Why pipelines should matter to Minnesota

Despite the reality of cold winters and the need for oil and natural gas to survive them—to say nothing of the use of such products by American businesses, the military and hospitals—Minnesotans have recently been subject to the same anti-oil and gas advocacy that Canadians (who also live in a cold climate) have seen for two decades.

For those not paying attention, one Canadian company, Enbridge, is replacing a Canada-US oil pipeline in existence since the 1960s. The 1,097-mile (1,765 kilometre) crude oil pipeline, Line 3 as it is known, runs from Edmonton, Alberta to Superior, Wisconsin with a portion of it through Minnesota. (Construction started in Minnesota in December 2020 following completion of the parts of the line located in Canada, North Dakota, and Wisconsin.) This has engendered some curious claims.

One anti-oil activist argues Line 3 is not a replacement project given it's a bigger pipeline with a new route and thus should never have been approved. The Minnesota governor, Tim Walz, has argued the pipeline is no longer needed because, he claims, demand for crude oil that the pipeline carries is decreasing.

Reality check: These claims—and many others—are diversionary tactics, reflective of reflexive opposition to oil and natural gas as products. They are not reasoned analyses.

When a company, after half a century, wants to decommission a pipeline and replace it with another, safer and more efficient one, that's a replacement pipeline. Misleading claims to the contrary are akin to arguing your new 2021 automobile, which replaces your 1975 Pinto, is not a "replacement" when it clearly is.

Also, the Line 3 Replacement Project does not expand flows on the pipeline; it allows capacity to be restored to previous rates, which Enbridge voluntarily restricted in 2008 to maintain pipeline integrity.

As for Governor Walz' oil demand argument, US oil consumption is rebounding, according to the US Energy Information Administration. Total consumption was 20.5 million barrels per day in 2019, 18.1 million barrels per day in 2020, forecast to be just under 19.5 million barrels per day this year, and over 20.4 million barrels daily in 2022. Unless Walz thinks that the American economy will stall out in 2022 (or collapse), it appears annual U.S. oil consumption two years from now will surpass the 2019 totals.

Beyond spurious claims about the Line 3 Replacement Project, there has been little analysis of the strong energy-related links between Minnesota and Canada. Here are some relevant facts on the importance of oil and gas and other energy to Minnesota's economy.

In 2019, the total value of the trade flows of energy products between Minnesota and Canada was nearly C$8.3 billion, or about US$6.4 billion. The vast majority of that was Canadian oil and gas, with over $7 billion in conventional crude oil and $481 million in natural gas in that figure, while Minnesota sent $134 million worth of energy products north in 2019 including gasoline, diesel and biodiesel fuels.

Minnesota does not have its own source of petroleum but oil has a significant, positive impact on the state. The reason is due to Minnesota's location and how it acts as key hub for the oil pipeline network.

The Minnesota House of Representatives' Research Department describes the key aspects of oil pipelines and refineries and their importance to the state this way: "The state's strategic location between the oilfields of western Canada and North Dakota and the refining centers of the Midwest, the Gulf of Mexico, and the eastern coasts of the United States and Canada, has greatly magnified the role it plays in meeting America's demand for petroleum products."

That memo also notes that Canada's crude oil exports to the United States "grew by 81 per cent between 2007 and 2017, reaching 1.25 billion barrels per year" and "two-thirds of those Canadian imports are shipped through Minnesota."

Also, from that memo: Minnesota has two refineries which produce more than two-thirds of the state's petroleum products; 70 per cent of those products are refined from Canadian crude oil with additional oil from North Dakota's Bakken oil fields; an extensive system of pipelines brings crude oil to Minnesota's refineries and which then distributes refined products throughout the state. There are 25 major petroleum storage terminals located along the routes of these pipeline with 15 of those in Minnesota.

Does all this transborder energy flow benefit Minnesotan workers? Yes. According to the US Bureau of Labour Statistics, the annual mean income for those employed in the pipeline transportation sector in Minnesota was US$73,500 in 2019. That was more 32 percent higher than the mean income for all occupations in Minnesota, at $55,890.

Of course, given that Minnesota has no oil of its own, there is another benefit to importing oil (and natural gas): use by Minnesotans themselves, in order to power automobiles and transport trucks, heat homes, power businesses, and for use in hospitals and by the military. It's why in 2017 alone, five billion gallons of petroleum products were produced or imported into Minnesota.

Oil is a long way from not mattering to Minnesotans, or any other American.

Mark Milke and Lennie Kaplan are with the Canadian Energy Centre, an Alberta government corporation funded in part by carbon taxes. They are authors of the report, Energy Trade Flows Between Minnesota and Canada: A Primer on the Line 3 Replacement Project.