INSIGHT: Great Lakes Face Continuing Threat From Pipeline

Michiganders—and all those who depend on the clean waters of the Great Lakes—should be deeply worried about the current effort by Canadian energy company Enbridge to get approval for a new tunnel under the Straits of Mackinac to house their ailing Line 5 pipeline.

With more than one million gallons of oil and other products pumping through Line 5 every hour, a spill would be catastrophic for the Straits, be simultaneously drawn into Lakes Michigan and Huron—and result in billions of dollars in damages, foul drinking water for millions, and kill an untold amount of wildlife, permanently scarring their habitats. Unique to Line 5 is the submarine section under the Straits which was a first of its kind when it was constructed in the 1950s.

As it has been for decades, Enbridge’s core business model is fairly simple: transport fossil fuels from source to refinery. In that process, Michigan and the Great Lakes are mostly a shortcut from Canadian source to Canadian destination. Today, Enbridge, through numerous acquisitions, has assembled the largest network of vintage (constructed prior to 1970) pipelines in North America.

At the same time, the proven flaws and dramatic consequences of a Line 5 failure are well documented. At 67-years-old, and directly exposed to the powerful currents in the Straits, Enbridge’s safety-focused rhetoric sounds promising—at least on its face.

Enbridge Can’t Responsibly Pursue Project

Battered by the recent falloff in demand and price for oil and natural gas, coupled with a growing list of committed projects and liabilities, Enbridge is in no shape to responsibly pursue this project. To date, conservative estimates put the tunnel’s cost at half a billion dollars, and that’s a floor not a ceiling. Enbridge’s jumbled application to Michigan regulatory authorities for this tunnel, which omitted a number of important details has been initially turned down. As a result, it is clear that Enbridge is ill-prepared to carry out their tunnel plan.

Already grossly overextended with $70 billion of on-balance sheet debt, plus more that lives elsewhere, the prospects for near-term recovery in the energy sector are scant. Enbridge also reported that as of Dec. 31, 2019, the company has $19 billion in committed capital projects—not including the Line 5 tunnel—and that its board of directors is committed to growing shareholder dividends at 10% per annum.

In addition, Enbridge’s liability and regulatory expenses, including from its Line 6B rupture in 2010, which was one of the worst inland oil spills in U.S. history, have to be factored into the company’s ability to sustainably fund this project.

Enbridge Won’t Promise to Protect Michigan

Enbridge has also been cagey about any promise to fully bond the project to protect Michigan and its citizens. In order to be even minimally appropriate, such bonding will need to fully cover the completion of the project (which could take as long as a decade) so that the state is not left holding an expensive bag if the tunnel is not finished.

In addition, Enbridge should be required to carry insurance adequate to pay for any damage done to the Great Lakes shorelines (not just in Michigan) in the event of a Line 5 rupture. Given the state-issued easement Enbridge enjoys in the Straits, construction on public lands and below public waters such bonding is entirely prudent.

From a simple design perspective, it is also important to ask why Enbridge has doubled the tunnel’s diameter in its latest description? To date, the company has not provided any rationale for this expansion which deserves a full explanation as part of any formal submission. By way of background, the lame-duck approval of former Michigan Gov. Rick Snyder (R) of a pact with Enbridge enabled a laissez-faire approach—as made clear by the fact that it is non-binding, lacks an enforceable timeline, and gave this green light without the normal and customary professional engineering, design, or safety studies.

Taken together, it is apparent that the current tunnel proposal is a stall tactic to avoid any changes in the status quo—and thereby allow Line 5 to continue to operate further past the end of its safe and useful life. The questionable financing, permitting, litigation, and community opposition that is ahead for Enbridge is just part of the company’s delaying effort.

Fortunately, Gov. Gretchen Whitmer (D) has the ability to call Enbridge’s bluff and exercise her executive authority to revoke the state’s easement and put an end to this sham effort.

This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.

Author Information

Ian Bund has spent the last 50 years in active venture capital investing, including 43 years building the venture capital industry in Michigan. In 2018, he helped produce “A Crisis In The Great Lakes,” a three-part documentary film on dangers of Line 5, which was directed by Barton Bund, his son.