Friday:
Chair Katie Seiben: We RUSHED to HELP YOU and gave a Hearing in 3 short days!! And here we Commissioners are… to hear the Tribal Motion for Stay on our Orders for the Line 3 project!! Anything anyone needs to add for our consideration? And, like, how come you didn’t file sooner guys?
Joe Plumer, attorney for Red Lake Band of the Chippewa: We couldn’t file until all your orders became official and the imminent danger of construction began. If we tried earlier, you would have explained that the project hadn’t even been given approvals yet.
Frank Bibeau, attorney for White Earth Band of the Ojibwe: Saw their filing but I’m not sure Enbridge understands how the Minnesota court systems work. Stays are EXPECTED during Appeals and we’re simply asking for the PUC to allow the Court decisions to play out without becoming moot. Enbridge’s response had only a few sentences about COVID-19… yet our Tribal Chairman’s letter notes that we’re talking about our tribal members dying. The PUC has the right to exercise a Stay and that’s what we’re asking.
Enbridge: We have nothing more to add but sure hope you saw all those letters towns along the right-of-way submitted [thanks, colluders!] about their harms if construction doesn’t start. [Lost wages being more important than lives of our citizens?]
Commissioner Tuma (Enbridge’s best buddy on the PUC): If the Court of Appeals can grant a Stay, why do we have to? Like, what happens if we don’t? [Cause, that’s already your decision, right, Tuma?]
Plumer: Uh, because the law implies that the most important consideration is to maintain the jurisdiction of the Court of Appeals and… it’s your job. If you don’t, we’ll look for a 2-week stay in order to get to the Court of Appeals with our concerns.
Tuma: Well, I don’t think we should obstruct them or their legal authority. Since you’ll be there in a couple weeks, we can take a pass here. How much damage can possibly happen by then?
Katie: Miss Friedlander, can you tell us what’s happening on the ground? Mr. Prantis? Enbridge?
Anna Friedlander, representing United Association: There are about 250 of our members there as of a couple days ago with “up to about 615” expected. And, yes, Commissioner Tuma, if Governor Walz orders a lock down, we’ll surely abide it… but that would have to come as a larger overall shutdown of all construction in the state.
Kevin Prantis of LIUNA: We have a thousand tradesmen out this week and working toward 2000 for next week.
Enbridge: “There are five spreads… and work has started throughout, not only through training as the workforce is arriving but also equipment is also being used to start the clearing process along the right-of-way in each of those spreads…. with issuance of the final permits Monday and it will continue in the weeks to come.”
Commissioner Schuerger (only Commissioner to oppose the project to date… ~30 minutes into the Hearing): So trees are being cleared now. When can we expect digging of trenches? In coming weeks? [Note: this is an irreparable harm as ruled in previous instances for Stay.]
Enbridge: “That has not yet begun as again the preparation work is underway but it will be underway shortly and in the next week to two weeks and beyond. … Work at facilities, Enbridge owned property is underway and that will continue.” [Note: Enbridge owns 1180 acres in Hubbard County alone.]
[There is a lot more discussion on a bunch of notions in the middle like: how come you didn’t file for a stay earlier; will the company and workers comply if the Governor issues a shutdown; and then the bringing in of Leech Lake representatives who explained that as a Member of the Tribe, Joe Plumer doesn’t speak for Leech Lake. How fucking appropriate given all the history I’ve watched as Tribes struggle just like colonizers with their government for protections. And what did Joe reveal? That Enbridge’s promise to Leech Lake was that all 6 of their pipelines would be removed by 2029 from their Reservation Lands. That means the Line 3 “replacement” is just the first of many more “relocations”. Frank Bibeau attempted to explain some treaty law to these imbeciles but they were not listening, it’s clear – as you’ll see from Tuma’s coming comments. You know, when you repeatedly explain, “I’m not trying to cause division,” it kinda makes me wonder if you’re trying to convince ME, or YOURSELF, Tuma… Frank also tried to explain the Federal Consent Decree, which the PUC reads as a REQUIREMENT for them to APPROVE the Line 3 project – and which it is not. Again, only Commissioner Schuerger was listening. Finally, just before the break for consideration, Joe Plumer notes that the Minnesota Chippewa Tribes letter must be removed from the docket as it did not have full tribal committee approval. Again, Tribal “leaders” trying to push through something the “People” (band members) oppose? Let’s return to the Hearing now for their decision.]
Commissioner Schuerger (1:28:50): “I’ve carefully read the joint motion for a stay of the Line 3 Replacement Project and answers to that motion and I’ve reviewed relevant law and discussed this application with our legal counsel. … I support the actions requested by the motion.” [He further argued there is no legislation that gives the Commission authority to require a bond for a stay.] “The Commission clearly does have jurisdiction and the authority to grant a stay – and no parties here have argued that we do not have that jurisdiction and authority. Regarding the legal standard… there is clear guidance from prior Commission orders and prior court cases and notably, um, in one of our recent cases, it was a petition from Excel Energy for approval of solar gardens and the order denied reconsideration and our clarifying on our own motion. In that order, the Commission stated that, um, that we grant a stay when it appears that a stay would provide the most equitable balancing of the interests of the parties. In balancing those interests,” various factors are considered… “In this case there is disagreement between the parties about whether the Commission should evaluate the likelihood of reversal on appeal. In my review of the record and the applicable law, I’m convinced that we should not.” [And he proceeds to give the legal basis for his stance, referencing Webster and other Supreme Court rulings, which give the Commission discretion to review the factors.] … Whether considering if the moving parties, the Tribes, will suffer irreparable harms, or if Enbridge will, or to protect the jurisdiction of the courts, the most important factor is the latter, protecting a legal point from becoming moot during Appeal. “A Stay is necessary to protect the Court of Appeals. … Focusing on relevant and key factors, the Tribes argue Line 3 will cause serious and irreparable harms with both construction and operations, and these cannot be reversed if the Tribes prevail in court. These arguments are in my view persuasive and critically important. And I know that Friends of the Headwaters supports and supplements the Tribes petition with Federal case law demonstrating a pattern of giving more weight to environmental harms than financial ones when conducting this type of analysis.” [Well, that’s too bad, Matt, because all those other Commissioners, they done got together and decided that the lost wages of workers is FAR MORE CONCERNING to them than any ole ndn lives. But please, my friend, continue…] “Overall, as I look at balancing the factors before us, um, just note that the Tribes argue and Enbridge appears to agree, that the Commission should evaluate whether there are irreparable harms to the Tribes or the public and whether there are irreparable or disproportionate harms to Enbridge. … I’ve evaluated the key relevant factors, applied the relevant law, weighed the balance of interests. I believe that the record before us supports a finding of irreparable harms to the Tribes, and importantly, I agree that a Stay is necessary to protect the jurisdiction of the Court of Appeals. Constructing the entire Line 3 replacement before the courts can issue an opinion would clearly limit the courts ability to impact the project, and thus would limit its authority and jurisdiction. In my view colleagues, the record and the law support granting the Stay.” [1:36:53]
PUC Hearing on a Motion for Stay from White Earth and Red Lake Tribes.
My favorite line from Commissioner Schuerger? It comes at 1:35:09 “The Tribes and other parties point out that Enbridge has a legal obligation to take all reasonable steps to prevent release from existing Line 3, including, if necessary, shutting the pipeline down.” Amen, Brother. It’s PHMSA’s jurisdiction anyway, not that of the PUC. [More on that below.]
So what did the other Commissioners say? Mainly that they were so concerned about all those folks waiting for jobs up along that ole pipeline route that they are just sure the best decision is to let the project move forward and assure Enbridge gets everything they ask! Commissioner Means explains (again, really, guys, get some new drums, ffs) her bewilderment with why this wasn’t filed sooner (which in her mind renders it ridiculous), along with a bunch of justifications for how the decrepitude of Enbridge’s current Line 3 REALLY, REALLY, REALLY mean they need to build a NEW ONE! [More on that later too…]
Commissioner Means goes on to say, “… the Motion to Stay should be denied. And although I considered all factors [including all the dead people?]… first with respect to the allegations that denying the stay would cause irreparable harms… the balance of the harms favors denial of the Motion because arguments related to this factor largely centered on impacts to the environment.” [Does that mean you DIDN’T consider the impact of COVID deaths?]
Means literally fucking argues that (again because Line 3 is so dangerous), “the record supports that operation of existing Line 3 is more likely to cause environmental harm than construction of the project. Therefore, denying the stay protects the court’s jurisdiction [TF?] because denying the stay would cause LESS HARM than granting the stay. [I think she’s a little confused about the actual law, this petition, and frankly, I just gotta say, if this chick is a lawyer, she’s a shitty one.] She basically says that since the Appeal Court themselves can issue a Stay, then they will maintain their authority.
My FAVORITE line from her is on the harms to non-moving parties… where she notes that any ideas that pipeline workers would contribute to the spread of COVID-19 are “simply unsupported”… [except by the MN Department of Health data?] and that these pipeline workers are “beneficial for Minnesota’s economy”! [apparently the only fkn thing this commission is considering.] She asks that we allow her to “be plainspoken for a moment”:
I think it would be an unconscionable disregard for the irreparable harm to these workers if the Commission grants the Motion to Stay.”
Commissioner Means [1:43:02] [Nothing a little unemployment check can’t fix? But… Irreparable? Really, Ms. Means? REALLY???
Commissioners Sullivan and Tuma go on with further similar justifications, citing the begging community letters. These revenues will go to schools! [Note: These same communities are being sued by Enbridge for back taxes and thus are in dire economic straits to begin.] Tuma (lying that he “won’t belabor it”) made a BIG PRODUCTION (as usual) with some bullshit ass kissing, this time for Governor Walz – as the Lone Republican, no less!! He spoke of how serious COVID is and that it needs to be addressed and then how the last thing the Governor needs is the PUC second-guessing his decisions or trying to claim authority over his powers. He noted it would be “extremely dangerous” for a motion to come through a back door via state agency to disrupt the Governor’s emergency powers, “bordering on treason.” [1:53 See what I mean about this Queen?] Even dramatically explains that HE HAS COVID NOW!
This is an emergency, this is a crisis, this is a war we’re fighting. It is a serious war. OK? And I’m losing my breath a little bit because I HAVE COVID! OK! … We should NOT, through a Stay Motion, even be doing this. And I think it was inappropriate to even ask us to consider that.”
Commissioner Tuma [It’s a TUMA! Drama QUEEN – sorry Queens to dirty us with this designation but for realz!]
So Tuma argues on the serious dangers of COVID-19 but CANNOT SEEM TO GRASP that those are the dangers for which the Tribes are ASKING FOR A FUCKING STAY!
Meanwhile, as Commissioner Schuerger noted, Friends of the Headwaters stood with the Tribes:
Friends of the Headwaters make a clear and concise argument:
The Tribes’ motion contains a detailed explanation and review of the relevant law. But the standards for granting a stay pending appeal are straightforward: (1) Does the appeal raise substantial issues? (2) Will there be injuries to one or more parties absent a stay? (3) Would a stay promote the public interest in preserving the appellate court’s jurisdiction? (Referencing Webster…) In today’s circumstances, the answer to each of those questions is yes. Therefore, a stay pending appeal is fully justified.
…there are many indications that the issues in the multiple appeals meet the “substantiality” test: * The PUC itself was divided on the issues now on appeal; * The PUC has already been reversed twice on the environmental review of the Line 3 project and the previous Sandpiper project that would have followed much of the same route; * The government agency with the acknowledged expertise on the need/demand question has concluded that the project does not meet the requirements of the statute and the rules, and is appealing the PUC decision itself, not a regular occurrence; * The relevant facts keep changing, but the PUC does not want to consider the changed circumstances.”
FOH Filing clearly reiterates that the Motion for Stay by the Tribes has substantial legal grounds. Thanks, Scott Strand and FOH. [my emphasis]
And the motion passed, just as their orders did, with a 4-1 vote and one lone Commissioner retaining love from the public… as he’s the only one listening to our concerns and properly applying the law to our requests.
Should we be surprised? Nah. Are we heartbroken? Yeah.
This is par for the course for Minnesota’s Public Utilities Commission on the Line 3 project approval process (with the exception of Commissioner Schuerger in 2020). They use the arguments that make them look like they care but fail to recognize that these same arguments show how little they care for people – as they ignore the pleas of Tribes begging for a pause for life, they praise themselves for accommodating the Tribes they FORCED to choose the least of pipeline evils facing them, all while ignoring any Treaty Rights and Responsibilities.
This is also par for the course for Enbridge – using arguments differently to suit their fancy. When decisions are in their favor, they have no issue with a State agency thinking they have more power than they truly do… but when the decision is not in their favor, they are happy to cite law. They applauded the PUC’s decision, based mainly on the unsafe condition of their current Line 3 [which truly should surely mean we don’t give them ANOTHER chance to FAIL?] but… sue Michigan noting:
“The attempt to shut down Line 5 interferes with the comprehensive federal regulation of pipeline safety and burdens interstate and foreign commerce in clear violation of federal law and the US Constitution,” an announcement from the company states.
In its filing, the company argued Michigan’s shutdown order interferes with federal authority in a way that “would create a disturbing precedent” and encourage “copycat” actions in other states.
Enbridge is basically arguing that Michigan is attempting to thwart the power, authority, and jurisdiction of the Pipeline Hazardous Materials Safety Administration (PHMSA) with their removal of an easement that complies with state law. Meanwhile, in Minnesota, the company constantly encouraged the PUC to act out of concern for safety of their current Line 3 in approving a New Line 3 “replacement”, which would also be a clear upsurping of PHMSA authority. Can’t have it both ways, Enbridge.
This is where we’re at, Minnesota. It’s time for a SOLID “NO” on Enbridge’s proposed Line 3.
Perhaps you watched on April 20thas oil hit a below-zero low at -$37.63/barrel? That’s a We’ll-Pay-You business model that just doesn’t work. And now, as many of the Supermajors are divesting of assets… those assets now include employees.
Other big oil firms are facing similar challenges. Rival BP has also cut its dividend and recently announced it was cutting 10,000 jobs out of its global workforce of 70,000.”
[That’s… almost 15% of its workforce.]
~ Shell to cut up to 9,000 jobs as oil demand slumps BBC News 9/30/20
Like other refiners in the United States, Marathon Petroleum – the biggest – is idling refinery capacity and cutting jobs to cope with the losses stemming from the demand crash in the pandemic.
Meanwhile, Exxon faces losses for a third straight quarter as demand continues to stagnate.
For the second quarter, Exxon reported at the end of July its second consecutive quarterly loss, which was the worst loss for the U.S. supermajor in its modern history.
Exxon booked a loss of US$1.1 billion for the second quarter due to the global oversupply and COVID-related demand impacts. This compares with earnings of US$3.1 billion for the same period last year.”
And… it seems not only has Big Oil been lying about Climate Change effects from their products for generations, but present-day oil gangsters are working to carefully prevent enough of us from realizing the sham as they work to hide the flaring of natural gas as they pull oil from the ground. Perhaps to prevent formation of a rebellion to stop them. [Spoiler alert: It’s too late.]
At a discussion convened last year by the Independent Petroleum Association of America, a group that represents energy companies, participants worried that producers were intentionally flaring, or burning off, far too much natural gas, threatening the industry’s image, according to a recording of the meeting reviewed by The New York Times.
“We’re just flaring a tremendous amount of gas,” said Ron Ness, president of the North Dakota Petroleum Council, at the June 2019 gathering, held in Colorado Springs. “This pesky natural gas,” he said. “The value of it is very minimal,” particularly to companies drilling mainly for oil.
A well can produce both oil and natural gas, but oil commands far higher prices. Flaring it is an inexpensive way of getting rid of the gas.”
Yet the practice of burning it off, producing dramatic flares and attracting criticism, represented a “huge, huge threat” to the industry’s efforts to portray natural gas as a cleaner and more climate-friendly energy source, he said, and that was damaging the industry’s image, particularly among younger generations.
~ A Secret Recording Reveals Oil Executives’ Private Views on Climate Change by Hiroko Tabuchi 9-12-20
Some ~ already awakening to the alignment of the regulatory agencies and the oil industry dismissing concerns from landowners and environmentalists ~ are now calling for reforms. As we’ve seen with Line 3 here in Minnesota with the PUC, MPCA, and DNR, every step of the way favors industry over residents. Industry meets regularly in board rooms with no opposition ideas provided any space. Meanwhile, citizens perhaps get a 3-minute public comment, which is summarily ignored and gets no response from government agencies, as I reported a few weeks back. A short 2-minute video is included at this link.
And Scott Russell at Healing Minnesota Stories also wrote recently about the MEQB’s dismissal of the public voice while presenting the Minnesota State 2020 Water Plan, echoing my concerns regarding Indigenous Treaty Rights.
After nine speakers and roughly 20 minutes testimony, Bishop cut off additional Line 3 comments. “We should stick to the Water Plan and not the individual actions and projects,” she said. Comments on Line 3 “seem to be a bit beyond the Water Plan itself.”
Which is the problem in a nutshell. The EQB apparently doesn’t see a connection between the Water Plan and project-specific decisions state agencies have to make, on such things as permits for Line 3 or large feed lots.
Bishop started to move towards a vote, when Nookomis (Deb Topping), an enrolled member at Fond du Lac, asked to speak. She wanted to know if the EQB had consulted with any of the state’s Native Nations in developing the Water Plan and if anyone on the board was familiar with the Winters Doctrine.
No one knew about the Winters Doctrine. …
The EQB approved the Water Plan on a vote of 11-1.”
~ State’s new ‘Water Plan’ looks good on paper, critics say it lacks accountability by Scott Russell 10/2/20
Judge John Guthmann’s ruling in the evidentiary hearing in the case of the Environmental Protection Agency’s comments on the water pollution permit to mine for PolyMet issued by the Minnesota Pollution Control Agency… showed that the MPCA attempted to delay the EPA from submitting comments critical of the PolyMet mining project until the public comment period had ended.
In a permitting case as risk-laden to the St. Louis River watershed and to Lake Superior as the PolyMet mine, such manipulation of public information is an extremely troubling failure of enforcement of regulatory protections. The public has a right to information pertinent to all regulatory enforcement. In this case, important EPA comments expressing grave concerns about the lack of water quality-based effluent limits were withheld.
Paula Maccabee, advocacy director and counsel for the nonprofit WaterLegacy, stated, “We didn’t learn about the EPA’s withheld comments through the MPCA’s permitting processes. These comments were revealed only due to confidential (whistleblower) sources and Freedom of Information Act lawsuits filed by WaterLegacy and settled by the federal government.”
The value of laws and safeguards rests on the trust of the people in their integrity and, just as importantly, their enforcement. Lapses or breaches of enforcement of environmental regulatory protections cannot be acceptable. Minnesotans demand a higher standard from all agencies entrusted with the care and protection of our natural resources for the sake of healthy communities across the state.”
~ Local View: Enforcement is key to environmental protections by Linda Herron | Oct 2nd 2020
And perhaps the corruption will get worse as fossil fuel magnates try to squeeze every penny they can from the ground as We Have Entered the “End Game” for Oil—With “Permanent Demand Destruction” noted in late July?
Indeed, every day renewables gets cheaper and cheaper. A paper published in the scientific journal Nature this week examined the potential for offshore wind competitiveness without any government subsidies.
The research examined wind power for five countries in Europe and found that offshore wind is going to be so cheap that it will soon no longer need government subsidies to compete, and that significant savings could soon be potentially passed on to consumers.
The lead researcher Dr. Malte Jansen, from the Center for Environmental Policy at Imperial College in London, said: “Offshore wind power will soon be so cheap to produce that it will undercut fossil-fueled power stations and may be the cheapest form of energy for the UK…This is an astonishing development.”
~ We Have Entered the “End Game” for Oil—With “Permanent Demand Destruction” by Andy Rowell 7/31/20
As the game gets desperate, will we see more desperados? Will Enbridge try to sneak in a bunch of workers from out of state as the election season distraction unfurls… thinking no one will notice?
We’re watching as it’s looking like they are planning just such a scheme. Word is that some areas along the proposed pipeline route are reporting local hotels booked solid as 2020 turns into 2021… Will Enbridge ignore the global calls to Keep Tar Sands in the Ground? Or will they bully their way through the wetlands of Minnesota, bringing their sludge pushing pipeline with them?
It’s been a bad year for Big Oil. A decade ago, a barrel of oil could fetch around $100. This year, prices briefly touched zero. With coronavirus lockdowns partially lifted, crude is now selling for $40 – $45. BP says demand for fossil fuels will drop 50% to 75% by 2050. On cue, Unilever just announced it will rid its cleaning products of fossil fuels by 2030, in the name of cutting carbon emissions.
Last year, after buying Anadarko, Occidental Petroleum Corporation was a $80 billion corporation. It’s now worth about $12 billion and selling off assets. U.S. shale celebrated its second acquisitions boom from 2016 to 2019; now, many of these deals won’t work. Lenders are shying away from fossil fuels, lest they get stuck with the stranded assets.
It’s worth noting that Salesforce.com, the company that just replaced ExxonMobil in the Dow Jones Industrial Average, produces carbon-tracking software so companies can disclose emissions data to shareholders. The writing is on the wall, boldface. …
Real Sustainability: Controlling Ourselves
Big Oil can’t go soon enough, but its replacements have to be used with care. Humans have already altered more than half of the Earth’s land surface. By August, just eight months into 2020, we used up the amount of resources it takes the planet a whole year to regenerate. A finite planet can’t take infinite growth—of our businesses or the Homo sapiens who run them.
We need to cut our energy use down. We need real plans to stop sprawl—especially now, as the remote work trend releases people from city living and allows them to head for the countryside.
If the pandemic can teach us to work without commuting, surely it can teach us to make peace with less extravagant lives. To shift from animal agribusiness to plant proteins. To stop binge flying. To hike locally, to more deeply appreciate the culture and beauty where we live. To wear condoms as well as masks. Eco-friendly ones, of course.
And, if they succeed, will we be better off than with their OLD Line 3?
A new tar sands pipeline is far more dangerous and costly than Enbridge would like us all to believe as they remind us every day of our budget shortfalls they can help remedy. And collusion with Enbridge comes at what cost to Minnesotans? Are we sacrificing our clean waters, our tourism, our own food production so that a Canadian corporation can transport the dirtiest of fossil fuels through our state to sell it globally?
It seems that Commissioner Laura Bishop at the MPCA is gearing up to permit Enbridge to decimate Northern Minnesota as they all (MPCA and Enbridge) pretend the fossil fuel industry has a future in tar sands infrastructure. I say the better path is to protect some of the cleanest NATURAL water infrastructure of Minnesota. It’s not only the path the public is urging the MPCA to take, it’s literally their mission.
Unfortunately, lots of marketing and cheerleading doesn’t protect the environment. And dreamy idealistic plans don’t equate with concrete goals and measurables that result in agency and corporate accountability. Perhaps this is why the water quality in Minnesota continues to degrade?
Hope the PUC, MPCA, DNR and other agencies will begin to listen.
So in case it hasn’t become clear to you yet, the end will not be Logan’s Run or Mad Max or even Threads (my personal prediction). It’s more like the book of the same name for the year Threads came out… 1984.
The doublespeak is insane. The arrogance with which they are acting is more blatant each year. They seemed to really kick it in to high gear with the Kavanagh debacle and I’ll be dammed if that shit didn’t stick!
They’ve escalated the antics, right through an impeachment “trial” with no witnesses or evidence. We’re living in a recession, eight months in to a global pandemic, and Congress left for recess! [Well, of course, they’re people of means… why wouldn’t they head out for vacation, while millions of Americans suffer? It seems the way of the wealthy – their Cancer of Greed has gotten to Stage 4.]
People are being evicted from their homes, finding themselves without enough money to buy food and medicine, largely due to severe unemployment, levels we haven’t seen since when? 1958? [Many of us experienced this in 2008… and many since have struggled for employment, or worked multiple shitty paying jobs to make ends meet in the “new economy” of the last decade. I will say the 2008 Recession was Dan and my clear sign to GTFO.] And yet the Stock Market is soaring! [You know, as the Federal Reserve pumps 15 Trillion of our tax dollars in, like so many little blue pills, to prop it up…
And NOW! They’re taking out the fucking mailboxes for Christ’s sake!!
So, yes, it’s the hunger games. For realz now.
Got a text this morning from a friend: Is Mother Earth trying to give us another wake up call??? I’ve had some really dark meditations and it’s focused on the earth. Maybe it’s as simple as my mind working through all the data points.
Have you or any of your more spiritual friends sensed that something really bad is going to happen?
I don’t watch the news, don’t have any subscriptions online but the number of natural disasters I’m aware of is increasing exponentially.
You and I talked a few years ago and I ignorantly said, “nothing catastrophic has happened”. You rattled off 3-4 significant natural disasters around the world.
(Stopped) reading because I need to put this out there. In the last 2 weeks I can think of 8-10 non precedented weather events. … • Mumbai, India 50% of the slum population has COVID and they are experiencing monsoon rains with more rainfall than ever recorded. • Ice melts in Serbia and Canada. • Heat wave in CA. • Severe thunderstorm, heavy winds, tornadoes from the Midwest to NE. 1. Cedar Rapids, IW had hurricane level 2 force winds, 1M trees down, 300K people without power. 2. IN power outages all over, trees down and damage to structures. 3. Same storm hit the NE… CT lost power for 9 days. • Earthquake in NC or GA • Excessive rainfall in MN
Yep. And I sat on the porch last night thinking: • It’s August and I’m on the porch excited about drinking a WARM beverage… • We got 8″ of rain in the last week… • And what’s with all the rocket launches? Is there already a secret war on Mars? Who has a relative or friend in Space Force? Anyone?
I replied to my my friend: Yeah. Dan had been saying ‘we’ve gone too far’ for a while now. I think because HE senses it based on data. I just thought he was a pessimist, which he can be, but I’m wondering more each day. Yeah. We had 8″ of rain in 6 days this past week. Sunday-Monday 4″+ in 48 hours, then Friday we got 4″+ in 24 hours…
IT is happening. (has been… for decades) again.. water on the toes… some of us have been feeling it for years now but the powers that be aren’t listening. Watch The Power – #1 movie on Netflix this week. Pretty accurate depiction of a metaphor of current situation. Mankind keeps pushing limits until there’s no breathing room. Literally. 🤨
I think it’s gonna be mass migration and starvation this year… even in the US.
Get ready, my friends. It’s seems a train is coming. A big train. It’s begun picking up passengers… thousands by the day. The climate chaos predicted is happening… at an exponentially increasing pace it seems – and the starvation and migration have been happening for years in some places on the globe. Places the humans in power don’t look at or talk about… as much as they can avoid it.
The pace seems to be quickening – or at least bumping up in fits and starts – but I am hopeful many will remain to rebuild – more sustainably, I hope – after the starving times. And there will be some who have enough to share with their communities around them to help them survive.
You’re all pretty enlightened, so you know that the Wiindigo system doesn’t work like ours. Instead of understanding and respecting the natural world or the rights of Mother Earth or the Creator’s laws—the highest laws— we live in a society that writes a bunch of laws based on who’s in power, redistributes pollution, arbitrarily changes recommended daily allowances of radiation and contaminants, and pretends that it’s all right to allocate the water in western basins until there’s no water left there. That’s the arrogance of a system that has no check with reality. And that’s what’s going on. There is no understanding for a cyclical system. We all live in a super-linear world instead of a cyclical world, and perhaps one of the best examples of that, in addition to the pipeline battles, is the fact that we live in a society with something like 13 trillion pounds of waste produced annually in the U.S. That doesn’t include waste water, and I ask myself, what is waste water? There’s no new water being made. In 2010 Americans wasted some 133 billion pounds of food. With a 430 billion pound food supply, that’s more than one-third of the whole being wasted. Economically, it’s $161.6 billion in food wastage. … In an Anishinaabe or other indigenous economy, one’s stature is associated with one’s generosity. That is why we have massive giveaways; that is why we have massive potlatches, which are ceremonial feasts at which possessions are given away or destroyed to display wealth and enhance prestige, because your stature in your community is ensured by how much you give away. In today’s society, people’s stature is ensured by how much they accumulate, and wealth is aggrandized. We don’t ask where they got it, how they got it, and how much they need. We act as if it doesn’t matter, and what I’m saying is that perhaps the time has come to turn that around because it’s not going to work out. Let me tell you what I think about this. And I won’t go into the consequences because I think you already know about the destruction of so many species of life. For example, fifty million buffalo, the single largest migratory herd in the world, destroyed. General Philip Sheridan, commanding armies of the west, urged destruction of the buffalo herds, foreseeing that when they disappeared, the Indians would disappear along with them; by 1885 the buffalo were virtually extinct, and the Indians were starving.
Winona goes on and I recommend reading her entire piece. [Makes one pretty pissed to realize local lumber company Potlatch is such a salt in the wound brand name…] I told my friend: I think all this – and it’s in the “Heartbeat of Wounded Knee” and recent stories in movies – talks about this human (male/dominator/white supremacy/colonial culture) tendency to destroy being the main way we eliminate enemies.. by destroying their food sources, their villages and homes, or taking their lives… this becomes the devastation for those that follow… nothing remains when destruction – or even thoughtless overharvest – depletes completely. We’re apparently far too short sighted a species to make much more than a couple thousand years before we annihilate ourselves… and this time we’re taking a bunch of species with us.
But. Keep hope! (And plan…) it may turn out some of us make it. And enough of us may die… or be sacrificed? I imagine Billionaire Bingo… where each of the 26 richest billionaires get to face trial for their gluttony and convince us that they are worth NOT SACRIFICING because they are going to commit to full time problem resolution with their cash going to good causes. (Of course, this vision requires a planet capable of human survival, so it may be a pipe dream at this point. But hey, a girl can dream!)
Let’s hope those billionaires find their hearts soon. 26 people who could remedy it all… if only they’d share. Perhaps we can put them all on a rocket to Mars to discuss it?
There might yet be time for a peace train after all.
So… I emailed one of my favorite authors and… AGAIN got a response!!! HOLY COW!! I was so excited! James Fucking Kunstler!!! Well, he goes by James Howard Kunstler…
Another crazy magical event in my weirder and weirder life…
This guy was introduced to me when I was reading about peak oil some time back. Dan and I read his World Made by Hand long ago and really enjoyed it. And more recently, I was turned on to his blog – When Giants Fall – and again thrilled by his use of wit and sarcasm to explain our current situation. So I wrote him to tell him. And he wrote back!!!
I also listened to his interview on the recent Oil Patch issues… which taught me a bit about that. So I’m sharing it with you today.
April Crash – 4/20/20… so a memorable day.
Futures were reportedly created long ago when cold markets had the potential to destroy an annual reaping from crop sales so agreements were made to assure farmers they could “flatten the curve” on risk. Kinda like CSAs were designed to do more recently – though with perhaps better returns?
Oil futures have been useful for producers who HEDGE to control for a future price. So how’d we go negative? Get online, buy a contract for a barrel of oil at a certain price – with a contract expiration date – and, if you can’t sell it before expiration, you’re on the hook for those barrels of oil which requires selling at a loss if you get stuck.
What happened was 110M barrels of oil had to be dumped when May deadlines were expiring – had to PAY the ppl who had storage lease to take their “futures”. Paid about $37-38 for this to happen!
A little suspicious…. Hard to imagine how so many ppl – or a few owners of such a large # of contracts could get caught. No NEWS that we were running out of storage space… Gonna be investigated as it “smells funny” and seems a weird event with no clear explanation.
-$37/barrel means some took a bath on sales but NOT that oil has no value. 150X price to get rid of the contracts… $37 X 100M… that’s a lot of dollars. Meanwhile, markets were sending strong signals to producers to STOP Producting – no place to put it, no demand (which is why the former) so markets were CLEAR.
Shale oil party seems to be over… for a while anyway. But don’t sell them short… More than half the oil produced in the US is tight oil – shale oil. If this is going away, the US is in BIG TROUBLE.
What about conventional oil? Not as much as the 1060s but… what about those guys? Lot of it but in many small places – too deep, under a National Park, not feasible to extract at a profit. Economics of this shale oil is better than most conventional oil… including Saudi Arabia and Russia. Saudi oil being $3.80/barrel is hogwash. Cost to run pump is that much! But drilling, taxes, royalties, moving the oil to a pipeline, etc. Aramco offering “publicly” meant they disclosed cost info…. Nov 2019 IPO – break even price is about $40/barrel. 10X more than most ppl thought.
Decline in ratio of energy invested to energy return has been dropping – 1990s was 100:1 and now about 15:1 to 18:1… making it hard to run an industrial civilization at this ratio. EROI – net energy – is a brilliant idea but almost impossible to calculate. What is true cost of drilling a well – simple question but hard to determine – all the diesel, trucks, dozers, concrete – a bunch of costs. Bakken shale stufy years ago (with some questions) – about 30:1 to 50:1. It does require more energy today to get a barrel of oil than 70 years ago but beats the hell out of any other energy by a ton. Numbers are squishy… But solar and wind are about 10:1. Oil best bang for buck – coal is lower – may be beatable by renewables but the real competition is oil and natural gas.
Money-making is the deal… but examining the details shows cost of solar and wind is almost nothing – so dirt cheap nothing can compete – assume that is true, why is only 4% renewable? Well, not so cheap. Oil is most productive fuel that man has discuvered.
Costs of oil and costs of energy – how do they fit into rest of the economy? Decade of shale oil rising – none in 2005 to great summit in 2019… amounted to a financial racket. Many shale producers couldn’t make a buck but attracted investment – how while demonstrating it was not a good investment? True for oil business since day one. Not a special feature of shale.
Oil industry on avg has returned about 7% since the 70s. For something that has such high cost intensive risks, investors are wanting 20%… So did shale oil draw a bunch of investments because other investments weren’t getting as much as desired? After 2008 when interest rates went to 0… US Treasury bonds were a loser. Fed Reserve was buying bonds and wanted you to put $ in stocks. Yields on safe/passive investments like bonds and money markets were not worth having. Oil was “master resource of the world”, was backed by a hard investment in the ground… collateral! Given no more than a percent or two for most other investments – not so much a risk overall, buying oil – slightly higher risk but higher returns. Most of the investment in tight oil was not real checks written to oil companies to subsidize their operations. Most was in stock.
Early days 2007-09 was bank money, then joint ventures, then private equity – moving to BIGGER AND BIGGER investors. By 2012 or 2013 – certainly after oil crashed in 2014 – was almost all secondary share offerings. Stocks are money a company can use… if you look at shale companies and, if you bought in Jan 2016 – lowest point in oil until recently. If you held it to end of 2018 gave you 250% profit! For those who played it right…
23 minutes in begins a discussion about the investment in shale and how it was based on the system, not the true value of the companies. Art Berman, an independent oil geologist and industry analyst, admits that the stock market is a casino. Jim notes that there is a disappearance of capital – and a creation of new capital that doesn’t seem to be keeping up. He asks what will keep shale going. Berman notes that oil was poorest performing long before COVID-19 began. [Note: Art lives in Houston and writes a blog.
Recent rally showed 89% increase in their stocks. Oil company stock price fluctuates as a function of it’s product, OIL. Started at -$39 and went to $25 – $60 increase in two weeks is largest oil rally in the history of man. A distortion in a world full of distortions… People are making money on this goosed price. [I’d ask if that seems fair. Certainly seems like money being made for no effort so doesn’t seem far…]
US Oil could be screwed.
Info on current state and COVID seem to say we’re royally screwed.
Price, cost and value are not the same thing. Price is $25/barrel but COST is $60/barrel to get it out of the ground. Value is hundreds of hours of work – tremendous source of energy. 4.5 years of human labor in a barrel of oil = $120K/barrel. Value far exceeded it’s price or cost of extraction.
Discussion continues on the prospect of nationalizing some portion of US oil production. Art sees it as pretty sure this will happen. Companies have billions in debt load Futures market and stock market are saying “turn off production”. With no output, there is no payment of interest expense to creditors… and then bankruptcy. Whiting declares bankruptcy [Tar Sands refinery in Indiana].
Usually there is an Exxon or Chevron ready to buy the littler guys as they fold… for pennies on the dollar. But these guys are struggling to pay dividends! Shareholders will not tolerate buying a zombie oil company on the cheap. But… oil is so important to the economy that, if no one is there, the US Govt, like they did for GM, may bail them out.
Refineries are operating at 2/3 normal intake. They are not profitable if they are not at 100%. Might as well not operate at all – from a financial perspective – at 67%. Shipping relies on transport. Without that, the whole industrial sector is hosed. Will likely be not only producers but refiners and all in between to assure we have oil.
Renewables won’t cut it in a pinch. [That assumes we need to keep going at the pace we are… which I believe has been proven to slow… outside our span of control. Think we’re heading to a new world, just not sure what it will be yet.]
Jim asks if government will fund or actually take over the business – are they competent? Art notes they were not able to run the auto industry – GM was a big org – could underwrite debts and costs and leave mgmt structure. But with OIL, it’s 1000s if not tens of 1000s of companies. Of all the government policies – energy is too complex to be covered. If US becomes the default owner of energy production, “heaven help us”. Jim says we will become Venezuela. Mexico did same. Saudis have managed their national company pretty well. Art agrees.
Storage and overproduction situation. Shale are shutting in their oil – closing down wells – not a cheap or simple procedure. VERY COMPLEX Process. Using a beach ball analogy, Art explains it. Fluid and material (Barite?) loaded on top to keep the pressure and then a metal plug installed – requiring a rig and thousands of dollars – and then cement poured to kill the well. Hope the cement holds!!! Then you can take the rig off. So this is a process that will need to be done over and over.
The pressure causes a probability that you will damage the formation. After 6-12 months, re-opening will be again, this same complex process – drill cement, pull metal plug, drain fluid… and then hope it pumps on its own. More often than not, it’s not that easy. Requires acid, zylene, cleanup and possibly re-fracking and STILL you may not get past performance.
Jim notes the Europe situation for oil (only Norway and a bit from Britain)? Not hearing from EU bigwigs about concerns for their lack of supply. Reset to an economic level unthinkable a few years ago? Art argues this will be a US and worldwide problem, not just European. He argues there is a 1:1 correlation between GDP and oil consumption. If the world is consuming 20% less oil, then GDP will reasonably to fall 20%. “A damn disaster. A catastrophe!” [But is it? Aren’t we destroying the planet too quickly? Wouldn’t that be a good thing to slow down?]
No one will like the way we get through it. We will NOT GO BACK to the way we were before – certainly not in the near term. Things are gonna suck economically. Jim is not surprised.
Europe is captive but there are lots – Saudi, Iran, Iraq, N. Africa, Libya, Tunesia…. We have more oil than we need as consumers. [Wait, what about peak oil?] Dispelling the myths from the Secretary of Energy that the US is a net exporter…
US imported avg of 9M Barrels/day of crude oil. More than Europe uses! US imports oil from around the world, refines it and sells as products. But we are NOT A PRODUCER of oil. We are an exporter of REFINING. US the NOT energy independent.
Art asks… if our oil is so great, why are we selling every barrel? Because our oil is NOT GREAT and we need better oil. We produce gasoline – light stuff – doesn’t contain molecular compounds needed to make DEISEL. Nothing you can do to give it something it doesn’t have so we have to blend it with heavier oil and there are limits to what we can do. 3.5M Barrels/day still exporting. VALUE IS WORTHLESS to us. May be worth something to a producer but, if it were so valuable, why would we export it?
Art Berman’s view on US 5-10 year economics, living, ordinary life: Geologist here… Simple answer is IDK but a range of scenarios exists.
Worst case – about 25% of Americans missed their mortgage last month and a bit higher % didn’t make rent payment. If this persists, creditors don’t get paid and the financial system collapses. If US finances collapse, then entire world system collapses and we’re in a parallel universe – unthinkable. In 5 years time, maybe things will be better… assuming no wars, mass chaos, rioting. [Well…] Then all bets are off.
Best case – that is completely avoided. Treasury, Fed defibrillate the economy by creating liquidity and capital to help us live through. In a service economy, can’t make widgets faster to make up for lost productivity. Consumer, industries – all damaged. Everyone saving to not let this happen again. In a few years, the US is hugely weaker. Credit out of system – 30% haircut on what we’re used to. Not the worst in the world but not many who will sign up for a 1970 standard of living. Best case? Maybe most likely case…
Hard to see a happy ending if nothing happens other than what is already happening.
5000 B/day – have to be there next month. Then 50% reduction in production. What is good news for the economy? If oil drops 63%, GDP drops 63%…
Optimists say Art is a pessimist but he argues he’s a scientist. Optimists choose to ignore objective information. Can’t pull a rabbit out of the hat. Hope you’re right – my feeling part wants to agree. But the present implies that the future looks awful. Hoping Treasury/Fed can make things happen but don’t see it based on the info today.
Jim agrees there is much anxiety and distress and we’re gonna have to stick with it. American impatience with uncertainty needs to end… we need to grow up.
Thank goodness for plum blossoms and roses. The critters don’t seem to be affected by all this. Hmmmm. Something to ponder.
Update 12/7/20: In hindsight, as I watch Enbridge rush to drill under the Mississippi River to install a NEW Tar Sands Pipeline in Aitkin County, Minnesota, it seems the critters are affected by this… we just haven’t been paying close enough attention. But yes, the critters go on, as best they can, as humans continue to destroy the planet’s ability to host human life. Fewer of them, certainly. I’m glad for those that remain in the forest where I live. ❤
Earlier this month, I attended the Minnesota Environmental Quality Board’s Environmental Congress. I signed up to attend not realizing there would be livestreaming of the event but I am so glad I attended in person as I was able to make so much of the trip.
I found lodging with a friend in the area and enjoyed a wonderful room full of delight. [Fran, you’d have loved the whole place!] I ended up staying two nights and really enjoying not only getting to know this lovely family but also their terrific town. I got the $10 tour of Owatonna and will blog it soon!
OK, back to the Congress. We had a full day ahead of us! Fermata Sol, an up and coming U of M Mankato a cappella group, opened the day with a nice selection of melodies. After this number, I noted they might yet make me like Taylor Swift!! (A high compliment per Jacob, their beatboxer. As I enjoyed the music, Jeffrey Broberg joined me and told me a bit about MN Well Owners Organization, who are seeking board statewide members. The Plenary speakers were terrific. As Grace Goldtooth ended up falling ill, we had plenty of time to hear Kate A Brauman, PhD (Lead Scientist, Global Water Initiative, Institute on the Environment, University of Minnesota) explain how Minnesota is getting hotter and wetter and no matter how sexy that sounds, it is not a good thing. EVERY Minnesotan will feel the effects of climate change. Sydney Bauer, recent graduate and member of the Emerging Environmental Leaders Program, challenged and encouraged us to try some new things today, to reach out to a young person, and to understand that they are ready to take on the challenges before us. I am still amazed at the patience of our young people…
Then it was time for breakouts (details at the bottom of this link), which covered quite a lot of ground.
Climate Justice, Energy, and Equity (Room 245) *
The Future of Minnesota’s Clean Water in a Changing Climate (Room 253-255)
Food, Fiber, and Fuel: Providing Society’s Needs While Addressing Climate Change (Ostrander Auditorium)
Adapting to Climate Change: Innovative Strategies from around Minnesota (Room 201) *
Pathways to Decarbonizing Transportation (Room 202)
Climate Change and Biodiversity: Building Resiliency of Our Lands and Wildlife (Room 204)
How to Talk Climate by Developing Your Personal Climate Story (90 minute session – Rooms 203 & 238)
I selected the Innovative Strategy one and heard from Alison Zelms, Deputy City Manager, City of Mankato who spoke on the water systems and risks to wells along the river requiring multi-million dollar projects to secure the water infrastructure. One thing we often don’t consider is all the infrastructure that we will need to replace, repair, or abandon as climate changes our spaces. Jeff Meek, Sustainability Coordinator, MN Department of Transportation spoke about how current flooding changes require new thinking for resolving culvert and bridge concerns. Hilarie Sorenson, Climate Specialist, 1854 Treaty Authority spoke about the work being done with Mille Lacs on walleye populations. When asked what one thing might need to be abandoned to improve going forward, here were the answers: Alison says to not mow to the edge of retention ponds, Jeff notes that we might need to consider what 1% of infrastructure we might abandon rather than continue to support, and Hilarie noted that sometimes problems are not in need of an immediate human fix and that a wait and watch approach can often allow situations to resolve naturally.
My second workshop I did not realize focused on energy as I was focused on the first and third topics in the list: Climate Justice & Equity. This was a panel presentation with 5 members expressing their experience and ideas regarding equitable energy strategies and why they are important. Presenters offered diverse perspectives on difficulties faced by people of color and the policies, programs, and resources available to mitigate them. Presenters included: Briana Baker, Weatherization Auditor, Minnesota Valley Action Council; Carmen Carruthers, Outreach Director, Citizens Utility Board of Minnesota; Ben Passer, Director of Energy Access and Equity, Fresh Energy; Janiece Watts, Policy Associate for Energy Access and Equity, Fresh Energy; and Ansha Zaman, Policy Coordinator, Center for Earth Energy and Democracy. At the end of the session, the panelists joined audience members to answer questions and share ideas. Overall, it was a really good session to bring understanding to the needs and what Minnesota government and NGOs are doing to meet the needs.
Side note for my fellow environmental geeks: I was uber impressed with Janiece Watts from Fresh Energy in that last breakout. Then, I sat down to lunch with J. Drake Hamilton, Science Policy Director for Fresh Energy!! And she raved with me about how great Janiece and Ben both are. [We’d been talking for several minutes before I finally realized who she was… and then we had an awesome discussion about TBIs! 🙂 She is a real gem. I now understand the amazing outpouring of love and prayer and good energy I witnessed earlier this year, from the entire environmental movement, when she took her tumble on the ice and hit her head. SO glad she’s back in action. And I turned her on to Annie Humphrey’s new song on this topic… The Boy Who Lived. Listen to the whole album though – it’s terrific. And buy it. 🙂 ]
Just a little ramble on how magical my life is…
Lunch followed and Governor Walz gave an address (start at 49 minutes in as apparently no one knew how to edit the video which recorded the lunch background noise for almost an hour before getting to the presentation…) before turning us over to a panel of his Commissioners and others involved with the new Subcabinet on Climate Change (they start at 1:12 into the video). Steve Kelly did a nice job of specifically saying that the Department of Commerce is an “advocate for the public interest before the Public Utilities Commission” (PUC) for regulated utilities. [Let’s hope they continue to stand with their statement that there is NO PUBLIC NEED for Enbridge’s proposed Line 3, currently being considered by the PUC.] He also mentioned they are working with the insurance and banking aspects of climate justice. (I got a chance to shake his hand and thank him for this at the end of the event.) The announcement of the Climate Change Subcabinet, announced with the signing of Executive Order 19-37, seemed to be the precursor to the Environmental Congress – excellent planning. While I had some expectation that the Congress would be a watered down, “Hey, look how great Minnesota is doing on climate change! Tech is going to save us! No worries!” thing, instead the presentation was a pretty honest assessment of the dire straits in which we find ourselves. There was some talk of things we hope to do and some that we’ve implemented already, but mostly it was a recognition that we have a long way to go. Even here in progressive Minnesota.
The most participant-driven part of the day was the Open Space time. If you’re not familiar with Open Space, the way it worked at the Congress was that any participant could create a room to discuss any topic they want to deep dive. Once the rooms were assigned, we all went off to our topics and, if we wanted, at any time, we could transfer to a different topic. The requirement was that each room have a note-taker to capture the conversations. These notes will reportedly be compiled and presented by the MEQB at the Environmental Congress website.
Our topics were quite varied: Greenhouse gas emissions accounting (data, methods); How to encourage inter-generational action on climate change; Diversity in MN Resilience Planning; How to make mass transit cool; How do we elect bold champions for a livable planet; Natural climate solutions to reach MN’s emission reduction goals! (2% to 33%!); Having meaningful discussions with people you disagree with; one on carbon fee and dividend (CCL was there), a few others and the one I attended, Implications of Line 3 on climate.
The Line 3 Open Space had about a dozen people and was pretty evenly divided between MN agency reps and citizens. Julie Goehring, MEQB Congressional District 7 Representative; Mary Otto, DOC Tribal Liaison; Helen Waquiu, MPCA Tribal Liaison; Steve Colvin, MN DNR Ecological and Water Resources Division Director; DNR Planner Nora (?); Laura Bishop, MPCA Commissioner; MPCA Educator (missed her name!), Sara Wolff, Minnesota Environmental Partnership Advocacy Director; Matteo, Sierra Club/MN350 Videographer; Robert Red Thunder, Red Lake Tribal Member; Jackie (didn’t catch her info); Lindsay Anderson, Green Corps Member; and me!
Sara Wolff began the discussion with a presentation of some data she had on Greenhouse Gas Emissions (GHGs) for MN. In 2005, we were at about 130 MMT CO2/year and we’ve reduced this to about 110 MMT CO2/year. Out 2007 goal for 2025 was to reduce by 30% – to about 90 MMT CO2/year – and by 2030, we hoped to reduce by 45% below 2010 levels to about 65 MMT CO2/year. Our old 2050 goal was to reduce to 80% of 2005 levels. But Walz’ new Climate Change Subcabinet calls for 100% reduction by 2050, at least for our electrical production. It will be interesting to see how the group proceeds. [I’ve applied for a seat at the table. Put out the good energy for it!!]
Sara noted that, while we started out strong, Minnesota is no longer on track to meet goals for GHG reductions. We need to further reduce by about 7 MMT CO2/year to hit our old 2025 goal or 13 MMT to meet our new 2025 goal of 30% reduction. That means a 40 MMT reduction by 2030 to meet the goal. She then noted that the GHG emissions for Line 3 will be 200 MMT CO2/year. I mentioned McKibben’s 2012 Do the Math article – where we learned that much of the remaining fossil fuels must remain in the ground.
I mentioned also that the only spill since 1989 on current Line 3 happened during a repair. When we look at the new lines for Keystone and DAPL, we’re seeing spill after spill negating the “improvement” that new pipelines bring. Instead of the jobs for putting in a NEW Line 3, we can create ongoing employment via maintaining our currently safely operating Line 3. Safer AND more jobs.
Lindsey asked about what our current state is and Steve Colvin pointed to Laura Bishop who noted that the permits are on hold at the MPCA. The updated EIS is needed for those permits to be reconsidered. I gave a summary of the court cases where the Court of Appeals required an updated EIS. Steve Colvin noted that Enbridge has to do the analysis but the Department of Commerce does the EIS and presents it to the PUC. He also denoted the open DNR approvals pending: water appropriation permits for different purposes, utility license to cross public lands, utility license to cross public waters, listed species taking permit, a calcareous fen management program, and a public waters work permit (an oddity for public water crossing permits). I summarized that there is currently NO Certificate of Need or Route Permit and, until the EIS is issued and re-approved as adequate, no EIS.
Someone asked about green jobs and a brief discussion ensued about the need. Someone asked about pre-construction work status and I mentioned the difficulty with understanding WHAT you are seeing in the landscape – is it Enbridge pre-construction or high line construction? Is it Enbridge pre-construction or Charlie clearing his timber to pay for his kid’s college?
Current state of the EIS and when and how it will be deemed adequate were unclear. The EIS due date of the 9th (or 10th?) noted by the agency reps. Whether it was supplemental was denied – it is an “update”. I noted that this is all potentially new territory as we have never done an EIS for a pipeline prior to this in Minnesota. Sara noted that the rationale from the PUC for approving Line 3 was to protect the people from disaster; building the pipeline would be a means to that end. [I’d argue now, after all the spills on new pipelines, that the current Line 3 is safer…] However, that decision was made in summer 2018 and, in October 2018, the IPCC released a report that noted an increased urgency for addressing climate, reducing to 45% of 2010 emissions by 2030. In November 2018, the US report on how climate is affecting us was a second major notice on the urgent need for considering how we make decisions in light of the climate crisis. None of this information was available when the PUC made the decision to approve Line 3.
Lindsey noted that we may need to include other states or governments to work on emissions reductions in a more global way. The health of the citizens where the oil will be burned might help involve more people in understanding the risks. She lost enthusiasm when it was mentioned that much of this oil will be exported to offshore users… noting, “China’s not a democracy.” [I’d argue that we’re doing nothing and we supposedly have a democracy…] Colvin noted that this brings us to considering the cumulative effects of these GHG emissions. Matteo noted the argument from Canada could be that we’re impeding their national interests to use their natural resources.
This led to a discussion on lobbying and a note that Enbridge accounted for more than twice the amount of the second largest lobbying source for Minnesota. I asked Steve Colvin about his comment that, “Minnesota is a pass through state” for Line 3. I asked on what basis the PUC made the decision when so many groups opposed, from the DOC to the Tribes to other intervening parties. While Steve didn’t want to speak to the actions of other agencies, he noted the rationale must be noted.* Sara also noted that the laws in the US were developed long ago to give allowances to the fossil fuel industry, for example, allowance to use eminent domain to take land needed for pipelines, to create the growth of the country. We’ve given deference to the free flow of fossil fuels and now we are swimming upstream with a change in our circumstances. The money supporting the fossil fuel industry is also a factor for consideration.
Sara also noted that the ads being placed by Enbridge – full page ads in the Star Tribune run ~$30K – are wrapped into the costs of getting the pipeline built!! This is assessed to the people in the area where the pipeline traverses. Per Federal Energy Regulatory Commission (FERC), these people are assessed a rate that includes the costs of these ads. So every time you see an Enbridge ad, you should be seeing it as more money you’ll be paying for these fuels. This explains why they advertise so heavily – it’s on our dime in the end anyway – but what about the risks of them going out of business? Globally we are discussing divestment from and an end to dependence on fossil fuels. Could not getting Line 3 bring bankruptcy leaving Minnesota on the hook for it all? Also noted, regarding ads, Enbridge markets as a “renewable” energy supporter… but they sold off all their wind assets!!
Lindsey noted that when she Googles Line 3, Enbridge pays to be sure their link is the top site listed. This is what money can do. I noted that this same thing happened as Exxon faced court challenges recently in New York.
The discussion turned next to jobs. Julie noted the county commissioners in her part of Minnesota are focused on jobs. This is their focus for Line 3. “Safer and brings more jobs” is the message from them. We hear this all the time in Greater MN. One of the agency people talked about how government jobs are great because of the mobility and possibility. But they’re in the Cities… Jobs are really in need in Greater MN.
I noted that the road to people ratio in Northern MN offers a lot of potential to capitalize on the new green economy coming my way. Julie noted that Paul Douglas recently noted he couldn’t take his electric vehicle for an outstate event because he didn’t have the charging possibility there. Lindsey noted that no car in her price range has the mileage range needed for her to get from where she lives to her parent’s house which makes an EV an impossibility for her. Everyone else in America is dealing with these same issues.
Sara asked us to all consider what the world would look like if it was the way we imagined it to be. A world where no matter what part of the state you lived in, you could have a job that is meaningful for you and provides for your family, and no one has to breath the fumes of pollution and our waters are clean. AOC did it. [Seriously, watch this – it gives hope.]
I talked about the question from the earlier session on what we need to let go of moving forward. I noted that the decision to stop mowing to the edge of the retention ponds also brings a solution to the goose problem because they fear predators in the foliage. And these solutions can become the snowball that we see rolling forward, leading to more and more solutions.
What’s the future for Line 3? Stick more people on repairs, eventually rid ourselves of it? Sara noted that the DOC report advised no need for Line 3 and that we could even NOT build a new Line 3 AND close the existing Line 3 and STILL meet all Minnesota’s needs. I noted that a bigger question is whether Enbridge is looking at bankruptcy near term as the Fossil Fuel industry dies. Will we have to clean up their mess of old and dead pipelines? If we want to talk JOBS, there are 3-5X more jobs in pipeline removal than pipeline construction. MN Taxpayers will be paying for the cleanup if we don’t get our ducks in a row to hold them accountable. Why not let Enbridge pay for their own removal? Starting NOW.
Steve Colvin noted that he’s not sure what financial assurance requirements are embedded in the regulations. For metallic mining, there are financial assurance requirements (though the figures are debated!). This protects against common mining bankruptcy.
Have we talked with the province from Canada that is likely also looking at their own GHG emission reduction programs? No one was familiar with their requirements but the idea of working together on these issues is a good one.
I mentioned the David Dybdahl report from Michigan on Enbridge’s financial liability. I noted there are programs for Line 3 but that the details are not public as Enbridge claims they are “trade secret”. One suggestion was to find whose oil they are transporting and stop supporting those businesses. Enbridge is only the mover, not the one selling the product, so we are largely unable to impact Enbridge as a company.
Laura noted timelines and said that MPCA has a responsibility and she is working with her staff on this work. MPCA’s is determining timing with USACE and they need to provide a schedule to the USACE as their default is 60 days. This consultation work is in progress. Nothing final on EIS as of yet. Route permitting was noted as “not done”.
One final question was to ask about carbon taxes which was a bit outside this group’s balliwick. Most agreed that all costs will eventually come back to consumers. I tried to give the CCL spin on this idea that those who spend a lot will pay more and those who spend less will gain with the standard refunds to all citizens. Had a bit of a discussion on where this would fall with MN being a pass-through state.
And finally, the feed lot that was questioned for GHG emissions was brought forward. There was speculation that this could affect the pipeline discussion as well. Laura addressed the MEQB factoring in of climate. This will be factored in on the EAW/ER. There is a larger idea of how we tackle this as climate as well, including what rule changes may be needed. This and health too will factor into the work being done by the MEQB.
This was a really interesting and diverse conversation and I was excited afterward to meet the other Northern MN person in the room and ended up finding that she’s a cousin to a friend of my parents! Small world. This was a perfect lead in to the closing for the Congress which included some beautiful closing comments and blessings. I wish I had caught the names and more information but it was moving quick and I was enthralled by the commentary and words of blessing. Just beautiful. I was just too in the moment taking it all in…
All in all it was a pretty inspiring conference. There were real conversations and challenges. I don’t know if we’ll end up doing enough but we’re talking a good game so far.
I’m glad I attended. I had an opportunity to meet some amazing people, deepen some relationships, and learn a lot about the state agencies and NGOs working for climate justice.
* For those who have made it this far, below are further details on the PUC decision and it’s avoidance of recognizing GHG emissions from Line 3.
In their Certificate of Need order, the PUC note: The lifecycle greenhouse gas emissions from the Project are a significant consequence. However, the lifecycle environmental costs include emissions from ultimate consumption of the oil transported over the Project. These costs do not result directly from the Project, but instead result from the continued demand for crude oil to produce refined products used by consumers.
This contradicts the Department of Commerce assertion that both direct and indirect effects must be considered, which itself is supported by the National Environmental Policy Act (NEPA) guidelines, and which the DOC quotes: As noted in the Council on Environmental Quality’s 2016 Final Guidance on Consideration of Greenhouse Gas Emissions and the Effects of Climate Change (Executive Office of the President, Council on Environmental Quality 2016), all greenhouse gas emissions contribute to cumulative climate change impacts.
The DOC laid out the climate impacts of Line 3 to the PUC. The PUC had a chance to take a major stand on climate, and they punted instead. If they wanted to deny the CN based on climate impacts (as well as other environmental and indigenous cultural impacts) they had the regulatory cover to do so as the Council on Environmental Quality (2019 version) itself says: A projection of a proposed action’s direct and reasonably foreseeable indirect GHG emissions may be used as a proxy for assessing potential climate effects. Direct effects are caused by the action and occur at the same time or place. 40 CFR 1508.8(a). Indirect effects are caused by the action and are later in time or farther removed in distance, but are still reasonably foreseeable. 40 CFR 1508.8(b). Following the rule of reason, agencies should assess effects when a sufficiently close causal relationship exists between the proposed action and the effect. A ‘‘but for’’ causal relationship is not sufficient. Agencies should attempt to quantify a proposed action’s projected direct and reasonably foreseeable indirect GHG emissions when the amount of those emissions is substantial enough to warrant quantification, and when it is practicable to quantify them using available data and GHG quantification tools.
Where GHG inventory information is available, an agency may also reference local, regional, national, or sector-wide emission estimates to provide context for understanding the relative magnitude of a proposed action’s GHG emissions. This approach, together with a qualitative summary discussion of the effects of GHG emissions based on an appropriate literature review, allows an agency to present the environmental impacts of a proposed action in clear terms and with sufficient information to make a reasoned choice among the alternatives. Such a discussion satisfies NEPA’s requirement that agencies analyze the cumulative effects of a proposed action because the potential effects of GHG emissions are inherently a global cumulative effect. Therefore, a separate cumulative effects analysis is not required.
[Thanks to my buddies for these links – the emphasis is ours.]
The Administrative Law Judge, Ann O’Reilly, noted in her findings on the proposed Line 3 what appear to be clearly reasonable conclusions:
676. The ALJ accepts these calculations as established in fact and adopts the finding of the incremental life-cycle GHG emissions (GHGe) for the Project will be 193 million tons of carbon dioxide emissions (CO2e), totaling $287 billion in social costs.
677. The adoption of these figures by the ALJ is based upon Applicant’s testimony that: (1) the Project, with a 760 kbpd capacity, will predominantly transport heavy crude; (2) the 390 kbpd of light crude currently transported through the line will be displaced by heavy crude; (3) the 390 kbpd light crude currently transported on the line will transferred to other lines (and, therefore, does not “disappear”); and (4) the new line will add an additional 370 kbpd of (new) predominantly heavy crude on the Mainline System to eliminate apportionment.
678. Consequently, reducing the annual life-cycle GHG emission of non-displacement (273.5 million tons CO2e) by the annual life-cycle GHG emissions from 390 kbpd light crude (80.5 million tons CO2e), equals the “incremental” (i.e., increased) annual life-cycle emissions of the Project (193 million tons CO2e). The calculation is as follows: 273.5 million tons CO2e (the estimated annual emissions from a new project bringing 760 kbpd of “new” heavy crude into the environment) minus 80.5 million tons CO2e (the annual emissions from the Existing Line 3), equals 193 million tons CO2e (the annual increased amount of emissions anticipated by the Project).
679. Sierra Club witness Andrew Twite maintains that approving the Project will make it difficult for Minnesota to meet the GHG emission goals set forth in the U.S. Climate Alliance, which affirms states’ support the objectives of the Paris Accord. The U.S. Climate Alliance is bipartisan coalition of governors committed to reducing GHG emissions by at least 26 to 28 percent below 2005 levels by 2025, consistent with the Paris Accord. Minnesota is part of this coalition.
Sadly, the PUC is under no obligation to heed ANY of the ALJ’s recommendations.
Why is it that so many Americans seem to work too many hours for too little pay and then have almost no free time?
Do we really need all the “stuff” we buy? Is it really making us happy?
Could we reduce our spending to a point where we don’t need so much income and can perhaps work less hours? Why is it that we don’t think more about how much money we really need instead of about simply getting a big paycheck job? Are we questioning how many of our hours we give to our bosses versus those given to our families?
Do we need all the separation we have? Could co-housing or multi-generational housing bring more happiness and socializing along with lower costs and added adult resources?
Can we look at what we truly want and need rather than what society tells us we do?
Take the holidays.
Do we need lots of decorations? Or can the few special decorations from the past suffice? Especially if they have connection to those we love? And aren’t the faces of our friends and family the best decorations in our homes?
Do we need to cut down a tree this season? Or can we simply enjoy the beautiful pines outside, in their natural snow-covered beauty?
And what about gifts? The focus in consumption-driven America is often on quantity. But do all gifts bring happiness? Have you ever gotten a gift that seemed like just a “thing to unwrap”? Why do we feel this compulsion to give so many gifts? For me, the best gifts are a hug, a smile, or a story from a friend. Sharing time is the best gift of all.
Yes, there are many things that can bring comfort or joy. And a gift that fulfills a need or wish can be wonderful. But if I get a gift that seems like a financial stretch for the giver, or one that is simply something I do not need or want, the gift becomes a burden. I’d rather have a story, a hug, or a smile. These are free blessings and they come with the added benefit of not putting more pressure on our already struggling planet.
This holiday season, I hope for less materialism and more love. I will focus on spending time with friends and family enjoying simple pleasures.
This blog will focus on a report released 10-29-19 by the Michigan Attorney General’s office: An Analysis of The Enbridge Financial Assurances Offered to the State of Michigan On Matters Related To The Operation of The Enbridge Line 5 Pipeline At the Straits of Mackinac.
This is perhaps the best written coverage on the report’s release. And this covers the Enbridge response more recently.
Summary: This report concludes that Enbridge’s financial ability to pay for response costs and property and personal injury damages arising from a rupture of Enbridge Line 5 at the Straits of Mackinac may be inadequate. [I know. Shocker.] It also suggests what actions Enbridge can take to reassure Michiganders of their financial capability but concludes that – if not now, then in the future – Enbridge faces a likely inability to secure the needed environmental insurance due to the excessive risks associated with Line 5.
In 20 short
pages, the report clearly expresses the fallacy of Enbridge’s current business
model and questions their ability to financially support the full lifetime
requirements of their Line 5 pipeline, including removal after decommissioning.
So let’s begin. My goal is to highlight portions of the report (in italics; bold additions are my highlights) to give a condensed version with added explanation (from my perspective at least) of what it implies specifically for our Line 3 opposition here in Minnesota. [My definition of “condensed” may be debatable. Huge kudos to David Dybdahl for this fine work]
Hint: For a quicker read, skim the italics, reading the bold portions, and then read my commentary in plain text. This should give you the basics. [Dan says that you can also just read the stuff I wrote and get the gist of it all.] Update: Scott Russell covers this concern in regard to Enbridge’s proposed Line 3 project in this Healing Minnesota Stories blog.
Section I Executive Summary
To avoid unfunded response costs and property and personal injury
damages arising from a rupture of Enbridge Line 5 at the Straits of Mackinac (Straits), the State of Michigan, the Michigan Department of Attorney General,
the Michigan Department of Environment, Great Lakes, and Energy and the
Michigan Department of Natural Resources (the State) has commissioned this risk financing analysis to evaluate the ability
of Enbridge companies to pay for the costs and damages that a rupture of Line 5
This report presents an analysis of the current and future ability of
various Enbridge companies to pay up to $1.878 billion in U.S. dollars for
costs and damages arising from the potential release of petroleum products from the 66-year-old, Enbridge owned and
operated, dual pipelines running under the Straits of Mackinac (Line 5).
In 1953 the State of
Michigan granted an easement to a U.S. subsidiary company of Enbridge, Inc. to
build and operate two pipelines under the Straits of Mackinac. Enbridge, Inc.
is a Canadian company with global operations. Enbridge, Inc. is not a party to the Easement, only the company
that was granted the Easement (Grantee) and its successors are obligated by its
This is the same as in Minnesota. Enbridge, Inc. seems to be the lead for this project but Enbridge Energy, Limited Partnership is the entity that applied to the Minnesota Public Utilities Commission for a Certificate of Need. So Minnesota faces this same risk Michigan would face from Enbridge, Inc. using a subsidiary for the application of Line 3. UPDATE: After a review with PUC and their Orders for the Compliance Filing, Certificate of Need, and Route Permit Orders, there ARE provisions made for Enbridge, Inc. to be a signatory for Line 3 liabilities (though I’m not sure of the exact mechanisms for making this work…). However, I also learned this from a fellow activist:
Enbridge’s primary means of funding spill cleanup costs is by passing on the costs of cleanups to its customers, which it is allowed to do under federal tariff law. For example, it appears that little to no amount of the costs of cleaning up the Line 6b Kalamazoo spill came out of Enbridge’s bottom line. About $500 million was recovered through insurance, and most if not all of the rest of the spill cleanup costs were included as operating costs and reimbursed through its customers’ tariff payments. In a way, Enbridge’s insurance isn’t meant to protect Enbridge’s wealth, but rather to limit the impact of a spill on the tariff rates charged to Enbridge’s customers. Federal tariff law determines the fee that Enbridge may charge for its services, and this fee is set at its costs of operation plus a guaranteed profit (~10%). Enbridge’s reports to the Federal Energy Regulatory Commission (FERC) make clear that it included the costs of the Line 6b spill under the “Casualty and Loss” category of its operating expenses over the course of a number of years following the spill. Enbridge’s customers (the western Canadian oil industry and US oil industry that imports crude oil on the Mainline System) then pass the costs of transporting oil on the Mainline System to their customers – meaning consumers.
This does not mean there is no risk that a spill might not be cleaned up, because as the oil industry weakens it is possible that it will seek to avoid paying for major spill cleanup costs. Also, regardless of its ability to pass on oil spill cleanup costs, Enbridge Inc. should be held liable for any harm caused by its subsidiaries.
The cost of mitigating abandoned pipelines is an entirely separate matter, and no state or federal law requires that Enbridge set aside funds to pay for abandonment costs. Since most of Enbridge’s pipelines could be kept in operation until near their end-of-life, it is possible that Enbridge could under existing law avoid liability for most if not all abandonment costs.
The goal of Enbridge’s shareholders will be to strip Enbridge of its assets for their benefit before these assets can be dedicated to remediation of abandoned facilities.
So basically what this says is, insurance is only to protect Enbridge assets and to give some relief to consumers who truly are left paying the bills for cleanup, regardless. But the insurance stuff is interesting, nonetheless. [For geeks like me anyway.]
The 1953 Easement does not have a provision for using the assets of the Signatories, which is essentially self-insurance, to backup the indemnity requirements. To the contrary, the 1953 Easement makes specific reference to requiring the Grantee and its successors to maintain comprehensive general liability insurance, bonds or surety on the dual pipelines. In 1953 none of these specified financial instruments would have contained pollution exclusions. The effects of pollution exclusions are accounted for in our recommended insurance requirements.
The report include excellent insurance recommendations that Minnesota should consider for our approval for Line 3. We’ll get to the specifics on that later.
Upon analysis of the
financial resources of Enbridge, Inc. in August of 2019, we find that Enbridge,
Inc. currently has the capability to fund $1.878 billion for the potential
damages caused by a petroleum product release from Line 5. However, we do not recommend the acceptance of
Enbridge, Inc. assets as evidence of Financial Assurance unless Enbridge Inc.
becomes a signatory to The Agreements with the State.
And here’s why…
Due to the corporate structure of Enbridge, Inc., only the assets of
the Signatories are obligated by The Agreements. We have reached this conclusion based on the sworn November 9th, 2018
testimony of Mr. Chris Johnston. That
testimony was provided in an evidentiary hearing for the Minnesota Public
Utilities Commission (PUC). The PUC hearing pertained to the siting of a
new Enbridge Line 3 which is not
related to Line 5.
insights into the corporate structure of Enbridge that is directly related to
Line 5 can be gleaned from this testimony. Mr. Johnston is the Chief Financial
Officer of Enbridge Energy Partners, L.P. Enbridge Energy Partners L.P. is the
largest U. S. based operation of Enbridge, Inc. and is an actual Signatory to
the Agreements. Enbridge Energy Partners L.P. is also the successor company to
the Enbridge company that was granted the Easement in 1953. As the CFO of the U.S. operations of
Enbridge, Inc. and the lead Signatory to the Agreements, Mr. Johnston is a
credible expert on the company structure of Enbridge, Inc. and its U.S.
In the Minnesota PUC hearing, Mr. Johnston testified that Enbridge, Inc. is not contractually obligated to stand behind the indemnity agreements of a subsidiary.
The Signatories and
the flow of revenues and liability within the Enbridge corporate structure is
detailed in the schematic in Appendix A. What this schematic shows is that while revenues flow up to the parent
company of a subsidiary, liabilities stay at the subsidiary level. This is the
typical corporate structure of a parent company with operating subsidiaries and
is reflective of Enbridge, Inc. and its subsidiaries.
What all this is saying is that, since the agreement with the state of Michigan is with U.S. subsidiaries of Enbridge, Inc. (not Enbridge, Inc. itself), the only thing that would force Enbridge, Inc. to support any failure of Line 5 in Michigan would be the good will of the executives at Enbridge, Inc. deciding to support the cleanup and repair. (I believe the 2017 closure of the nursing home in Clearbrook, Enbridge’s Minnesota company town – just before Christmas no less, with absolutely no intervention by Enbridge, Inc. and their tremendous piles of money to save it, shows just how little they might care for the state of Minnesota as a whole.)
Based on the last historical publicly available financial information
on the Signatories, which is found
in the 2018 September 10-Q of Enbridge Energy Partners L.P., the Signatories did not have $1.878 billion
in liquid assets, credit facilities and insurance for the damages arising from
a rupture of Line 5.
Which means it is unlikely that Enbridge Energy, Limited
Partnership will have the financial capability to cover any damages posed by
Line 3 either, as they would require much more to cover liabilities for both
pipelines. And this leaves nothing for concerns
on any of the other pipelines currently under Enbridge management throughout
The liquid financial
resources of the Signatories based on September of 2018 10-Q information are
shown in Appendix C. We used September 2018 for this comparison of assets
between the Signatories and Enbridge Inc. because it is no longer possible to evaluate the financial resources of
Enbridge Energy Partners L.P. using publicly available information.
Partners, L.P. no longer produces its own financial statements for public
review. As described in the Enbridge, Inc. 2018 10-K, an unnamed wholly owned
subsidiary of Enbridge, Inc. purchased all of the stock of Enbridge Energy
Partners, L.P. at the end of 2018. At that point in time Enbridge Energy
Partners, L.P. became a wholly owned subsidiary of Enbridge, Inc. Because there
would be no further public trading in the stock of Enbridge Energy Partners,
L.P., the subsidiary no longer produces its own 10-K or 10-Q reports for the
U.S. Securities and Exchange Commission.
Since Michigan has no visibility to Enbridge Energy Partners, L.P. (EEPLP) financials, it will have to rely on another means to assure continued financial liability coverage for a spill on Line 5. Minnesota Pollution Control Agency (MPCA) indicates on its webpage for Line 3 that “Enbridge Energy, Limited Partnership” (EELP) has applied. Every search for this entity brings me back to EEPLP. I’ve got a call in to see if these are indeed one in the same but later in this report, it notes that all Signatories are U.S. based subsidiaries and both EELP and EEPLP are listed above.
We noted that in
October 2019, the assets of Enbridge,
Inc. were used in the Financial Assurance Verification Form supplied to the
State as required under the Second and Third Agreements. However, Enbridge, Inc. is not a party to the
1953 Easement or a Signatory to the subsequent Agreements. Based on the
testimony of Mr. Johnston, the
contribution of funds under an indemnity agreement made with a subsidiary would appear to be to be a purely voluntary
endeavor for Enbridge, Inc.And THERE IT IS! It would be VOLUNTARY for
Enbridge, Inc. to cover costs of a spill, but not legally required.
We did not evaluate
the cost recovery provisions in the environmental laws of the United States in
the light of foreign corporation status of Enbridge, Inc. for this report. [This
may be a future endeavor but would have likely make this document much longer
and exponentially more complex.]
Based on our research
for this report, we recommend
enhancing the indemnity obligations for the operators of Line 5 at the Straits.
To accomplish this goal, in summary we recommend:
1. Obtaining an indemnity obligation from
Enbridge, Inc., the Canadian based holding company of the Signatories to
the Second and Third Agreements.
2. Being more specific on the source of the information to be provided on the Financial
Assurance Verification Form, which was agreed to in the Second and Third
3. Requiring more specific types and amounts of
liability insurance on the dual pipelines, with the State named as an
Additional Insured on those policies. 5
4. Develop a pre-agreed upon process to
eliminate the loss exposure arising from Line 5 operation if the available prescribed assets of the Signatories dip below $1.878 billion U. S.
dollars at any point in the future.
5. Based on more
recent third-party projected cost studies, further
evaluate the adequacy of the $1.878 billion minimum level of financial
What this is proposing is to make Enbridge, Inc. legally liable for a Line 5 spill into the Straits of Mackinac, to assure that proper financial verification can be made of the protections offered by those liable to Michigan, and to assure liability coverage even if their assets lose value in the future. The level of need for cleanup is uncertain as estimates were (on the low end, from Enbridge) $300K to as high as $45B (yes, billion, from a Michigan State University study) – quite a range! More details to follow but we’re through the Summary!!! 🙂
Section II Our Scope of Work
ARMR.Net has been
directed to evaluate if Enbridge entities have the resources to pay up to
$1.878 billion for the costs and damages caused by a release of petroleum
products from the dual pipelines at the Straits of Mackinac.
To this end this
1. Evaluate the risk bearing capacity and
financial resources available to respond to, remediate, and pay
compensation for all damages that could result from a worst-case release of
petroleum products from Line 5 at the Straits of Mackinac and to satisfy the indemnification obligations
under the 1953 Easement and subsequent Agreements.
2. Evaluate the adequacy and reliability of
the Financial Assurance Verification Form provided by Enbridge business
entities to the State of Michigan in 2019 and, to make recommendations to
create a reliable and resilient Financial Assurance Verification Form,
including detailed insurance specifications.
3. Provide perspective on the scope, adequacy,
and dependability of the indemnity obligations assumed by the Grantee of the
4. Provide perspective on the projected
ability of Enbridge business entities to satisfy the indemnity agreement to the
State of Michigan over the next 7 to 10 years.
Basically, this will be a review of all the numbers. The work will show that Michigan currently lacks an agreement that will financially support a spill and the report will explain exactly how this can be remedied. I love item 3, which will question whether the original agreement was sufficient to cover a loss. But my favorite is item 4, where the report shines the light on Enbridge’s business untenable model.
Section III Findings
Our findings are:
1. Estimates on the
potential costs arising from a release of petroleum products from Line 5 at the
Straits range from an Enbridge supplied estimate of $300 million, to a $1.878
billion estimate from the Independent Risk Analysis for the Straits Pipeline
analysis, to a $45 billion estimate from a Michigan State University study on
the projected costs.
Our report does not
analyze the accuracy or reliability of the various potential cost estimates of
a petroleum product release from Line 5. However, the range of possible damage
costs arising from a release of petroleum products from Line 5 strikes us as
extremely broad, and $1.878 billion is on the low end of the possible range.
The higher range cost studies appear to have been prepared after the $1.878
billion financial assurance threshold amount was agreed to in the Second
Agreement. In light of the wide range of
possible damage costs in the various studies, we question the reliability of
the $1.878 billion risk funding target used for this study. But we offer no
opinion on the $1.878 billion being the right amount.
2. If Line 5 ruptured today, Enbridge, Inc. has the financial capacity to voluntarily pay up to $1.878 billion to fund an environmental clean-up and to compensate victims. However, based on the historical financial records, the U.S. based Signatories would not have enough resources to fund a loss event of this magnitude; without a voluntary financial bailout from the Canadian parent company.
3. With 275 operating
subsidiaries listed in the Enbridge, Inc.’s 2018 10-K report, the Enbridge corporate structure enables the
Canadian holding company Enbridge, Inc. to avoid liability for the U.S. based
subsidiary’s liabilities. The original Grantee of the 1953 Easement was
required to indemnify the State. All of
the Signatories to the 1953 Easement and the First, Second and Third
Agreements are U.S. companies.The State of Michigan is not contractually
indemnified by the Canadian company Enbridge, Inc.
In the absence of a
contractual indemnity from Enbridge, Inc. only
the assets of the obligated parties (The Signatories) should be used for the
completion of the Financial Assurance Verification Form.
The financial resources of the U.S. based Signatories are impossible to
verify using publicly available information because after 2018 these companies no longer file 10-K or 10-Q
financial statements. The Signatory
companies are 100% controlled subsidiaries of Enbridge, Inc. today.
Therefore, receiving an indemnity
obligation from Enbridge, Inc. is essential to facilitate objective
verification of the $1.878 billion of financial resources based on publicly
available financial reports.
4. The Financial
Assurance parameters agreed to in the Second and Third Agreements lack the
specificity to be accurate, reliable and easily verifiable by a third party.
Therefore, we recommend modifications to the metrics used in the 2018 Financial
Assurance Verification Form as shown in Appendix C.
5. The Enbridge business model is facing new
challenges that could affect the ability of the firm overtime to pay for
clean-up costs and other damages caused by a release of petroleum products
from Line 5 at the Straits.
Even among its peers
in the oil and gas business, Enbridge,
Inc. and its Subsidiaries face unique risks and challenges in their business
model which have the potential to adversely impact the risk bearing ability
of the firm over time.
These risks and challenges include:
To earn its profits, Enbridge transports
crude oil that is primarily extracted from tar sands in northern Alberta.
Crude oil extracted from tar sands (bitumen) has a unique set of environmental
issues not associated with other sources of crude oil. The extracted synthetic
crude oil is transported through thousands of miles of high-pressure pipelines,
some of those lines, like Line 5, are at the end of their useful life cycle and
need to be decommissioned or removed and replaced. Although Line 5 does not
transport tar sands derived crude oil, the overall business of Enbridge, Inc.
is heavily weighted to transporting tar sands derived products. The general financial well-being of
Enbridge, Inc. and therefore its ability to pay for the costs and damages
caused by petroleum releases through self-insurance is heavily dependent on the
market viability of tar sands oil.
To reach consumer markets, the Enbridge
lines run across land in the United States that is subject to American Indian
treaty rights. Resistance to the use of tar sands oil by nongovernment organizations
including Native Americans, is making maintaining and replacing old lines or
creating new routes for existing lines across lands subject to treaty rights
increasingly difficult for the company.
The U.S. demand for tar sands derived
crude oil is expected to decrease over time. Most of the historical sales
of tar sands derived oil has been to consumers in the United States. However, new forms of extracting oil, including
fracking, has created an excess supply of crude oil and natural gas in the
United States. Tar sands derived oil competes in a global market for crude oil.
Many producers of crude oil have lower production costs, have lower
transportation costs to bring crude oil to the market of end users and have a
smaller total carbon footprint per barrel than tar sands derived oil.
With the U.S. market saturated with local supply, the Enbridge, Inc. 2018 10-K references
future plans to supply crude oil to India and China. These countries are a
long distance from the tar sands of Alberta. The distance to these consumer
markets add transportation costs and
carbon footprint loading to tar sands derived crude oil that the competitors of Enbridge entities
do not have.
These risks and
challenges entwined within the Enbridge business model cannot be eliminated
through good management of its core business. We expect that over time these operational challenges in
the Enbridge business model will have an even greater impact on the financial
results of Enbridge entities in a carbon constrained world, which in our
opinion is likely. Although Enbridge, Inc. could self-insure a $1.878 billion
petroleum product clean-up in the Straits this year that does not mean the
company will be able to do so in the foreseeable future. Therefore, it will be necessary for the State of
Michigan to monitor the financial condition of the relevant Enbridge business
entities annually over the operational life of Line 5 through the Straits.
What all this says is that, while the costs of a spill are not clear, the ability of Enbridge, Inc. to cover these costs, now and over time, is questionable. In light of the fact that only the subsidiaries are currently legally liable, and their financials are no longer publicly available, revision of the financial reporting must be aligned to capture the proper data. This can be enhanced with insurance underwriting which will be discussed in more detail below.
But the most relevant portion of this to Stopping Line 3 in
Minnesota is bullet 5 which questions the viability of Enbridge’s business
model in light of our changing socio-economic and environmental situation here
on planet Earth.
1) Enbridge’s overwhelming reliance on Tar Sands shipments will hinder its financial well-being. This is due to multiple factors including: a) science dictates that Tar Sands must remain in the ground to assure future human habitation on planet Earth, b) the cost structure for this dirtiest of crudes makes it less attractive as oil prices drop, c) the social uprising against fossil fuels in general and Tar Sands in particular are pushing the end for extraction, especially in Alberta’s Tar Sands region. It should be noted that Line 5 is not restricted from carrying synthetics derived from Tar Sands, which carry their own inherent dangers and are allowed to transport on the line.
2) Enbridge’s current pipelines cross Treaty Territories in the U.S. bringing resistance and opposition from NGOs and Tribes as a) environmental dangers increase (The Line 5 lawsuit by the Bad River Band of Lake Superior Chippewa is a very example and a good read with lots of photos and explanation of the environmental risks of pipelines at river crossings), b) easements expire (Bad River Bad also is a reference for this as their easement expired in 2013, a fact that Enbridge has continued to ignore…), and c) Tribes invoke their sovereignty (Winona LaDuke speaks to a recent White Earth’s cease and desist to Enbridge regarding Line 3 work).
3) U.S. demand is decreasing while global demand still
rises. However, the insanity of trying
to compete against crude with Tar Sands crude is not cost-justified or
carbon-justified. And the prospect of
moving oil from Alberta, Canada east to China/India through the U.S. Midwest is
just plain nonsensical when the trip to the west is so much shorter.
“No amount of compensation is worth risking Wenji-Bimaadiziyaang – an Ojibwe word that literally means ‘From where we get life.’ It’s time to end the imminent threat the company is presenting to our people, our rivers, and Gichi-Gami [Lake Superior]”, Chairman Mike Wiggins said. Bad River turned down a $24 million offer from Enbridge in October. It appears that if a tribe takes money, (ie: says yes in consultation), Enbridge will bestow gifts. If “consultation” means “no”, Enbridge will sue the tribe. That seems fair, right? At some point No should actually mean No. Consultation is not the same as consent, and the human rights standard internationally is “free, prior and informed consent”. Simply stated, No means No, if you are a woman, or if you are a First Nation. Consent is the standard of this millennium.
Powerful statement regarding the value of money versus the value of water and the importance of consent.
Section IV Background Information on Enbridge Operations and The
Obligations To The State of Michigan
Enbridge, Inc. is one
of the largest firms in Canada. It has a complex corporate structure listing
275 operating subsidiaries in its 2018 10-K report to the U.S. Securities and
Enbridge, Inc. is a
profitable company, earning approximately $2.475 billion U.S. in profits and
generating $7.877 billion U.S. in cash in 2018. We will be using Canadian
dollars to U.S. dollars at a conversion rate of .75 for simplicity in this
The core business of
Enbridge is highly dependent on the market demand for tar sands derived oil. We
did note in conducting the research for this report that the future business forecasts for Enbridge
tend to focus on the future supply of tar sands derived oil with little or no
mention of the future demand for this source of fossil fuel.If demand for tar sands derived oil
decreases over time, the ability of Enbridge to self-insure for damages
resulting from a rupture of Line 5 would also decrease, potentially relatively
The History Of The
Indemnity Obligation In The 1953 Easement and, The First Agreement, Second
Agreement and Third Agreement (You can read this section in the report in
full but much of it is non-related to Line 3 in Minnesota. I’ve retained the
portions that felt most applicable or relevant.)
On April 23, 1953 the
State of Michigan and Lakehead Pipeline Company, Inc. (Lakehead) a subsidiary
of Enbridge, Inc. in Canada entered into an Easement that allowed Lakehead to
construct, lay and maintain pipelines over, through, under and upon certain
lake bottom lands for the purpose of transporting petroleum and other products.
Per the 1953 Easement,
in paragraph J., Lakehead agrees to indemnify and hold harmless the State of
Michigan “from all damage or losses caused to property (including property
belonging to or held in trust by the State of Michigan), or persons due to or
arising out of the operations or actions of Lakehead, its employees, servants
Within Paragraph J. of
the 1953 Easement, Lakehead agrees to the following relative items for this
1. Maintaining a
comprehensive bodily injury and property liability policy, bond or surety in
the amount of at $1,000,000, and
2. A surety bond in
the sum of $100,000 that is in force for the life of the agreement.
Both of these items
must be in place for as long as Lakehead and its successor companies operate
the pipelines and until the abandonment of the Dual Pipes installed across the
Straits is completed.
There have been multiple name changes, consolidations and mergers in
the Enbridge business operations over the years. Appendix A provides a Corporate Organizational Chart showing current
and historical Signatories to the Easement and subsequent Agreements. The
schematic also shows how profits and liabilities flow through the Enbridge
organizational structure. Typical of
corporate structures involving a parent company and subsidiaries, profits flow
upstream to the parent company and liabilities stay planted at the subsidiary
The Second Agreement
included a provision addressing Paragraph J. … To address the indemnity
requirements in the 1953 Easement the Enbridge Signatories agreed to provide
assurances that it had and would maintain $1.878 billion of liquid financial
assets to pay for an oil spill from Line 5.
It should be noted
that under the 1953 Easement there is no mention of using company
self-insurance, in lieu of liability insurance, a bond or surety to back up the
indemnity obligations in the lease. The $1.878 billion U.S. dollar threshold
amount was the estimated quantifiable damages from a most likely worst-case
scenario found by the Independent Risk Analysis for the Straits Pipelines.
Enbridge agreed to provide evidence of the minimum of $1.878 billion in liquid
assets to the State on a Financial Assurance Verification Form. See Section VI
of this report for a discussion on this form.
In the first Financial Assurance Verification Form supplied by Enbridge
representatives, the assets of Enbridge, Inc. were used to show that the
Signatories to the Agreement had liquid assets to meet the $1.878 billion threshold amount of financial resources as
set forth in the Second Agreement. As previously noted, Enbridge, Inc. is not obligated by contract to the State of Michigan to
contribute any money to an oil spill in the Straits of Mackinac.
The history of Line 5 in Michigan should be a warning to Minnesota. The bottom line is that U.S. Subsidiaries of Enbridge, Inc. are largely responsible for the liabilities of the pipelines in the state while all the profits go to the parent company, Enbridge, Inc., which remains legally free-and-clear based on the agreements with the state. Minnesota would do well to consider some of the recommendations in the remainder of this report, should Line 3 continue to proceed toward approval. The recommendations from Michigan should be considered as a part of the approval process for Line 3, not an afterthought to be dealt with once construction has started.
Section V Recommendations
1. The State of Michigan needs to obtain an
indemnity agreement from Enbridge, Inc. in Canada to pay for all costs and
damages associated with a potential rupture of Line 5. It is not
insignificant that Enbridge, Inc. is a foreign corporation based in Canada.
Money held in Canada may not be as accessible as assets held by a company in
the U.S. would be. We have not investigated or evaluated the complications that
Enbridge, Inc. being a foreign corporation may create in an indemnity agreement
with the State of Michigan.
2. The Financial Assurances Verification Form
with our recommended metrics should be evaluated by the State at least
annually, and should the Signatories fail to provide the required amount of
Financial Assurances at any point in time, a clear path to the elimination of
the hazard associated with operating Line 5 should be predetermined and agreed
upon. A recommended revised Financial Assurance Verification Form is
discussed in Section VI in this report and the evaluation metrics for
completing the Form are provided in Appendix C.
3. The recommended amounts and types of Liability Insurance including modern and verifiable insurance requirements are Shown in Section VII.
4. In light of the
more recent studies on the projected damages costs resulting from a rupture of
Line 5 at the Straits, the $1.878
billion financial assurance threshold requirement should be reevaluated.
In our opinion, $1.878
billion as the threshold amount for financial assurance appears based on the
available studies to be on the low end of the range of potential damage costs
resulting from a rupture of Line 5 under the Straits. There are economic impact
studies from 2018 concluding that the damages incurred from a rupture of Line 5
at the Straits could cost $45 billion including cleanup costs, natural
resources damages and economic damages. In
sharp contrast, Enbridge representatives estimated the clean-up cost of a Line
5 rupture at only $300 million, which represents a deviation in projected costs
of over 1300-fold at the $45 billion cost projection. We have not been
tasked with evaluating the reasonableness of the potential damage cost
estimates for a breach of Line 5 at the Straits of Mackinac, nor are we
qualified to do so. However, a 1300-fold differential between the high and low
cost estimates is too much of a range for a reliable risk financing planning
report. We have assumed $1.878 billion was the right number for our report but
have little confidence that is the right projected cost number given the wide
range of projected costs and where $1.878 billion falls within the range.
Again, all of these recommendations should be considered in
Minnesota as part of the Line 3 approval process. If necessary, Minnesota Attorney General
Keith Ellison can press for this same financial analysis and insurance review
prior to Line 3 approval.
Section VI Financial Assurance Verification Form
Paragraph J. in the 1953 Easement requires that the Enbridge
Signatories indemnify the State of Michigan and that the Signatories maintain
comprehensive general liability insurance, a bond or surety to back that
The 1953 Easement does
not mention the use of self-insurance to back up the indemnity obligation to
the State. The use of self-insurance was
agreed upon by the parties to the Second Agreement. In that Agreement, the
Signatories agreed to file with the State the Financial Assurance Verification
Form on an annual basis.
There is detail to the Enbridge financials provided – and to
be provided moving forward – in the appendices and detailed verbiage of the
report. What is to be kept in mind for Line 3 is a) what level of insurance
Minnesota will need (which should become more clear once the Supplemental
Environmental Impact Statement is released December 9, 2019 noting the impacts
to the Lake Superior watershed) and b) what legal indemnification Minnesota can
secure from Enbridge, Inc. for a potential spill.
Financial Assurance Verification Form Each Year
The financial assurances of the Signatories should be verified annually
from the information contained in audited financial statements. If Enbridge,
Inc. was a Signatory, the company’s 10-K report should be used to evaluate
compliance with the financial assurance requirements.
The evaluated criteria
in the Financial Assurance Verification Form are found in these areas of the
Enbridge, Inc. 10-K today:
1. Cash or equivalent
– Part 1, Section 1, Financial Statements: Consolidated Statement of Financial
2. Credit Facilities
(Available credit for the next 12 months) – Part 1, Section 1, Financial
Statements: Debt, Credit Facility
3. Accounts receivable
and other – Part 1, Section 1, Financial Statements: Consolidated Statement of
Financial Positions (accounts receivable and other)
4. Specified Insurance
– Specified insurance will be verified by referencing the Certificate of
Insurance that must be provided as shown in the recommended insurance
requirements in Appendix E.
If the Signatories are
not publicly traded in the U.S., an audited Statement of Financial Position for
the Signatory Enbridge company or companies could be used to prepare the
Financial Assurance Verification form.
The Property Plant and
Equipment Assets Are Not Useful Measures for Financial Assurance
Enbridge, Inc. does have assets owned by subsidiary companies in the
U.S. in the form of property, plant and equipment. These assets could
potentially be attached to satisfy a judgement against the firm. However, for
the reasons stated below, we have made no accounting of these fixed assets in
our evaluation of the ability of the Signatories to fund $1.878 billion in
losses as a result of a rupture of Line 5.
In our evaluation of
the financial resources available to the Enbridge Signatories to pay for oil
spills, we noted that generally accepted
accounting principles tend to overvalue pipeline assets and to undervalue the
environmental legacy liabilities of firms in the oil pipeline business. This
is especially true when a pipeline is not transporting oil to produce profits.
Pipeline assets like
other forms of fixed assets have a book value based on what was paid for the
pipeline, minus depreciation. In
contrast to most types of fixed assets, a pipeline permanently not pumping oil
has no value to anyone. In fact, the cash value of an idle pipeline can be less
than zero, if the costs to decommission or remove the idle pipes are taken into
account. Those kinds environmental
legacy costs for its U.S. subsidiaries are not being accounted for in
the Enbridge financial statements. This creates a situation where the book
value of a pipeline company’s assets is not reflective of their actual cash
market value. Cash and insurance proceeds are what is needed to pay for an oil
spill cleanup and other damages.
The future costs of removing idle pipelines from the ground are not immaterial and may be unavoidable new costs in the Enbridge business model in the near future. For example, in the negotiations over the replacement of Line 3 in Minnesota, the Public Utility Commission made the removal of the old Line 3 at the discretion of the landowners, a condition of the permit for the new Line 3. This is thanks, in part, to all us Water Protectors!!!
In another example of
pipeline removal costs, in a lawsuit filed by the Bad River Band of Chippewa in
Wisconsin, which is discussed further in Appendix J, the Band seeks the complete
removal of the existing Line 5 on their reservation.
The removal of pipes from the ground is expensive. Enbridge testimony in Minnesota on the
replacement of Enbridge Line 3 was that it costs on average $855 per foot to
remove pipelines from the ground14. At
$855 per foot it would cost approximately $23 billion to remove all the
Enbridge companies buried pipes in the U.S. alone. The $23 billion in potential
environmental legacy costs is not shown as a liability in the firm’s books, nor
is the firm required to do so by generally accepted accounting rules, or by the
U.S. regulations in effect on pipelines.
For these reasons, the value of property, plant and equipment,
as shown in the Consolidated Statements of Financial Position, 15 is not an accurate picture in time of the
firm’s ability to pay for environmental damages that it may cause as a
result of a rupture in Line 5. Therefore,
we have left the fixed assets of Enbridge businesses out of the Financial
Assurance Verification form.
Basically, your pipeline assets can’t be used to pay for a
pipeline spill. Additionally, they are
more of a liability than an asset as we move to a future that doesn’t include
Section VII Recommended Insurance
Insurance is an efficient financial mechanism to pay for otherwise
unaffordable loss events. One of the benefits of insurance from the State’s
perspective is liability insurance coverage survives the bankruptcy of the
named insured. In addition, the insurance underwriting process itself produces
a benefit for all the stakeholder’s in Line 5 by engaging global knowledge
sharing on the risks of pipelines through the international reinsurance
Pretty much speaks for itself. There is further clarification later on the
importance of the insurance underwriting process as a way to estimate risk.
Insurance Required In The 1953 Easement to Modern Insurance Coverage
liability insurance is a key component in the Financial Assurance Verification
Form. Ideally, 100% of the worst-case
loss exposure of Line 5 could be insured. However, there is likely not enough
liability insurance in the world to fund a $1.878 billion pollution loss
resulting from a rupture of Line 5.
Previous sworn testimony provided by Enbridge in Wisconsin and
Minnesota is that the firm purchases as much comprehensive general liability
insurance as it can in the world insurance marketplace. In the 2018 10-K report, that was $940,000,000 in general liability insurance.
We find this Enbridge testimony credible. Therefore, liability insurance with coverage for pollution releases from Line
5 can only supplement the other sources
of funds available to Enbridge entities to meet the agreed upon $1.878 billion financial assurance amount.
The scope of the recommended liability insurances and the annual
verification process of that insurance by the State during the operation of
Line 5 is addressed within the insurance recommendations in Appendix E. The recommended insurance requirements in
Appendix E take into account the 1953 Easement language requiring comprehensive
general liability insurance, and the general liability insurance that Enbridge
has testified in recent court proceedings that it carries today.
insurance requirements also encompass modern methods to verify the types and
amounts of liability insurance that Enbridge carries.
Enbridge has provided testimony in Wisconsin and Minnesota that the
information contained within the company’s insurance policies is a trade
secret. We respect that Enbridge would want to keep its trade secrets out of
the public eye and have accommodated Enbridge on this point in the insurance
recommendations. In place of an annual review of its actual insurance policies,
we recommend that the prescribed Certificate of Insurance as shown in Appendix
E be used to evidence the liability insurance carried by Enbridge, Inc. Providing a Certificate of Insurance to
interested parties is the customary way that evidence of insurance is provided
by businesses. The prescribed
Certificate of Insurance is designed to make the compliance with the insurance
requirements easy for the State to verify.
The Requirement for
Comprehensive General Liability Insurance In The 1953 Easement
The 1953 Easement
makes a specific (reference) to comprehensive general liability insurance. In
1953 “comprehensive” general liability insurance in the U. S. and Canada was
not referring to a specific insurance industry standard policy form. Also in
1953 there was no reference to coverage for pollution as a cause of loss in the
common general liability insurance policies sold to businesses in that time
frame. Pollution exclusions and exceptions to pollution exclusions in general
liability insurance policies developed decades later in the insurance business.
The title of “comprehensive” general liability insurance and having
coverage for pollution liability took on a specific meaning in 1973. In that year the Insurance Services Offices
(ISO), the largest standard policy form setting organization in the U.S.,
created the ISO Comprehensive General Liability insurance policy form as the
new industry standard general liability insurance policy.
In addition to a new
official name for the policy, there were a number of changes in coverage that
were incorporated into Comprehensive General Liability policy form. One the most significant changes to the
industry standard Comprehensive General Liability policy was a new exclusion
for losses arising from the release or escape of pollutants was added to
the policy. The pollution exclusion in the policy had an exception built into
it, the exclusion would not apply if the
release or escape of pollutants was sudden and accidental.
In 1973 for the first
time in history, Comprehensive General Liability insurance with coverage for
sudden and accidental pollution liability took on specific meaning in the
The scope of Enbridge, Inc.’s general liability insurance coverage for
sudden and accidental pollution liability was the subject of legal proceedings
in multiple Wisconsin courts for over three years. A core issue in these legal proceedings was does Enbridge carry
general liability insurance that meets Wisconsin Statute 59.70 (25). This
statute prohibits a county in Wisconsin from requiring additional insurance on
an interstate pipeline if the pipeline company carries the requisite insurance
as specified in the statute.
The Wisconsin statute
LIQUID PIPELINES. A county may not require an operator of an interstate
hazardous liquid pipeline to obtain insurance if the pipeline operating company
carries comprehensive general liability insurance coverage that includes
coverage for sudden and accidental pollution liability.” (emphasis added)
The underlined part of
this statute is an exact match to the ISO Comprehensive General Liability
insurance policy in both name and scope of coverage for sudden and accidental
pollution liability. This is the only industry standard general liability
insurance policy that provides an exact match to the Wisconsin statute.
After more than three years in multiple Wisconsin courts, on June 27, 2019, based on the sworn
testimony of Enbridge representatives that the company carries liability
insurance that meets the requirements of this statute, the Wisconsin Supreme Court ruled that Enbridge carries the insurance
specified in Wisconsin Statute 59.70 (25).
To avoid years of potential litigation in Michigan courts over the
scope of Enbridge’s trade secret comprehensive general liability insurance
coverage, the recommended insurance requirements for Line 5 as shown in
Appendix E specifically mirror the scope of insurance coverage required in
Wisconsin Statute 59.70 (25).
The remainder of this section gives further insight to Comprehensive
General Liability insurance and its coverage.
While I retained the detail in the top portion of this section, you can
refer to the report for those additional details. I felt the reference to “trade secret”
insurance, which has been a concern regarding Line 3, was critical. Though I have not researched the MN
requirements, there is likely more to be learned from Wisconsin as we proceed
with a review of the Line 3 application.
It is common practice
for large companies like Enbridge to purchase insurance policies that cover all
of the company’s operations. This practice introduces the possibility that a loss in Canada for example could exhaust
the available insurance coverage for a subsequent loss at Line 5. The
recommended insurance requirements anticipate this contingency.
We recommend that Enbridge, Inc. must at all times maintain a minimum
of $300,000,000 of recoverable insurance limits including coverage for sudden
and accidental pollution releases arising from Line 5 at the Straits. Within
that $300,000,000 of liability insurance at least $25,000,000 must be in the
form of Environmental Impairment Liability insurance. Enbridge, Inc. may use a combination of ISO
Comprehensive General Liability with sudden and accidental pollution liability
and Environmental Impairment Liability insurance coverage to meet the insurance
requirements set forth in Appendix F. The $300,000,000 of recoverable insurance
limits can be specific to Line 5 at the Straights.
Ideally, we would require $1.878 billion in Environmental Impairment
Liability insurance to cover a
rupture in Line 5 and not be dependent upon a General Liability insurance
policy that excludes pollution unless the pollution event is sudden and
accidental, or relying on self-insurance in any way to back up an indemnity
obligation to the State. However, the
global insurance marketplace for genuine environmental insurance does not have
$1.878 billion in capacity. Our recent survey of the insurance marketplace
for genuine Environmental Impairment Liability insurance showed market capacity
was just over $400,000,000 in potential limits of liability. Not all of that
environmental liability insurance would be available for purchase on a crude
oil pipeline. The recommended insurance
requirements reflect the practical constraints in the global insurance business
and are designed to be achievable.
So what this says is that there is NO WAY for Enbridge to buy liability insurance for the total cost of a spill that would exceed the $400M limit of available liability insurance worldwide. Thus, the recommendations request a level of insurance that is achievable, not what is truly needed. 😦
Impairment Liability Insurance Is Required in Addition to Comprehensive General
Impairment Liability insurance fills the coverage gaps created by pollution
exclusions in general liability insurance policies.
[Again, this verbiage is a bit of extra but it is highly
informative of the history of this kind of insurance. And, it is key to understanding how Minnesota
will need to work to protect itself from being left holding the bag for an
The general liability
insurance policies sold in 1953 did not contain pollution exclusions.
Therefore, any general liability insurance policy that has a pollution
exclusion of any type would not fulfill the minimum insurance requirements in
the 1953 Easement calling for “comprehensive general liability”.
Since the early 1970’s, virtually all general liability insurance
policies in North America, including Canada, have contained pollution
exclusions.Therefore, to meet an insurance specification written in 1953 for
general liability insurance on a pipeline which would have been silent on
pollution as a cause of loss, it is necessary to purchase Environmental
Impairment Liability (EIL) insurance to fill the coverage gap created by the
pollution exclusion in all general liability insurance policies sold today.
Even the ISO Comprehensive General Liability insurance policy has a pollution
exclusion as previously discussed.
insurance requirements shown in Appendix E. include a specification for
$25,000,000 of Environmental Impairment Liability (EIL) insurance on Line 5.
According to the Consumer Price Index, the present value of $1,000,000 in 1953
is $23,000,000 today. We recommended $25,000,000 Environmental Impairment
Liability to match the insurance industry custom of increasing insurance limits
in $5,000,000 increments.
Since the Comprehensive General Liability insurance that Enbridge
carries today has a pollution exclusion, technically the EIL coverage limits
should match the general liability policy limits if the exact terms of the 1953
Easement were followed. We have not recommended this approach in the insurance
requirements because such a requirement would be impossible to comply with.
It should be noted that the $1,000,000 limit of liability in the 1953 Easement insurance requirement was intended to set the minimum amount of required insurance. The idea behind requiring Comprehensive General Liability insurance in the Easement was to back the indemnity obligations of the Signatories.The stakeholders in the Second Agreement have acknowledged that the loss exposure from Line 5 is much greater than $25,000,000.
Again, this seems highly concerning to me that Enbridge will
be unable to secure enough insurance to guarantee that Minnesota taxpayers will
not be left with a bill for cleanup should a spill arise on Line 3.
The Advantages Of
The requirement for actual insurance which is not self-insurance in the 1953 Easement should not be overlooked. A requirement for some amount of purchased insurance versus self-insurance insurance, which is allowed for in the Second Agreement, will enable the State to receive real time feed-back on if the global insurance market thinks Line 5 is insurable or not. The insurability of the line will serve as “the canary in the coal mine” risk indicator for the State. [THIS IS CRITICAL.]
The Environmental Impairment Liability insurance requirement acts as a
form of expert independent third party risk evaluation. If Line 5 is low risk,
Enbridge should have ready access to environmental insurance that is relatively
low cost from a insurance market place with over $400 million in limits of
liability capacity. If Enbridge is unable to purchase this relatively low
amounts of Environmental Impairment Liability insurance, that situation would
provide an early warning sign to the State of Michigan that professional risk
evaluators (insurance underwriters) feel that Line 5 at the Straits is too
risky to insure.
Another early warning is provided by requiring the State to receive 60
days’ Notice of Cancellation or Non-Renewal on the Comprehensive General Liability and Environmental Impairment
Liability policies. If an insurance policy is cancelled or nonrenewed in the
future, the State will get an early warning that the underwriters have changed
their minds about the insurability of Line 5 at the Straits.
By requiring that the State
of Michigan be an Additional Insured under the liability insurances on Line 5,
the State of Michigan gains the additional benefit of having direct access to
very broad and reliable insurance coverage for pollution damages arising from
Minnesota would do well to also incorporate similar
requirements for Enbridge regarding Line 3, which will pose significantly higher
risks than Line 5 in that it would transport Tar Sands (more corrosive to the
pipe as evidenced by failure after failure of newer Tar Sands pipelines in the
U.S. with Keystone already failing 4 times in less than a decade) through
wetlands (the most dangerous place for a Tar Sands pipeline, especially with
regard to cleanup).
Section VIII The Long Term View On The Operation of Line 5
This could be my favorite part of the
report… J And it pretty much speaks for itself.
This section of the report discusses some of the business challenges
that Enbridge business entities will face during the foreseeable future of Line 5 at the Straits. These challenges
in what could be a relatively short period of time have the potential to
undermine the ability of Enbridge to pay through self-insurance the costs
associated with a release of petroleum products from Line 5.
Changes in social norms and a heightened awareness of the human impact
on the planet is affecting the Enbridge business model in profound ways that
the company has not had to deal with in the past. For example, in two permit
applications that would have been routine for Enbridge 10 to 20 years ago;
one was a building permit to add a pumping station to an existing pipeline, and
one was a permit to replace an existing line; Enbridge had to fight local resistance to the Enbridge development
plans all the way to the State Supreme Courts in Wisconsin and Minnesota.When routine business maintenance matters
require the State Supreme Court to resolve disputes with neighbors, the
writing is on the wall that there are
fundamental challenges to the old business model of Enbridge company’s
The Coal industry’s experience with challenges to its core business value proposition illustrates what the impact of changing
environmental awareness and concerns in the general population can do across an
entire segment of the energy economy. Coal as a source of fossil fuel is
relatively dirty compared to natural gas. Natural gas is in over supply in the
U.S., it costs little to produce, and it is relatively cheap to transport and
use. Coal does not compete well against natural gas over pollution concerns,
its carbon footprint or on cost. After
over a 100 years of robust business, furnishing most of the energy needs in the
US, “Approximately 44% of U.S. coal now comes from companies that have declared
bankruptcy sometime in the last four years.”All fossil fuel-based companies will be subject to the same economic
pressures over time as society moves to reduce the greenhouse footprint of
energy sources and gravitate to use relatively clean sources of energy.
In the spectrum of
potential crude oil supplies, tar sands
derived crude oil displays some common traits with coal. The profits of
Enbridge are closely tied to the consumption of tar sands derived crude oil
which has unusually high environmental impacts relative to other sources of fossil
fuels. Therefore, the robust business
results of Enbridge in the past and therefore the firm’s ability to self-insure
environmental risks may not endure indefinitely into the future.
The Enbridge Business Model Incorporates Systemic Risks Which Cannot Be
Some of the challenges
to the Enbridge business model are detailed below:
1. The risk of a rupture of Line 5 at the
Straits is in an extremely high consequence location for an inland oil
pipeline with potential damage costs well in excess of all available funding
sources for Enbridge entities.
2. The relatively high carbon loading
associated with tar sands derived crude oil and the corresponding work of
environmentalists to completely eliminate the use of tar sands derived oil as a
fossil fuel source is already having impacts on the operations of Enbridge,
Inc. As a source of fossil fuel, tar sands derived oil is relatively
inefficient on a total carbon footprint basis. This is because it takes a
relatively high amount of fossil fuel derived energy to heat the water, to
produce the steam needed, to produce a gallon of tar sands derived crude oil,
to put into the pipeline. For this reason, people
concerned about the greenhouse effect of carbon dioxide are mobilizing in
increasing numbers to completely eliminate tar sands oil consumption.
Appendix H illustrates an activist group chartering buses to protest
the Enbridge pipeline terminal in Duluth, Minnesota. Michigan is mentioned in the announcement. These activities by forward thinking environmentalist
will make it more difficult for Enbridge to earn money trading in and
transporting tar sands oil in the future.
3. The relative distance to end users of the
petroleum products that Enbridge transports is not competitive on a cost basis
to other sources of crude oil closer to the end users. The Enbridge, Inc.
2018 10-K mentions that demand from India and China will lead to future demand
for the services of Enbridge. We have no expertise in oil markets, but shipping relatively expensive tar sands
derived crude oil on ships to India and China does not make sense to us.Both countries are heavily focused on
renewable energy sources, they are both a great distance from northern Alberta,
and there are ample supplies of crude oil that cost much less to get out of the
ground closer to India and China.
The shortest route to China from Alberta is through British Columbia.
However, Enbridge lines do not run west, nor is it likely that Enbridge will
ever be able to build a new line to the west of Alberta to ship product for the
The existing Trans
Mountain Pipeline which does run west from the tar sands was built in 1953,
extending 715 miles from Alberta across the Rocky Mountains to Vancouver,
British Columbia. It carries 300,000 barrels per day.
The proposed expansion plan for the existing Trans Mountain Pipeline to
ship tar sands derived oil to the west was opposed by 59 Canadian tribes and
First Nations, and 22 local governments in British Columbia. The First Nations
undertook several lawsuits in opposition to the expansion. At the same time the
collapse in global oil prices in 2014 made it unlikely that earlier projections
of tar sands oil production would any longer come to fruition. Kinder Morgan,
the lead investor, confirmed the project may be “untenable”. In 2018, in efforts to overcome the financial
and legal challenges to the expansion, the Canadian government had to step in
to finance the expansion project.
Considering the difficulties encountered in expanding an existing pipeline
to carry tar sands oil to the west, it does not appear as if Enbridge could
build a new pipeline of its own. Without an Enbridge pipeline to the west, the
only way Enbridge will be transporting oil for the China market is through U.S.
ports to the South and East.
Looking at a globe, moving oil to the south and east of Alberta is not the most
direct way to move product to China. Transporting
oil thousands of additional miles to reach end users adds hard dollar and
potential carbon footprint costs to the tar sands oil that the competitors of
Enbridge oil supplies would not have. Therefore, the viability of the business
expansion plans to ship tar sands derived oil to China are questionable in our
India as a consumer of tar sands oil from Alberta also does not make a lot of sense to us. Oil from the middle east requires about half the production cost of tar sands oil, and middle east oil has the potential to be in over supply when the producing countries want it to be. Middle east oil is also much closer to the end users in India than the northern Alberta tar sands.
4. Other sources of crude oil have a lower
cost of production. Using steam to extract the oil from sand adds costs to
produce a barrel of tar sands derived crude oil. As shown in Appendix I, tar
sands oil has a relatively high cost of production when compared to alternative
sources of crude oil. If the market
price of crude oil dips below $44 a barrel for an extended period of time, the
supply of tar sands derived oil would be expected to decrease, adversely
affecting Enbridge’s revenues and profits.
5. The extractive process for tar sands oil in
Alberta is basically surface mining, which has extreme and long lived local
environmental impacts on the land. This is another reason that
environmentalists thousands of miles away seek to totally eliminate the use of
tar sands derived oil products.
6. Indian Treaty Rights including eviction actions for Line 5 at the Bad
River Indian Reservation in Wisconsin, as discussed in Appendix J of this
report, illustrates how quickly contemporary treaty rights can alter a business
plan for Enbridge.
The major feeder pipelines from Canada cross into the United States
into lands that are subject to treaties formed in the 1800’s. These treaties
give Native Americans certain rights to the lands. In more contemporary times,
various Native American Bands in the United States have perfected those rights
in court. As a result of the precedent and evolving case law on Treaty Rights,
Enbridge faces legal challenges in the U. S. as the firm attempts to replace
pipelines that were installed more than 50 years ago across land that is
subject to treaties with Native Americans.
The right of ways and
easements used by Enbridge to access U.S. markets and international shipping
ports are being challenged by Native Americans in yet untested legal theories
regarding treaty rights. Treaty rights
established in courts over the past 20 years have the potential to severely
restrict the ability of Enbridge to move product and therefore earn revenues in
a relatively short period of time.
Of particular importance for this report, if Line 5 is shut down at the
Bad River Reservation in Wisconsin as further discussed below, unless and until
Enbridge is able to re-route Line 5 around the reservation there will be no
throughput of oil in Line 5 in Michigan including at the Straits of Mackinac.
In our opinion, the
10-K financial reports of Enbridge, Inc.
tend to downplay the potential effects of Treaty Rights on its business model.
For example, Enbridge comments on its replacement for Line 3 on page 73 of the
“United States Line 3
The MNPUC approved the
Certificate and Route Permit and denied petitions to reconsider the decisions.
All related Certificate conditions have been finalized and are being addressed.
In addition, agreement was reached with the Fond du Lac Band of Lake Superior
Chippewa granting a new 20 year easement for the entire Mainline including the
Line 3 Replacement Project through their Reservation. The remaining permit
applications have been submitted to the various federal and state agencies,
including the United States Army Corps of Engineers (Army Corps), the Minnesota
Department of Natural Resources, the Minnesota Pollution Control Agency and
other local government agencies in Minnesota.
We anticipate that the agencies will process all of these applications
in the coming months, and with timely approvals continue to expect an
in-service date for the project before the end of 2019.”
From this project update, which was not untrue when it was written just
ten months ago, a reader of the 2018 10-K would conclude the replacement of
Line 3 would be coming on-line shortly. [BUT IT IS NOT!!! We have successfully stopped Enbridge’s New
Line 3 from becoming a reality in 2019!!!
However, the reality is the permit for the replacement Line 3 was
appealed at the Minnesota Supreme Court. There were also two other actions
opposing Line 3 filed at the Minnesota court of appeals, one of the appeals had
been made by the Minnesota Department of Commerce. The emergence of three
appeals after the PUC approval paints a different picture of the Line 3
replacement permitting process than what is expressed in the 10-K from just 10
In another example of a disclosed risk in the 2018 10-K that does not
fully reflect the developing reality 10 months later, the 2018 10-K discusses a
dispute between the Bad River Band of Chippewa.
“On January 4, 2017,
the Tribal Council of the Bad River Band of Lake Superior Tribe of Chippewa
Indians (the Band) issued a press release indicating that the Band had passed a
resolution not to renew its interest in certain Line 5 easements through the
Bad River Reservation. Line 5 is included within our mainline system. The
Band’s resolution calls for decommissioning and removal of the pipeline from
all Bad River tribal lands and watershed and could impact our ability to
operate the pipeline on the Reservation. Since the Band passed the resolution,
the parties have agreed to ongoing discussions with the objective of
understanding and resolving the Band’s concerns on a long-term basis.”
In their lawsuit, The
Bad River Indian Band in Wisconsin alleges that Enbridge Line 5 since 2013 has been trespassing on its reservation
property. If the lawsuit is successful, not only would Enbridge forgo the
revenues derived by shipping petroleum products in Line 5, the cost to remove just 10 miles of existing Line 5 pipe within the
reservations could cost $855 per foot or $45,000,000.
The 10-month-old Enbridge, Inc. 10-K report does not reflect the
potential removal costs or the gravity of the eviction lawsuit at the Bad River
In its report to shareholders Enbridge says it may need to reroute Line
5 around the reservation. It does not mention how difficult that can be. Based
on the Enbridge experience in permitting a new Line 3 through Indian treaty
rights-controlled territories in Minnesota, getting a replacement route for
Line 5 will not be as easy as it was 50 years ago.
In general, in case you’re only reading the non-italicized
portions… Enbridge operates under a business model that 1) fails to account for
the tremendous costs of spills, 2) dismisses the carbon budget of the planet
that will allow continued human habitation and the ensuing societal uprising
that speaks to this concern, 3) insanely thinks their almost-all-the-way-around-the-world
shipment of oil to India and China is going to be more attractive that more
local, less energy intensive, and cheaper fossil fuels available, 4) fails to
see the high production costs of their product as a liability, 5) ignores the environmental
degradation of the Tar Sands which are quick becoming globally recognized, and
6) fails to address the Treaty Rights of Native Peoples and the potential for
these rights to shut down their pipelines.
Along with over-valuing their assets (which are pretty much worthless for anything other than shipping oil) and their ability to secure insurance for spills (especially as the new Tar Sands pipelines are showing new materials, specifications, and technologies DO NOT eliminate them…), Enbridge is facing a recipe for disaster and possible quick bankruptcy in the right circumstances. And these circumstances seem to become more real every day.
Indigenous fights for Treaty Rights are on the rise. Societal uprisings in civil disobedience fighting pipelines and fossil fuels in general are in the news on a daily. As the government and corporations seem unable to heed the warnings of science, we see more and more calls for a rapid redress of the climate catastrophe. All this, along with a movement for a clean, green energy future, spells out that Enbridge is in a dying industry. It’s just a matter of time… and it’s more imminent each day.
Section IX Qualifications of the Author
This for sure gets left in as I am AMAZED by the work David has done in this report. 🙂
This report has been authored by David J. Dybdahl, CIC, CPCU, ARM, MBA with the help of researchers.
Mr. Dybdahl has
extensive experience in environmental risk management and insurance. He holds a
bachelor’s and a master’s degree in risk management and insurance from the
University of Wisconsin Madison, where he has been a guest lecturer on
environmental risk management and insurance topics for over 35 consecutive
He has authored the
chapters on environment insurance and risk management in over 30 insurance text
books including the chapter on Environmental Insurance in the Chartered
Property and Casualty Underwriter (CPCU) 4, Commercial Liability, Risk Management
and Insurance textbook, and authored and edited the chapters
“Environmental Loss Control” in the Associate in Risk Management
(ARM) textbook and the chapter on environmental claims in the Associate in
Claims textbook. His Curriculum Vitae is attached in Appendix D.
Mr. Dybdahl’s past
consulting work includes advising and providing technical information on
environmental insurance to the U.S. Department of Defense, the U.S.
Environmental Protection Agency, the U.S. Department of Justice and the U.S.
Department of Energy. Directly related to this work for The State of Michigan,
he was the author of An Insurance and Risk Management Report on the Proposed
Enbridge Pumping Station which was prepared for The Dane County Zoning and Land
Regulation Committee and submitted for review on April 8, 2015 and he prepared
in 2018 the Risk Financing and Insurance report on the replacement of Enbridge
Line 3 for the Department of Commerce in the State of Minnesota. Many of the
risk and insurance topics associated with Enbridge Line 61 in Dane County and
Line 3 in Minnesota parallel the risks and insurance topics associated with
Line 5 in Michigan.
Mr. Dybdahl has served
as an expert witness in both state and federal courts on over two billion
dollars in litigated and arbitrated insurance coverage cases involving mostly
environmental damage losses. In his
profession as an insurance broker, he has placed thousands of environmental
insurance policies into the global insurance marketplace. These environmental
insurance policies insured risks ranging from mold in a single-family home, to
the clean-up operations of the Chernobyl nuclear disaster in the Ukraine for
the World Bank in London. He has worked with environmental insurance
products on a day to day basis for over 35 years.
Thank you, David!!! And your find team of researchers as well. 🙂 You have given me added hope that we will yet DEFEAT LINE 3!!!
Note: Updates 11-13-19 include Line 3 requirements for Enbridge, Inc. in the PUC Orders, why insurance is less about protecting us and more about protecting Enbridge (since they can pass on costs to customers), and clarification about what Line 5 can transport (which includes tar sands derivatives).