America's Economic 'Bad Luck' Began with Keystone

President Joe Biden’s inauguration day decision to shut down and cancel construction of the Keystone XL pipeline from Canada is even more shocking when it is recognized that environmentalism has moved on to an ominous new phase. For the last two generations at least, the political battle over energy in the U.S. has revolved around the left’s attempts to strangle the oil, gas, and coal energy that generates 80 percent of America’s total energy supply. The typical move was challenging every drilling permit application, and having Democratic presidents seal off more federal land from exploration and production through the executive fiat of designating more “wilderness areas.”

Environmentalists wrapped their intransigence against domestic oil and gas with the lie that America’s oil and gas supplies were so limited that we couldn’t “drill our way out” of our dependence on foreign supplies, mixed with happy talk about the fantastic “renewable energy revolution.” While windmills and solar panels are spreading like kudzu grass throughout the land (thanks to lavish subsidies), strangling oil and gas production hasn’t worked fully worked out.

A funny thing happened on our way to the new green utopia—we did drill our way out of foreign oil and gas dependence, much to the fury of the left. Dramatic improvements in technology, especially precise directional drilling and hydraulic fracturing (“fracking”) unleashed a revolution in domestic oil and gas production. Much of this revolution occurred by stealth, and on private or state land, largely during the anti-oil Obama Administration. If the political class in Washington had known this revolution was under way, they would have moved aggressively to stop it.

By degrees environmentalists have become open and explicit about their goal, with the more honest slogan, “Leave it in the ground.” Environmentalists have long enjoyed considerable success in blocking or delaying oil and gas exploration and production even in the region of Alaska quaintly called the “National Petroleum Reserve,” let alone the oil-rich Alaska Natural Wildlife Refuge (ANWR) and many offshore areas. The offensive has broadened, with success in getting Wall Street and several federal bureaucracies such as the Federal Reserve, the Securities and Exchange Commission, and others to make life more difficult for domestic oil and gas production.

But while the environmental crusaders may hamper, they cannot entirely strangle, domestic oil and gas production. We can see this dynamic in action in real time right now. Between the typical epicycle of oil prices and the disruptions in the global market the Ukraine war has caused, suddenly we desperately need increased supply from our domestic producers. Credible predictions of $8 a gallon gasoline and rolling electricity blackouts this summer have had a sobering effect. While Wall Street may look down its nose at oil and gas companies in their public pronouncements, their capital allocation tells a different story. The oil and gas sector’s value has soared over the last year as capital seeks the best return, while the rest of the stock market is in bear territory.

Our domestic hydrocarbons are not going to stay in the ground in these circumstances. But there is another way for environmentalists to achieve their objective of strangling it—one that is a lot simpler and more effective than opposing every drilling permit application. In a variation of the old gangster approach to a protection racket, environmentalists have settled upon a new tactic: “Nice little oil well you have there; good luck getting any of it to a refinery.”

This is preface for understanding the deeper meaning of Biden’s decision to cancel Keystone. The decision made no sense on the merits, and seemed heedless of basic politics. The Obama Administration had concluded that Keystone would have no effect on "climate change" (because that Canadian oil is going to go somewhere regardless), and canceling it angered our largest trading partner and leading foreign oil supplier—this from a person who said he’d repair relations with foreign nations that President Trump supposedly trashed. It was also an unprecedented abuse of presidential power: no president has ever shut down a private-sector construction project—unionized, no less—already under way absent clear malfeasance or illegality.

Keystone should be seen therefore as a capstone to the strategy environmentalists have embraced by degrees in recent years of seeking to block pipelines and other infrastructure necessary for a flourishing hydrocarbon sector. The Dakota Access Pipeline, proposed in 2014 and under construction in 2016 after clearing the usual concerns from state governments and native American groups, suddenly faced a late vigorous protest movement that went national, supplementing spurious environmental claims with a heady mix of identity politics. The Obama administration intervened late to halt Dakota Access, but Trump swiftly gave it the green light upon taking office in 2017.

Meanwhile, the successive governors of New York (David Paterson, Andrew Cuomo, and now Kathy Hochul) have not only refused to allow production of ample supplies of natural gas in economically sluggish upstate, but refuse permission for a pipeline to send natural gas from Pennsylvania and Ohio to northeastern states that otherwise now have to import it from, among other places, Russia. (Massachusetts generates two-thirds of its electricity with natural gas.) Michigan governor Gretchen Whitmer wants to tear up an existing pipeline from Canada, and while the effort is temporarily in abeyance, no doubt the idea will come back if Whitmer is re-elected.

The point should now be obvious: Biden’s Keystone decision was a political rather than a serious policy decision. Message: Don’t even think about proposing any new pipelines in the U.S. Keystone isn’t just one pipeline; it is all pipelines. And even if a future Republican administration approves construction of a new pipeline, we’ll tear up the permit and expropriate your project the next time we’re back in office. Who is going to risk billions on new pipelines with this kind of political uncertainty? (Little noticed in the media is that international rating firms now place the United States as one of the highest risk countries for oil and gas investment.)

They hate you. They really hate you.

Blocking hydrocarbon infrastructure is only one part of the strangulation strategy of environmentalists. We haven’t built a new major oil refinery (with capacity over 100,000 barrels a day) in the U.S. since 1977. Modernization and expansion of existing refineries have been able to keep up with market needs, but the strain is starting to show and the limits of this patchwork adaptation are being reached. Refining constraints explain a lot of the reason gasoline in California now costs $2 more than the national average, but good luck proposing to build a new or expand an existing refinery in California.

The point is clear: blocking the infrastructure to transport and process hydrocarbon energy reduces the need to block production at the well. It’s like saying automakers can make all the cars they want, but taking away the roads. (Actually environmentalists want to do that, too.) The long-running argument about whether to drill more at home has become a classic misdirection. It represents a revival of the mid-20th century socialist strategy that sought to control the “commanding heights” of the economy (steel, autos, rail, etc.) so as to control everything else, and it is fitting that the pipeline that makes this keystone strategy vivid is called Keystone.

This problem won’t get fixed until there is fundamental reform of basic laws and regulations that allow this kind of obstruction to gain traction. GOP 2024 candidates take note.

Democrats’ Energy Spousal-Abuse Syndrome

Listening to Democrats suddenly begging the oil and gas industry to increase domestic output resembles nothing so much as the serial spouse-abuser who promises to be good, only to resume their abuse as soon as the cops leave, all the while pining to shower their cheap mistresses (in this case solar and wind energy) with ever more expensive gifts.

Energy Secretary Jennifer Granholm, to whom Donald Trump’s famous epithet “low-energy” applies better and more literally than to any other target, is begging the oil and gas industry to ignore the administration’s repeated assaults, and to carry on as if Trump was still in office:

We are on war footing. That means [crude oil] releases from the strategic reserves all around the world. And that means you producing more right now if and when you can. I hope your investors are saying this to you as well. In this moment of crisis, we need more supply. [Emphasis added].

Would those be the same investors that the Biden administration and woke capitalists like Black Rock’s Larry Fink are trying to intimidate from investing in fossil fuel production? The same companies for whom the Biden regime has sought to raise the cost of capital (with partial success already) through administrative harassment, such as setting the Federal Reserve and the Securities and Exchange Commission after them? The same industry whose viability the Biden administration’s Federal Energy Regulatory Commission (FERC) is trying to hobble with restrictions on new oil and gas pipelines? Never mind proposed or half-built pipelines such as the Keystone XL.

Granholm: Big Nurse is not happy.

There are ongoing efforts to shut down existing pipelines such as Enbridge’s Line 5 pipeline under a small stretch of Lake Michigan that transports more than 500,000 barrels of Canadian oil and petroleum products a day to the U.S. A court has temporarily stopped Gov. Gretchen Whitmer’s attempt to close Line 5, and FERC has abruptly halted its anti-pipeline rulemaking. But the crazed anti-pipeline activists will be back. The Biden administration is “studying” the issue, which means attempting to find another means to shut down Line 5, and FERC will surely return to its strangulating ways.

Asking the oil and gas industry to produce more oil while preventing new pipeline construction and shutting down existing pipelines is like asking the auto industry to produce more cars and trucks while tearing up existing roads and prohibiting new ones.

Unknown to most consumers, pipelines are the most versatile part of the energy supply chain, as they transport much more than crude oil between refineries. They can transport a wide variety of distillate products in addition to crude oil—propane in the particular case of Michigan’s Line 5—which adds to the overall resiliency and adaptability to consumer and industrial needs from the energy sector; Line 5 provides over half of the propane supply to propane-dependent parts of rural Michigan, for example. Non-pipeline transport, chiefly trains or trucks, is more expensive and difficult to secure.

Still other administration actions display its fundamental hostility to domestic oil and gas production. The Interior Department is dragging its feet on new required five-year plan for oil and gas leases in the Gulf of Mexico. Due in June, the plan is far behind schedule, and in the absence of the new plan no new leases can be processed. (Needless to say, Interior’s plans for offshore wind power leases are breezing through the department’s review process very quickly).

On the surface a neutral observer might think the Biden administration’s current energy policy is schizophrenic. It is actually mendacious, and rests on a cynical calculation that both the oil and gas industry and finance capitalists won’t play along in the long run. The great irony of America’s self-inflicted energy disaster is that profits for incumbent oil and gas producers are soaring, as are their stock prices. So naturally Democrats are going back to the Jimmy Carter playbook and demanding a “windfall profits tax” on current energy producers. In other words, please produce more, but don’t expect to get to keep any profits from expanded activity!

"Windfall profits" tax, anyone?

Oil and natural gas, like real estate, have been prone to boom and bust periods for more than 50 years, as large global price epicycles have delivered fat profits in boom times and inflicted severe pain during recessions and cycles of overproduction. Following the most recent wave of bankruptcies in oil and gas over the last decade, the domestic industry and its investors have at last become more disciplined about production and investment strategies. Neither producers nor investors are likely to be taken in by the administration’s temporary relief of the government boot on their neck. They know that once the current “crisis” has passed, the beatings will resume.

The last missing piece of this maddening puzzle brings us back to the opening analogy of oil and gas as the abused spouse of American industry. The oil and gas industry, with precious few exceptions such as Chris Wright, founder and CEO of the comparatively small Liberty Oilfield Services, does not defend itself against the green onslaught. Most of the oil and gas majors implicitly apologize for providing a product everyone uses, and promise to “do better” (that is, go out of business slowly) just as the abused spouse will internalize blame for the bruises her husband inflicts.

Not since Mobil Oil’s Herb Schmertz (ironically a liberal Democrat most of his life) fought back against the left in his famous “advertorials” in leading news publications in the 1970s and 1980s has the petroleum industry made a sustained defense of itself. A major oil company that tried this today would likely face an internal revolt from its woke millennial staff in the HR and public-relations departments. But until and unless the petroleum industry stands up for itself again, the abuse at the hands of the left will intensify until they are beaten out of existence.

Welcome Back, Carter

I mentioned in my last post that environmentalist policies have been a major driver of the energy crisis that's currently eating up Europe. We are now beginning to see the same dynamic play out in North America.

West Texas Intermediate crude, America's oil benchmark, is trading at just under $80 per barrel, double what it was a year ago. Average gasoline prices in the U.S. are at their highest point in seven years. After years of having to compete with lean, mean North American resource companies, OPEC is back in the driver's seat and enjoying profits that come at the expense of American and Canadian producers who have been cursed (by their own customers, no less) with environmentalist governments. Justin Trudeau actually got reelected on the promise to continue to increase taxes on heat and energy in a cold country just before the winter. (Not that his opponent even attempted to hold him accountable). Joe Biden was cagier about his actual plans while campaigning, but the pledges were there for those that had ears to hear.

The nations of OPEC, whatever their other problems, have a better instinct for self-preservation than that.

But even with their green bona fides, Biden and Trudeau can't catch a break from Team Gaia. Despite a looming energy crisis, the eco-warriors are refusing to back down in their battle against Enbridge Line 5. The pipeline, which brings petroleum products from Alberta to Ontario by way of Michigan, has been the subject of protests and a simmering legal dispute with Michigan's Governor, Gretchen Whitmer. Here's what I wrote about the stakes in this fight back in May:

Some 540,000 barrels of Canadian oil and natural gas pass through Line 5 every day, between 40 and 50 percent of Ontario and Quebec's total supply.... It has been referred to as the “spinal cord of Ontario’s infrastructure,” and through Ontario, to Quebec and points further east as well. A shutdown would have devastating consequences for consumers in eastern Canada, leading to fuel shortages and price spikes. And then there's the effect on employment -- the government of Ontario estimates that killing Line 5 would cost that province 5,000 jobs directly and indirectly almost 25,000. Whitmer's own constituents would be effected as well -- half of the propane used to heat homes in Michigan passes through Line 5, and a great deal of oil bound for Ohio and Pennsylvania besides. But that's nothing like the effect a shutdown would have on Canada's two largest provinces.

All of that is still true, but this is running a lot hotter than was expected back then because we're seeing "fuel shortages and price spikes" as well as depressed employment numbers while Line 5 is still up and running!

Consequently, the Trudeau government have now invoked the Transit Pipeline Treaty of 1977 in court with the hope of sidestepping the local authorities in Michigan so they can begin negotiating directly with the Biden Administration about the future of Line 5. But who knows if that will improve the situation? After all, the same activists who have Gov. Whitmer's ear also have powerful friends in the White House, and then president hasn't exactly shied away from screwing over our neighbors to the north.

It's become almost a cliché to say the 1970s are back, what with rising crime, stagflation, and especially an energy crisis, while a feckless liberal president blames everyone but himself. But as John Robson has pointed out, what we're going through now is worse in one important respect:

[A]t least in the 1970s it was done by accident, through policies that achieved the opposite of what their architects hoped and expected. This one is deliberate. They said they would get rid of fossil fuels, mocked those who protested that it would cause economic disaster, and now that it is they’re doubling down. They really mean it.

We're getting a glimpse of the future they've been planning. If we don't change course, it's going to get a lot worse.

Gretchen Whitmer in the Enbridge Pipeline Wonderland

The drama surrounding Enbridge Inc.'s Line 5 is getting tense. Michigan's governor, Gretchen Whitmer, has ordered the Calgary-based energy company to cease operating the pipeline by May 12th. Enbridge has vowed to defy that order, which it insists Whitmer has no authority to issue, and await a legal judgement. Whitmer's office has declared that "Enbridge’s continued operation of the Line 5 pipelines in the Straits of Mackinac [after May 12th] would be unlawful." Enbridge executive vice-president Vern Yu shot back, “We will not stop operating the pipeline unless we are ordered by a court or our regulator, which we view as highly unlikely."

Tempers are clearly running hot, and they have been for months. Back in November, Whitmer fulfilled a campaign promise by revoking the easement -- first granted in 1953 -- which has allowed Enbridge to operate a pipeline along the bottom of the Straits of Mackinac en route to refineries in Sarnia, Ont., arguing that any rupture in the line could devastate the ecosystems of two Great Lakes -- Lakes Michigan and Huron.

Line 5 has never had a significant leak in its nearly seventy-year history, but even so Enbridge had already proposed a solution to this potential problem -- a replacement pipeline to be laid beneath the riverbed and encased in concrete, with the object of safeguarding the straits. This was too little, too late for Whitmer and her fellow environmentalists, who pointed out that the proposed project would take years to complete.

Take that, Canada!

Some of that time, of course, is due to agencies in Whitmer's own administration dragging its feet about issuing permits and cheerfully adding extra regulatory hurdles. Most recently, the Michigan Public Service Commission, all of whose members are Whitmer appointees, decided that it was legitimate for them to take into account the environmental impact of the petroleum products the pipeline is transporting when deciding on the environmental impact of a new pipeline.

I'll say that again -- the commission is going to factor the future CO2 emissions of the oil and gas which pass through Line 5 into their decision about whether the pipeline itself poses a threat to the Great Lakes. Utterly insane, bringing to mind a certain tea party from the pen of Lewis Carroll:

Mad Hatter: Would you like a little more tea?
Alice: Well, I haven't had any yet, so I can't very well take more.
March Hare: Ah, you mean you can't very well take less.
Mad Hatter: Yes. You can always take more than nothing.”

Quite a lot is at stake in this dispute. Some 540,000 barrels of Canadian oil and natural gas pass through Line 5 every day, between 40 and 50 percent of Ontario and Quebec's total supply, including all of the jet fuel used at Toronto’s Pearson International Airport. It has been referred to as the “spinal cord of Ontario’s infrastructure,” and through Ontario, to Quebec and points further east as well. A shutdown would have devastating consequences for consumers in eastern Canada, leading to fuel shortages and price spikes. And then there's the effect on employment -- the government of Ontario estimates that killing Line 5 would cost that province 5,000 jobs directly and indirectly almost 25,000.

Whitmer's own constituents would be effected as well -- half of the propane used to heat homes in Michigan passes through Line 5, and a great deal of oil bound for Ohio and Pennsylvania besides. But that's nothing like the effect a shutdown would have on Canada's two largest provinces.

And that makes this a tricky situation for Canada's famed green prime minister, Justin Trudeau. As Rex Murphy has pointed out, for the Canadian left, environmentalism was always supposed to be an anti-Alberta project. Though cloaked in high-flung rhetoric about saving the planet, in Canada the Green Movement has often been a cat's paw of the left-of-center parties for preventing the conservatively inclined western provinces from capitalizing on their natural resources and enhancing their economic might. But, notes Murphy:

Line 5, is not a pipeline OUT of export-blockaded Alberta, heading to the U.S. and hoping for a better market. Line 5 is a pipeline INTO Ontario, and — as Robert Frost was good enough to supply the phrase — that “has made all the difference.”

The 2019 election definitively demonstrated that the Trudeau Liberals can remain in power with essentially zero support out west, but only if they pull big numbers in Ontario, Quebec, and the Maritimes. If, however, voters in those provinces, whose fuel bills have already swelled thanks to Trudeau's carbon taxes, suddenly see their gas prices jump by, say, 30 percent, coupled with related job losses in the tens of thousands, enough of them are going to flip to one of the other parties to boot Justin from power, no matter how hard the CPC appear to be trying to lose.

2019 election by province (Wikicommons)

Consequently, the Trudeau government is desperate for the Line 5 dispute to be resolved in their favor. According to Reuters:

Ottawa’s strategy... is to repeatedly raise the issue of Enbridge Inc.’s Line 5 with numerous U.S. counterparts — including Biden — to get them to pressure Michigan’s Democratic Governor Gretchen Whitmer to keep the pipeline open.

Trudeau has apparently spoken to Biden directly about Line 5 more than once, but with no public response from the president as of yet. And Whitmer's side seem disinclined to back down -- Whitmer ally Liz Kirkwood recently remarked that “[t]he Canadians are awfully silent about our shared responsibility to protect the Great Lakes." Consequently, the Canadian government has begun flirting with more drastic measures, including invoking the (never-before-used) 1977 Transit Pipelines Treaty, which states:

No public authority in the territory of either party shall institute any measures… which are intended to, or which would have the effect of, impeding, diverting, redirecting or interfering with in any way the transmission of hydrocarbon in transit.

Suffice it to say, this is far more than they ever did for Keystone XL. And, of course, that makes this a mess of their own making, at least in part. As I wrote at the time, there was "no obvious limiting principle" to the rationale for killing Keystone, and now the same vacuous arguments are being deployed against Line 5. Had Trudeau been willing to actually defend Canadian interests then, it's unlikely that he would have this problem now. Instead, he played politics while accepting a pat on the head from the global environmentalist crowd.

Well now he's on the receiving end while Gretchen Whitmer does the same thing. Trudeau deserves everything he gets. And it's tempting to say the same for the people of Ontario and Quebec. After all, they voted for him.

Gaia's Minions Won't Stop with Keystone

One theory as to why Team Biden killed the Keystone XL pipeline on Day One of his presidency is that the project had garnered so much notoriety. Keystone, the reasoning goes, had become a cause célèbre for the environmentalist left, and the Biden administration had to throw them a bone by terminating it, but that doing so doesn't give us a window into how he will actually govern over the next four years. No doubt this is what leaders of the various unions who endorsed Biden are currently telling themselves.

There is an obvious flaw in this reasoning. If Biden is willing to quash a major pipeline project like Keystone (midway through construction and at the cost of damaging America's relation with our ally, Canada) simply because environmentalists have succeeded in making the pipeline infamous, what's to stop them from making other pipeline projects similarly well known and with the same object in mind?

Well, it seems as if that is exactly what they're doing. Last week, we discussed a victory for Enbridge Line 5, which moves 540,000 barrels of Canadian petroleum products per day from Wisconsin. to Sarnia, Ont. Gretchen Whitmer has declared war on Line 5, and is both trying to halt its operation, on the grounds that it is a danger to the Straits of Mackinac, and trying to stop the construction on a tunnel under those straits whose object is to make its operation safer. Michigan's department of energy has, nevertheless, granted a construction permit to build the tunnel.

Gov. Whitmer's war goes on, however, and the possibility that she'll succeed has started to make Canadians nervous. Trudeau's minister of natural resources, Seamus O'Regan (a committed environmentalist), and Ontario's Conservative Premier Doug Ford have both put out statements in support of Line 5. Conservative leader Erin O'Toole recently wrote an op-ed defending it. Why would a Liberal Minister set out to defend a pipeline alongside Conservative politicians? Because, beyond the jobs it supports, Line 5 supplies about half of the petroleum needs of Ontario and Quebec! Losing it would be a disaster for Canada, and even Trudeaupian Liberals know it.

The honorably lady "from" Minnesota.

And now another front in this war has developed. Ilhan Omar, the hard-left congressional representative from Minnesota, has appealed directly to Joe Biden to kill Enbridge Line 3, which transports those same petroleum products from Alberta to Wisconsin, crossing through the congresswoman's home state. In an open letter (of course), Omar said "I joined millions of Americans celebrating your announcement to withdraw permits for the Keystone XL pipeline." She asks Biden to do the same to Line 3, currently in the process of being replaced with a larger pipe. She continues, "Under even the best-case scenarios for climate change, we cannot afford to build more fossil fuel infrastructure.”

If Team Biden really is operating under the assumption that killing Keystone has bought them some environmentalist good will, and that they don't have to sacrifice any more pipelines or jobs on the alter of Mother Gaia, they're in for a rude awakening. Mother Gaia's minions are insatiable. And their chief weapon is publicity.

Enbridge Line 5 Lives! (For Now)

Some unexpected good news: Michigan's Department of Environment, Great Lakes and Energy has approved construction of an underground tunnel to house a replacement for Enbridge Line 5 which transports roughly 540,000 barrels of petroleum products per day from Superior, Wis., to refineries in Sarnia, Ont.

This is surprising because the general expectation was that Joe Biden's decision to kill the Keystone XL pipeline extension is just an opening salvo in the new administration's war on energy. After all, there is no obvious limiting principle to Biden's rationale for killing Keystone. The pipeline had failed no environmental review, and TC Energy, which owns the pipeline, has satisfactorily responded to every legitimate concern of governments and environmentalist groups on both sides of the border.

What Keystone XL would do is facilitate the safe transport of fossil fuels, and that is what made it a target. This was clearly articulated in Biden's executive order, which offered no justification for revoking Keystone's construction permit beyond the necessity to "prioritize the development of a clean energy economy." If that's the governing logic, no pipelines are safe.

Enbridge Line 5 seemed the next theater of conflict because, as Joan Sammon discussed in a recent piece, there's already an ongoing crusade against it, spearheaded by Michigan governor Gretchen Whitmer. Here's the background, as described by Sammon:

Whitmer, a Democrat, took legal action against Canadian pipeline operator, Enbridge, revoking a 67-year old-easement to extend an approximately four mile underwater section of the pipeline that runs through the Straits of Mackinac.

Whitmer's argument is that the section of pipeline which runs underwater between Michigan and Ontario would endanger the Great Lakes should it leak, and thus she must act. The pipeline, which has been in operation since 1953, has never had a significant leak; indeed, Enbridge had already preemptively addressed this problem, planning a new section of pipe to be laid beneath the riverbed with the object of safeguarding the straits.

Construction approval has been slow, in part because of the change in administration in Michigan -- initial approval for the project had been granted by former governor Rick Snyder, a Republican. But following the 2018 election subsequent permits have to be granted by Whitmer appointees.

The Canadian position regarding Line 5 is that a shutdown would be disastrous. According to the National Post,

[It] would cut off nearly half of the crude oil it needs to make petroleum products such as gasoline. All of the jet fuel used at Toronto’s Pearson International Airport is made in Sarnia, and distributed through Line 5. It also carries propane used to heat homes in northern Michigan and Ontario, and supports thousands of jobs on both sides of the border.

Enbridge has refused to comply with Whitmer's order, arguing that the governor has no jurisdiction to shutdown a pipeline approved by the federal government.

The approval of Michigan's energy department -- which determined "the project would have 'minimal impact' on water quality and wetlands" -- is significant, but Line 5 isn't in the clear yet. The project still requires the approval of the Army Corps of Engineers, and the Michigan Public Service Commission, whose members have all been appointed by Whitmer, must grant approval for the pipeline to actually be put into the new tunnel.

Still, in the current hostile environment Enbridge will take any good news it can get.

In Michigan, the Left's New Attack on Pipelines

In a surprise maneuver on November 13, Michigan governor Gretchen Whitmer, a Democrat, took legal action against Canadian pipeline operator, Enbridge, revoking a 67-year old-easement to extend an approximately four mile underwater section of the pipeline that runs through the Straits of Mackinac. The revocation takes effect in May 2021, at which time Enbridge would be expected to cease operating the line. Line 5 is part of Enbridge's Lakehead network of pipelines.

The effect of closing Line 5 will be to shut the entire pipeline, which runs between Superior, Wisconsin and Sarnia, Ontario and carries about 23 million gallons of oil and natural gas liquids system-wide, daily. Line 5 moves about 540,000 barrels daily.

Curiously, Whitmer appears to be about two years late to the party. In 2018 Enbridge reached an agreement with then-Governor Rick Snyder to replace the underwater segment with a new pipe. It will be housed in a tunnel that is to be drilled through bedrock beneath the Straits of Mackinac. The company is seeking state and federal permits for the project, a process that is notoriously arduous and slow, but is ongoing. In this case these regulatory requirements are slowing the process that will mitigate the concern the state alleges in their order. Did you follow that?

What a good idea.

In short, Governor Whitmer is playing games -- asserting solutions to problems that do not exist and using taxpayer money to do it. She is two years too late and five paces out of step. Enbridge cannot begin drilling the replacement tunnel until the requisite permits and regulatory review is complete, a process that is currently underway on a timeline over which Enbridge has no specific control.

Through an understanding of supply and demand curves and the cost of inputs, the economic implications of shutting this pipeline are predictable. The price of propane and other products transported through this network will increase. This is plainly detrimental for the citizens of Michigan and the broader market. Pipelines are after all the safest and fastest way to move oil and gas from the field to refineries. Whitmer wants inexpensive fossil fuel for her state on one hand, while nixing the very transportation system that affords Michigan’s residents this inexpensive fuel supply.

While impeding construction of pipelines is not unto itself an unfamiliar tactic for the ‘green new deal’ lobby, there is something new at work here. This shot across the Enbridge bow should not be disregarded by other pipeline operators, nor the broader oil and gas industry because it portends challenges to the oil and gas industry without a decisive response.

Pipeline operations typically fall under federal jurisdiction. Governor Whitmer, however, is acting under the state’s public trust doctrine, which in this case requires state authorities to ‘protect' the Great Lakes. The implication is that pipelines are intrinsically unsafe. But this is not true. This obviously sets the stage for Enbridge’s legal challenge.

The pipeline has been in operation since the early 1950s. Until now, older pipelines had not been thought to be targets of the efforts of green zealots. While it is not clear that Whitmer’s legal strategy could easily be applied to other pipelines, it is clear that the hunt is on. Under a potential Biden administration there is no doubt that federal agencies will be willing participants in this legal strategy.

And it always looks much like this.

This tactic was used in Washington state to try to have hydro-electric dams along the Snake River removed. In that case green zealots attempted to use the plight of Salmon, Steelhead and Orca whales as the pretense to dismantle the dams that provide clean, inexpensive electricity to those in the west. That effort was only recently rebuffed after years in court. The green zealots in that case hailed from the Center for Biological Diversity.

Now, four months after that decision based on a review by the U.S. Army Corps of Engineers, a senior attorney with the same Center for Biological Diversity, Jared Margolis, explains the strategy around Line 5 and similar pipelines to the New York Times:

I think, at some point, we do need to turn to pipelines that are in the ground that are dangerous, that are posing a serious risk.

And so the games begin. Enbridge and other pipeline owners need to develop their own narrative in the face of this new strategic assault on their industry sector. While this battle may be in Michigan, the larger war is being waged against the entire fossil fuel industry. The industry is an essential element of American energy independence and essential for market access for Canadian product.