(Bloomberg) -- The White House pledged to discuss a key pipeline that carries Canadian crude through Michigan with the northern neighbor, stressing the U.S. isn't considering a shutdown of the conduit the state's governor wants shuttered.
The Canadian and U.S. governments will “engage constructively” on the future of Enbridge Inc.'s Line 5 pipeline, the White House principle deputy press secretary, Karine Jean-Pierre, said at a briefing Tuesday.
“These negotiations and discussions between the two countries shouldn't be viewed as as anything more than that, and certainly not an indicator that the U.S. government is considering shutdown,” she said. “That is something that we're not going to do.”
The comments helped clarify the position of the Biden administration in an escalating dispute between Michigan Governor Gretchen Whitmer, a Biden ally, and Enbridge. Speculation the U.S. was considering a shutdown of the line that delivers propane and oil to the Midwest triggered strong criticism from Republicans at a time when energy prices are surging because of tight supplies.
The line is also a key conduit of oil for refineries in Ontario and Quebec, a fact that has drawn the attention of Justin Trudeau's government. Canadian officials have called the continued operation of the pipeline nonnegotiable, and Canada recently invoked provisions of a 1970s treaty to defend the line's operation, elevating the dispute to an international level.
President Joe Biden has taken a harder stance than his predecessor on oil pipelines, cancelling the controversial Keystone XL project, which would have helped ship Canadian crude to U.S. refineries, on his first day in office. But siding with Whitmer on shutting Line 5 could raise fuel prices in Michigan, a key electoral state, and would sour relations with Canada.
Whitmer argues Line 5 is a threat to the Great Lakes because it crosses the Straits of Mackinac and could spill oil into the waterway. Enbridge has so far defied the order, leaving the two sides to fight out their differences in Federal court.
The Calgary-based pipeline giant has said its project to build a tunnel to house the pipeline under the lakebed will make it safer. The tunnel project is currently under review by the U.S. Army Corps of Engineers.
What Bloomberg Intelligence Says:
“The project now faces a three-front fight: fighting in federal court to remain operational; pursuing replacement project approval with the state regulator; and applying for permits to reroute in Wisconsin. We believe that Line 5 will be successful on all three fronts, though project approvals may drag into late 2022 or beyond.”
--Brandon Barnes, senior litigation analyst
Enbridge was little changed in Toronto on Tuesday, after sliding 2.2% on Wednesday. The stock is up 29% for the year.
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