In the July 2024 issue of Wiley Journal Climate and Energy, Senior Managing Director Jeff D. Makholm and Director Laura T.W. Olive explore the complexities of the energy market between the United States and Canada, focusing on the Enbridge Line 5 pipeline. For more than a century, the US and Canada have worked through challenges to develop an integrated North American energy market. Major energy infrastructure projects—pipelines and electric transmission lines—and an institutional ecosystem to foster the competitive development of resources mean that energy trade between the countries remains essential. Recent legal woes related to the Enbridge Line 5 strain that relationship.
Enbridge Line 5 currently faces two major legal challenges to its continued operation. The first relates to 12 expired easements to cross the Bad River Band Reservation in Northern Wisconsin. The second is a challenge to its crossing of the Straits of Mackinac.
Enbridge’s problems in its Line 5 right-of-way in Wisconsin concern a US District Court ruling that Enbridge trespassed on expired easements in the Bad River region. The court asked the parties to collaborate on a plan to ensure Line 5’s safe, continued operation until Enbridge can reroute the pipeline—within three years. The court also awarded the Band $5.2 million in trespass damages based on the share of profit (since 2013) attributable to the Band’s easement ownership for the duration of that trespass (Dr. Olive served as a witness for Enbridge in that case, supporting the award). In a brief related to that dispute, the US Department of Justice (DOJ) described the amount as “extreme discounting” in relation to Enbridge’s over $1 billion of Line 5 earnings for the trespass period of the expired easements. The authors note the DOJ opinion on “extreme discounting” is inconsistent with the principal economic feature of pipelines: crossing lands of potentially many owners to deal with the geography necessary to make a useful petroleum industry.
The Straits of Mackinac crossing involves troubling historical and treaty issues. Spurred by the state’s concerns about the impact of a leak in Line 5 in the Straits, Michigan and Enbridge developed a plan to construct a tunnel for the pipeline to contain any potential oil spills—a plan approved by Michigan’s regulator. But Michigan Governor Gretchen Whitmer revoked Enbridge’s easement in November 2020, raising treaty concerns from Canada. As Canada’s first major 1950s oil pipeline system, there was essentially no other practical route from Canada’s major Alberta oil fields to its industrial region in southern Ontario. Seventy years later, there is no practical replacement for Canada’s petroleum industry, the source of the country’s greatest exports. It is only a function of sheer historical and political chance that a single state brackets the Straits of Mackinac waterway and that the spanning of that waterway by pipeline is of such economic consequence to Canada.
The authors explain that the US and Canada operate more than three-quarters of the world’s oil and natural gas pipelines—a highly unusual dominance in such an important industry. And yet, pipeline transportation is manifestly a difficult industry to assess, even for the two countries that operate more pipelines than any other. The authors suggest the problems for Line 5 represent such difficulties which these drawn-out court cases show. The solution to each requires a broad, interdisciplinary, and historical focus.
Makholm, Jeff D. and Olive, Laura T.W. (July 2024). “Troubles with Seven Decades of Canadian/United States Oil Trade,” Climate and Energy, Vol. 40, No. 12, ©2024 Wiley Periodicals, Inc., a Wiley Company.
