Enbridge Pipeline Delayed a Year in Hit to Canadian Oil Industry

(Bloomberg) -- In a major blow to the Canadian oil industry, Enbridge Inc. now expects the replacement and expansion of its Line 3 crude oil pipeline to be in service about a year later than expected.

The project, previously slated to start shipping crude in the fourth quarter of this year, is now expected to enter service in the second half of 2020, the Calgary-based company said Friday. Construction is being pushed back because the Minnesota permitting process won’t be complete until November, and the federal permits won’t be received until as long as 60 days after that.

The delay is a crushing setback for Canadian oil producers, who have suffered from a lack of pipeline space that has made it difficult to ship their crude to refineries, hammering prices. Enbridge’s Line 3 is particularly important because the government of the oil-rich province of Alberta was counting on its startup this year to let it end mandated production cuts that were implemented to cope with a glut of crude.

The postponement of the C$9 billion ($6.8 billion) Line 3 expansion, which would add 370,000 barrels of daily shipping capacity, is the latest in a string of canceled or stalled projects that have plagued the Canadian energy industry. TransCanada Corp.’s Keystone XL has been on the drawing board for more than a decade amid environmental and landowner opposition. The Trans Mountain expansion, which Canada’s government bought from Kinder Morgan Inc. to save it from cancellation, has been stalled amid legal challenges.

The industry also has been hit in recent years by the cancellation of TransCanada’s Energy East pipeline and the Canadian government’s rejection of Enbridge’s proposed Northern Gateway conduit.

The replacement and expansion of Line 3 would help ship more crude along a 1,031-mile (1,659-kilometer) route from the Alberta oil hub of Hardisty to Superior, Wisconsin. Construction is already finished in Wisconsin and largely completed elsewhere along the route. Enbridge said as recently as Feb. 15 that it expected to bring the project into service this year.

To contact the reporter on this story: Kevin Orland in Calgary at korland@bloomberg.net

To contact the editors responsible for this story: Simon Casey at scasey4@bloomberg.net, Virginia Van Natta, James Ludden

©2019 Bloomberg L.P.