Fossil Gas Firm Enbridge: Local weather Change Means We Must Make Cash Now, Not Later – Jacobin journal

Login
Our newest version is out in print and on-line now. Subscribe in the present day and begin studying.
The pipeline large Enbridge is making a novel argument in protection of jacking up shopper costs: the local weather disaster is heating up, so Enbridge must make increased earnings now.
An oil refinery close to the Enbridge Line 5 pipeline in Sarnia, Ontario, Canada. (Cole Burston / Bloomberg by way of Getty Photographs)
Our winter concern is coming quickly in print and on-line. Subscribe at a particular fee and don’t miss it.
As Republican state officers insist that Canadian oil pipelines are essential to decrease power prices for American shoppers, the fossil gasoline large working these pipelines is all of the sudden citing the local weather disaster its merchandise are creating as a rationale for elevating these costs increased, in line with new paperwork reviewed by the Each day Poster.
Final month, Ohio Republican governor Mike DeWine — who has raked in practically $400,000 from fossil fuel industry donors — demanded the Biden administration keep open Enbridge’s controversial Line 5 pipeline, which runs under the Great Lakes, as a way to reduce energy prices.
But Enbridge just dropped a bombshell undercutting that argument: the firm told government regulators that climate change means its tar sands pipeline network only has nineteen years left of economic life. That assertion could allow the company to jack up the tolls that its customers pay to transport oil through its pipelines, because pipeline operators are authorized to recoup their operational costs through rate increases — and a shorter timetable means higher levies.
The episode is a spectacle of what’s been called disaster capitalism: In this case, a fossil fuel behemoth is citing the ecological crisis it is intensifying as a justification to extract more profits from consumers already being crushed by higher prices.
“There is something ironic about pipeline companies like Enbridge conceding that they can see the writing on the wall, they’re not going to be competitive or needed less than twenty years from today, and, as a result, they have to raise prices today to account for that,” said Ari Peskoe, director of the Electricity Law Initiative at the Harvard Law School. “There’s something incongruous about that.”
Enbridge has been doing everything in its power to preserve and expand its massive pipeline network, the largest in North America. The multinational completed construction on its expanded Line 3 pipeline in Minnesota this fall, despite years of heated opposition from Indigenous people, climate activists, and lawmakers. Now the company is working to derail Michigan governor Gretchen Whitmer’s reelection bid, in response to Whitmer’s order aiming to shut down the company’s aging Line 5 pipeline, because a spill could be imminent and the pipeline runs through the Great Lakes.
In that battle, Enbridge has insisted that shutting down Line 5 would cause a spike in fuel prices, because the pipeline supplies ten refineries in the region. And yet, this May, the company told federal energy regulators that its pipelines are likely worth far less because governments are preparing to try to combat the carbon emissions from its products.
The admission was included in filings with the Federal Energy Regulatory Commission (FERC), the US regulatory body which regulates electricity, oil, and natural gas as part of ongoing tariff negotiations with the oil companies that use its pipeline network. During the negotiations, Enbridge filed a depreciation study in May 2021 in which it proposed an accelerated depreciation schedule for its Lakehead System, which transports crude oil from the Alberta tar sands through the Upper Midwest.
In that study, Enbridge estimated that the Lakehead System had an economic life of nineteen more years, a downgrade from its 2016 estimate in which it projected a lifetime of at least thirty years. Enbridge was not required to update those estimates until 2026, but filed the latest depreciation filing five years early as part of the negotiations.
Enbridge cited a number of factors in justifying the shorter expected life of its pipelines, including: “current and anticipated competition to the Enbridge Mainline, actions by state and local governments, and the uncertainty arising from the recent acceleration in the pace of Federal (United States and Canada), state/provincial and local governments passing decarbonization legislation or adopting policies that may influence the market demand for pipelines.”
Enbridge brought up these matters in its tariff negotiations because the rates for using pipelines are set by FERC to account for pipeline companies’ operational costs — infrastructure investments, salaries, maintenance, and other expenses — as well as reasonable profit. As a result, if the economic life of a pipeline ends up being shorter, the company won’t be able to collect payments from customers for as many years, so it can raise rates in order to recover its construction costs.
“These filings take into consideration the changing environmental and political landscape in which we operate this critical piece of energy infrastructure,” Enbridge spokesperson Juli Kellner told Jacobin.
The tar sands companies that move their oil through Enbridge’s pipelines filed a protest with FERC disputing the 2040 truncation date because they don’t want to pay a higher rate. The protest, filed by the Canadian Association of Petroleum Producers (CAPP), asks FERC to “investigate the factual basis of the claims that Enbridge makes regarding its remaining economic life.” According to the protest, “The claim that the Lakehead System may be, indeed will be, out of business in [2040] is exceptional given the whole lot of the factual circumstances.”
Kellner mentioned that the depreciation research “is used to find out the cost-of-service toll,” however famous: “It might not replicate the precise lifetime of the property.”
It’s attainable that Enbridge and its prospects will come to a settlement by ongoing negotiations earlier than FERC has to intervene.
Whether or not or not the pipeline firm and the oil companies come to an settlement, the negotiations level to an issue that specialists say will turn out to be more and more frequent in coming years: As the large enterprise of extracting and transferring crude oil involves an finish, who ought to bear the associated fee and danger of that transition?
One of many central points thought-about throughout the Minnesota Public Utility Fee’s multiyear allowing course of for the Line 3 pipeline by the state was whether or not there was adequate demand for oil to justify constructing the brand new pipeline. Enbridge mentioned in its April 2015 utility for a “certificates of want” for the pipeline: “The anticipated financial lifetime of the Undertaking shall be at least 30 years.”
Enbridge repeated that estimate over the course of the allowing course of, mentioned Paul Blackburn, an lawyer for Honor the Earth, an environmental justice group which has opposed Line 3. “Thus, the [new depreciation study] represented a basic shift in Enbridge’s understanding of its future,” Blackburn mentioned.
Enbridge has mentioned the newest research doesn’t apply to the Line 3 pipeline as a result of it was beneath building when the research was carried out. However Blackburn disputed {that a} single passage of the pipeline community might outlast the remaining.
“Enbridge implies that new Line 3 can preserve working even when the remainder of the Mainline System isn’t, and naturally this can be a blatantly false assertion, as a result of new Line 3 is only one piece of the system: It receives crude oil from different upstream pipelines and tanks owned by Enbridge, and new Line 3 delivers oil to different downstream pipelines and tanks,” he mentioned. “If these different Mainline System pipelines and tanks ceased operation, it could be unimaginable for brand spanking new Line 3 to proceed working.”
However specialists say Enbridge’s new assertion does increase questions on who ought to bear the price of the accelerated depreciation.
“The environmental teams and the oil and gasoline corporations agree on accelerated depreciation. The fossil gasoline corporations get well the cash for his or her infrastructure and the environmental teams get an earlier shutdown,” mentioned James Coleman, professor of power regulation at Southern Methodist College. “The problem for that’s, and has all the time been, the buyer teams. And for those who begin charging extra, and that reveals up in oil and gasoline costs — we’ve seen that could be politically delicate.”
A few of these prices shall be assumed by power prospects in Minnesota, the place Enbridge — with the help of native officers and police — compelled by completion of its Line 3 pipeline this summer time within the face of herculean efforts by Indigenous-led teams to cease it.
“The oil trade makes an attempt to go all of its prices onto shoppers, so it’s seemingly that Enbridge’s tariff fee will increase shall be handed onto shoppers,” mentioned Blackburn of Honor the Earth. “The supporters of recent Line 3 who claimed it could scale back gasoline prices in Minnesota as a result of it could improve provide fully disregarded the complexity of this market.”
It doesn’t assist that nobody is certain how a lot oil shall be wanted a number of a long time from now — and that’s not simply because Enbridge and oil corporations are presently arguing over the matter in tariff negotiations. Enbridge’s proposed oil pipeline truncation date, which tar sands corporations are lambasting as being too early, remains to be far later than what scientists say is critical to stave off catastrophic international warming.
“We stay with a specific amount of cognitive dissonance about these inconsistent commitments, and for corporations and regulators like FERC, they actually need to sq. that circle and make some type of prediction about what’s going to occur,” Coleman mentioned. “The charges that they’re recovering in the present day rely upon what oil use goes to be in 2040 versus 2050. We’ve this wild asymmetry in predictions about what oil use shall be in 2022. So how are we presupposed to have correct predictions about 2040 or 2050?”
Regulators and lawmakers may even need to quickly deal with an even bigger query: Who ought to bear the prices of soon-to-be stranded property, similar to pure gasoline and oil pipelines?
If a cautious plan isn’t put in place to account for the prices of pipelines that can quickly be out of date, the burden will seemingly fall on those that are least geared up to deal with it, in line with a 2019 report by the Environmental Protection Fund in California on the state’s pure gasoline infrastructure.
“What [would end] up occurring is you make [electricity bills] dearer by accelerated depreciation, which is able to additional inspire prospects who can afford to go away the gasoline system early,” mentioned Michael Colvin, coauthor of the report and director of Regulatory and Legislative Affairs for California on the Environmental Protection Fund. “That can go away behind prospects who aren’t capable of electrify, so you find yourself with a tradeoff the place wealthier and whiter prospects who personal their very own properties and have extra web site management electrify, whereas the remaining buyer base, which tends to be low and center earnings, and extra renters, are left behind.”
That’s why in California, the place newly handed local weather laws is more likely to lead utilities to shorten the lifespan of their pure gasoline pipelines, in line with the report, advocates and regulators are attempting to take a forward-looking strategy to the state of affairs, together with phasing gasoline out on a deliberate timeline.
If governments set targets and require utilities to submit plans to get well their prices, the eventual abandonment of this infrastructure might be managed with an emphasis on fairness, Colvin defined. There are instruments that policymakers have at their disposal to defend low-income prospects from bearing many of the danger, similar to masking a number of the price of decommissioning pipelines with tax {dollars}, or forcing utilities to eat a number of the price by decrease earnings. Regulators have already got the authority to cut back the earnings that corporations like Enbridge earn from fee assortment.
Elevated power payments aren’t the one method the pipelines’ shortened life spans will affect the individuals who stay within the areas which have been torn aside by the development of Line 3, which contributed to droughts and leaked drilling fluids in waterways throughout building final summer time.
In Minnesota, Honor the Earth has responded by petitioning state regulators to ensure Enbridge retains its promise, as a part of the allowing course of, to put aside cash for the eventual decommissioning of the pipeline, which is estimated to price $1.5 billion or extra.
“The Fee mustn’t wait to behave on the matter,” Honor the Earth mentioned within the petition. “It ought to promptly set up a sturdy and safe funding mechanism as quickly as attainable to make sure that new Line 3, as soon as deserted, doesn’t turn out to be a monetary burden on personal in addition to state and native authorities landowners.”
You possibly can subscribe to David Sirota’s investigative journalism mission, the Each day Poster, right here.
Julia Rock is a reporter for the Each day Poster.
This does not seem like a legitimate e mail.
Thanks for signing up!
Already on our record? Get our print journal for simply $20 a 12 months.
As Republican state officers insist that Canadian oil pipelines are essential to decrease power prices for American shoppers, the fossil gasoline large working these pipelines is all of the sudden citing the local weather disaster its merchandise are creating as a rationale for elevating these costs increased, in line with new paperwork reviewed by the Each day Poster. Final month, Ohio Republican […]
As Republican state officers insist that Canadian oil pipelines are essential to decrease power prices for American shoppers, the fossil gasoline large working these pipelines is all of the sudden citing the local weather disaster its merchandise are creating as a rationale for elevating these costs increased, in line with new paperwork reviewed by the Each day Poster. Final month, Ohio Republican […]
As Republican state officers insist that Canadian oil pipelines are essential to decrease power prices for American shoppers, the fossil gasoline large working these pipelines is all of the sudden citing the local weather disaster its merchandise are creating as a rationale for elevating these costs increased, in line with new paperwork reviewed by the Each day Poster. Final month, Ohio Republican […]
Our winter concern is coming quickly in print and on-line. Subscribe at a particular fee and don’t miss it.
Catalyst, a brand new journal revealed by Jacobin, is out now.
This does not seem like a legitimate e mail.
Thanks for signing up!

supply