Lately, Enbridge’s (TSX:ENB)(NYSE:ENB) Line 5 pipeline has been a hot topic of discussion. After Michigan governor Gretchen Whitmer revoked the line’s easement, Conservative leader Erin O’Toole took up the cause, saying that the pipeline was in jeopardy. In a National Post op-ed, O’Toole wrote that the closure of Line 5 would be a threat to the economies of Ontario and Quebec and to Canada as a whole. Costing numerous jobs and 66% of Quebec’s crude oil supply, its effects would be felt across the country.
It’s true that Line 5 being shut down would most likely have a negative economic impact on Canada. It would certainly have a negative impact on Enbridge’s investors. However, the likelihood of it actually happening is low for reasons I’ll outline in this article.
Mixed signals from Michigan
One fact arguing against the idea that Line 5 will be shut down is that Michigan’s own government is giving mixed signals on the matter. It’s true that Gretchen Whitmer revoked the Line 5 easement — a required land permit — but other government officials are sending just the opposite message. Just recently, Michigan’s EGLE board approved Enbridge’s Line 5 tunnel permit. That’s a permit approving new construction on Line 5 infrastructure. That does not suggest that Michigan’s energy regulators are looking to shut down Enbridge’s pipeline in their State. The political leaders apparently want to, but they don’t have the support of the entrenched bureaucracy. That calls into question the likelihood of their shutdown plans succeeding.
Enbridge doesn’t consider this a serious problem
Another argument against the likelihood of a Line 5 shutdown is Enbridge’s own statements. In a press release, the company stated that Whitmer’s order was illegal. In a letter to governor Whitmer, Enbridge’s Vern Yu wrote that Michigan’s government lacked the authority to cancel the easement. Obviously, this is a contentious stance that will have to be challenged in court if the Enbridge-Michigan standoff doesn’t end. But the company clearly believes that it has the legal authority to continue operating Line 5 and will continue operating it for the foreseeable future.
Pipelines have been a sensitive topic for Canada lately. After Joe Biden cancelled the Keystone XL pipeline, many Canadians found themselves out of work with no prospects to return.
The political ramifications for Canada of pipelines being shut down are beyond the scope of this article.
As for investors, it appears there isn’t much cause for concern. To date, Michigan politicians have not received support from Joe Biden or even their own state’s energy regulators regarding their plans to shut down Line 5. That could change going forward, but Enbridge’s pipeline looks safe for now. If the state was determined to push the Line 5 cancellation ahead, its orders would need to hold up in a court of law. Enbridge does not think that they will. If the company’s own assessment of the situation is accurate, then Line 5 is not in jeopardy.