Line 5 Closure Would Strain Light Crude Flows to US Midwest and Canada

Litigation over the pipeline has been ongoing for several years after various pipeline spills have occurred in Michigan. Enridge received approval from the prior administration in the state of Michigan to build a tunnel to enclose the pipeline to protect the lakes from any future potential oil spills. The tunnel is expected to be complete by 2024, but the current government in Michigan is strongly opposed to the project due to the sensitive ecological environment of the Great Lakes. Earlier in the month, Michigan’s Court of Appeals upheld a lower court decision which found in favor of Enbridge, validating the agreement the company made with the prior government to build the tunnel. Last week, Line 5 was shut down due to damage to the east leg of the pipeline. The hearing scheduled for Tuesday will establish whether Line 5 will remain shut indefinitely.

Most of Line 5's light crude and NGLs are delivered to Sarnia, Ontario, then transported to refineries in Ontario and Quebec. Some of the crude oil goes to a Marysville terminal, where it connects with a Sunoco line and is transported to the Marathon Refinery in Detroit and two others in Toledo. Several years ago, the 140,000 b/d Detroit refinery invested in configuration changes to process mainly heavy crude from Canada, and only about 15,000 b/d of light crude. Refineries in Toledo, OH do utilize some light crude from Line 5, along with deliveries from other pipelines.

Since 2016, data from the Canadian Energy Regulator indicates that crude and NGLs volumes into Sarnia left combined spare capacity on the pipelines of about 25 percent. If Line 5 remained shut, any spare capacity on Enbridge Line 78 (from Patoka, IL to Sarnia, ON) would likely fill. Other pipelines that deliver light crude to the US Midwest, such as the 250,000 b/d Mid Valley Pipeline, that takes Permian Basin crude to Ohio and Michigan, and Marathon’s pipelines from the Patoka, IL hub to Ohio refineries, are also thought to have some limited spare capacity.

The chart below shows the monthly volumes that were delivered into Sarnia on Enbridge Lines 5 and 78 since 2016. The space between the dotted line and the blue and gray bars illustrates the combined spare capacity, showing under-utilization of the pipelines. As the chart shows, closure of Line 5 halves the total pipeline capacity to Sarnia. Line 78 would then likely run closer to full capacity. Once refinery demand for crude is met in Sarnia, crude supplies also flow from Sarnia onto connecting pipelines to Nanticoke, Ontario and refineries in Quebec. Any deficit would need to be made up by increasing crude sent by rail, or in the case of Quebec, an increase in imports via the St Lawrence River is another option.

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