In re Enbridge Energy, Ltd. P'ship

Affirmed
Jesson, Judge
Dissenting, Reyes, Judge

Minnesota Public Utilities Commission
File Nos. PL-9/CN-14-916, PL-9/PPL-15-137

Scott R. Strand, Environmental Law & Policy Center, Minneapolis, Minnesota (for relator Friends of the Headwaters)

Paul C. Blackburn, Minneapolis, Minnesota (for relators Honor the Earth and The Sierra Club)

Joseph Plumer, Red Lake, Minnesota (for relator Red Lake Band of Chippewa Indians)

Frank Bibeau, Deer River, Minnesota (for relators Honor the Earth, The Sierra Club, and White Earth Band of Ojibwe)

Amelia J. Vohs, Brent Murcia (certified student attorney), Minnesota Center for Environmental Advocacy, St. Paul, Minnesota; and

Cresston Gackle, Cresston Law LLC, Minneapolis, Minnesota (for relator Youth Climate Intervenors)

David J. Zoll, Charles N. Nauen, Rachel A. Kitze Collins, Arielle S. Wagner, Lockridge Grindal Nauen P.L.L.P., Minneapolis, Minnesota (for relator Mille Lacs Band of Ojibwe)

Keith Ellison, Attorney General, Katherine Hinderlie, Cha Xiong, Assistant Attorneys General, St. Paul, Minnesota (for relator Minnesota Department of Commerce)

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Thomas H. Boyd, Eric F. Swanson, Betsy Schmiesing, Kyle R. Kroll, Winthrop & Weinstine, P.A., Minneapolis, Minnesota; and

Christina K. Brusven, Fredrikson & Byron, P.A., Minneapolis, Minnesota (for respondent Enbridge Energy, Limited Partnership)

Keith Ellison, Attorney General, Jason Marisam, Jeffrey K. Boman, Assistant Attorneys General, St. Paul, Minnesota (for respondent Minnesota Public Utilities Commission)

Brian B. Bell, Michael J. Ahern, Dorsey & Whitney LLP, Minneapolis, Minnesota (for respondent Shippers for Secure, Reliable, and Economical Petroleum Transportation)

Brendan D. Cummins, Alex M. Bollman, Cummins & Cummins, LLP, Minneapolis, Minnesota (for respondent Laborers' District Council of Minnesota and North Dakota)

Anna Friedlander (pro hac vice), O'Donoghue & O'Donoghue LLP, Washington, District of Columbia (for respondent United Association of Journeymen and Apprentices of the Plumbing and Pipe Fitting Industry of the United States and Canada, AFL-CIO)

Anne Marcotte, Northern Counties Land Use Coordinating Board, Hill City, Minnesota (for amicus curiae The Northern Counties Land Use Coordinating Board)

Robin C. Merritt, Hanft Fride, P.A., Duluth, Minnesota (for amicus curiae Area Partnership for Economic Expansion, Inc.)

Andrew P. Moratzka, Marc A. Al, Riley A. Conlin, Stoel Rives LLP, Minneapolis, Minnesota (for amicus curiae Flint Hills Resources Pine Bend, LLC)

Considered and decided by Jesson, Presiding Judge; Reyes, Judge; and Kirk, Judge.^*

SYLLABUS

Before granting a certificate of need for an oil pipeline under Minnesota Statutes section 216B.243 (2020), the Minnesota Public Utilities Commission must evaluate "the accuracy of the applicant's forecast of demand for the type of energy that would be supplied by the proposed facility." Minn. R. 7853.0130(A)(1) (2019). When an applicant seeks a

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certificate of need for a crude-oil pipeline, "demand" is "that quantity of a petroleum product from the applicant's facilities for which there are willing and able purchasers." Minn. R. 7853.0010, subp. 8 (2019). The willing and able purchasers of crude oil are refineries. The commission therefore must, in determining whether to grant a certificate of need for a crude-oil pipeline, evaluate a forecast provided by the applicant of the amount of crude oil from the proposed pipeline that refineries will be willing and able to purchase over the forecast period.

JESSON, Judge

Enbridge Energy, Limited Partnership seeks to replace its existing Line 3 pipeline, which transports crude oil across Minnesota, with a new pipeline that will take a different route across the state. In order to build, Enbridge must establish the need for replacement Line 3. That question of necessity divides state agencies—and many Minnesotans. The legislature tasked the Minnesota Public Utilities Commission to decide—after consideration of attendant environmental risks—that central question of need, and to decide (if need exists) on the appropriate pipeline route.

After considering the potential environmental impacts of replacement Line 3, the commission concluded that it was necessary. It did so leaning heavily on the comparative risks of continuing to operate existing Line 3. The commission issued the required certificate of need, and selected a route as well. As part of its decision, the commission ordered Enbridge to remove, at landowner option, existing Line 3.

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These decisions were not made in a vacuum. Rather, they followed vigorous public debate. In addition to everyday Minnesotans—some in favor and some opposed to replacement Line 3—the commission heard from interested groups including multiple Indian tribes with interests impacted by existing Line 3 or that would be impacted by the replacement pipeline; environmental organizations opposed to replacing the pipeline; trade organizations that hoped to use the pipeline and unions that hope to build it; and the department of commerce, which asserted a lack of need for the replacement pipeline. And the commission deliberated against a backdrop of a deteriorating existing pipeline and a federal consent decree directing Enbridge to replace existing Line 3, if it could obtain state authority to do so.

That exercise of state authority now comes before us for judicial review—a review that, grounded in the separation of powers between branches of government, is largely deferential to the expertise of the executive branch. As described below, we affirm the commission's ultimate decisions. The commission addressed our earlier concern regarding the failure, in its environmental review, to consider the impact of an oil spill on the Lake Superior watershed. And, while reasonable minds may differ on the central question of need for replacement Line 3, substantial evidence supports the commission's decision to issue a certificate of need. Finally, the commission reasonably selected a route for the replacement pipeline based upon respect for tribal sovereignty, while minimizing environmental impacts. Accordingly, we affirm.

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Enbridge operates a number of pipelines in the United States and Canada that together comprise its "Mainline System."¹ The Mainline System transports crude oil from the Western Canadian Sedimentary Basin (the tar sands region) of Alberta, Canada, to terminals throughout the United States. Line 3 of the Mainline System begins in Alberta, crosses through North Dakota and into Minnesota before connecting to a terminal at Clearbrook and the Minnesota Pipeline System, which serves Minnesota's two crude-oil refineries. From Clearbrook, existing Line 3 continues across Minnesota, crossing both the Leech Lake and Fond du Lac Reservations before entering Wisconsin and ending at a Superior, Wisconsin, terminal.

As the commission bluntly described: "Existing Line 3 is an aging, deteriorating pipeline." The commission, however, has no authority over the operation of existing Line 3. Rather, the operation of existing Line 3 is regulated by the United States Department of Transportation, Pipeline and Hazardous Materials Safety Administration. Yet the commission regulates the construction of new pipelines in Minnesota. And Enbridge is required under a consent decree with the federal government to replace existing Line 3 if it is able to obtain state permission to build a new pipeline.

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These appeals stem from Enbridge's efforts to do just that: replace the part of existing Line 3 that travels through Minnesota with a new pipeline.

The History of Existing Line 3

Existing Line 3 was built in the 1960s, before the adoption of modern federal and state laws governing pipeline construction, routing, and operation. The pipeline was constructed with now-outdated methods that have, over time, resulted in external corrosion, stress corrosion cracking, and cracks along longitudinal welds along the pipeline. A 2014/2015 study revealed that over 70 percent of the pipeline's 140,000 joints exhibited external corrosion, that corrosion deeper than 50 percent of the pipe wall thickness would affect over 3,000 joints by 2016, and that over 25,500 pipe joints will have corrosion depth of 50 percent or more by 2030. And the pipeline is deteriorating at an accelerating rate.

Numerous failures along the pipeline resulted in oil spills, including substantial spills near Grand Rapids in 1991 and Cohasset in 2002. Enbridge attributes the latter spill to pipeline fatigue and construction defects that continue to be present on existing Line 3.²

To address the integrity concerns regarding existing Line 3, Enbridge limited the volume and type of oil transported on it, first voluntarily and then pursuant to the consent decree. The pipeline historically transported about 760 kilo barrels per day of varying types of crude oil. In 2008, Enbridge began limiting the capacity of existing Line 3, and it

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currently is limited to transporting 390 kilo barrels per day of predominantly light crude. In addition to these operational limitations, Enbridge undertakes "integrity digs"³ to assess and repair corrosion defects. In 2017, Enbridge estimated that it would need to undertake approximately 6,250 integrity digs in Minnesota over the next 15 years if existing Line 3 continued to operate, even with operational limitations. In short, the ongoing integrity management is detrimental—both financially and environmentally—and it cannot return existing Line 3 to its historical capacity.

Apart from the safety risks posed by existing Line 3, its operational limits have contributed to apportionment on the...