Business
Enbridge to pay Bad River band $5.1M in Line 5 profits, move pipeline by 2026: judge
This June 29, 2018 photo shows tanks at the Enbridge Energy terminal in Superior, Wisc. A U.S. judge in that state has ordered the Calgary-based energy giant to pay an Indigenous band US$5.1 million and to remove the Line 5 pipeline from the band’s property within three years. THE CANADIAN PRESS/AP-Jim Mone
By James McCarten in Washington
Calgary-based Enbridge Inc. must pay an Indigenous band in Wisconsin more than US$5 million in Line 5 profits and relocate the controversial cross-border pipeline within the next three years, a U.S. judge says.
A rupture on territory that belongs to the Bad River Band of the Lake Superior Chippewa would constitute a clear public nuisance under federal law, district court Judge William Conley said in a decision late Friday.
But while the order affirms that Enbridge has been trespassing on Bad River land since 2013, when certain permits for the 70-year-old pipeline were allowed to lapse, it stops short of causing “economic havoc” with an immediate shutdown.
“The use of trespass on a few parcels to drive the effective closure of all of Line 5 has always been about a tail wagging a much larger dog,” Conley writes in his opinion.
In other words, there are “much larger public policy issues” surrounding cross-border pipelines like Line 5 that the band’s arguments, while valid, lack the power to overcome, he said.
Those issues “involve not only the sovereign rights of the band, but the rights of multiple states and international relations between the United States and Canada.”
Enbridge has already agreed to reroute the line, an essential energy conduit for much of the U.S. Midwest as well as Ontario and Quebec. But Conley wants that project completed more quickly than currently planned.
“Considering all the evidence, the court cannot countenance an infinite delay or even justify what would amount to a five-year forced easement with little realistic prospect of a reroute proceeding even then,” he wrote.
“The court will give Enbridge an additional three years to complete a reroute. If Enbridge fails to do so, the three years will at least give the public and other affected market players time to adjust to a permanent closure of Line 5.”
Enbridge’s lawyers continue to dispute the finding that the company is trespassing on Indigenous territory and intend to appeal the decision, and may also request a stay pending its outcome, said spokesperson Juli Kellner.
“Enbridge’s position has long been that a 1992 contract between Enbridge and the band provides legal permission for the line to remain in its current location,” Kellner said.
“Timely government permit approvals” would be necessary to complete the reroute within three years, while relocating the pipe currently on Bad River territory would take about a year, she added.
Any shutdown before then “would jeopardize the delivery of reliable and affordable energy to U.S. and Canadian families and businesses, disrupt local and regional economies, and violate the Transit Pipeline Treaty.”
Talks between the two countries have been ongoing for months under the terms of that treaty, a 1977 agreement that effectively prohibits either side from unilaterally closing off the flow of hydrocarbons.
In prior court documents, Enbridge has accused the band of being focused on a single outcome: the permanent closure of the pipeline on their territory “while refusing much less extreme alternative measures.”
The band argues that several weeks of spring flooding along the Bad River has washed away so much of the riverbank and supporting terrain that a breach is “imminent” and a shutdown order more than justified.
Enbridge insists the dangers are being overstated — and even if they were real, the company’s court-ordered contingency plan, which spells out the steps it would take, would be a far more rational solution.
Conley’s order Friday included tweaks to that plan to establish a more “conservative” threshold for the conditions that would trigger it, such as lower water levels and flow rates on the river.
“The court is particularly concerned that Enbridge’s plan does not account for inevitable delays that could occur due to weather conditions, supply and equipment problems and human error.”
Enbridge has also been rebuffed repeatedly in its efforts to perform remedial work on the site, which would include using sandbags and trees to fortify the riverbanks —decisions the band has defended as its sovereign right.
Heavy flooding that began in early April washed away significant portions of the riverbank where Line 5 intersects the Bad River, a meandering, 120-kilometre course that feeds Lake Superior and a complex network of ecologically delicate wetlands.
The band has been in court with Enbridge since 2019 in an effort to compel the pipeline’s owner and operator to reroute Line 5 around its traditional territory — something the company has already agreed to do.
But the flooding has turned a theoretical risk into a very real one, the band argued, and time is now of the essence.
Line 5 meets the river just past a location the court has come to know as the “meander,” where the riverbed snakes back and forth multiple times, separated from itself only by several metres of forest and the pipeline itself.
But it was clear both from Friday’s order and an in-person hearing last month, when Conley openly questioned the band’s motives, that he faults the band for rejecting Enbridge’s proposed plans to mitigate the danger.
“The band has refused to approve any of Enbridge’s remediation and prevention proposals, much less proposed even one project of its own to prevent or at least slow further erosion at the meander,” he wrote.
The neighbouring state of Michigan, led by Attorney General Dana Nessel, has been waging its own war against Line 5, fearing a leak in the Straits of Mackinac, the ecologically delicate waterway where the pipeline crosses the Great Lakes.
The economic arguments against shutting down the pipeline, which carries 540,000 barrels of oil and natural gas liquids daily across Wisconsin and Michigan to refineries in Sarnia, Ont., are by now well-known.
Line 5’s defenders, which include the federal government, say a shutdown would cause major economic disruption across the Prairies and the U.S. Midwest, where it provides feedstock to refineries in Michigan, Ohio and Pennsylvania.
It also supplies key refining facilities in Ontario and Quebec, and is vital to the production of jet fuel for major airports on both sides of the Canada-U.S. border, including Detroit Metropolitan and Pearson International in Toronto.
This report by The Canadian Press was first published June 17, 2023.
From the Fraser Institute
By Jason Clemens and Jake Fuss
Under the new budget plan, this wedge between what the government collects in revenues versus what is actually spent on programs will rise to 13.0 per cent by 2029/30. Put differently, slightly more than one in every eight dollars sent to Ottawa will be used to pay interest on debt for past spending.
The Carney government’s much-anticipated first budget landed on Nov. 4. There’s been much discussion by pundits and analysts on the increase in the deficit and borrowing, the emphasis on infrastructure spending (broadly defined), and the continued activist approach of Ottawa. There are, however, several critically important aspects of the budget that are consistently being misstated or misinterpreted, which makes it harder for average Canadians to fully appreciate the consequences and costs of the budget.
One issue in need of greater clarity is the cost of Canada’s indebtedness. Like regular Canadians and businesses, the government must pay interest on federal debt. According to the budget plan, total federal debt will reach an expected $2.9 trillion in 2029/30. For reference, total federal debt stood at $1.0 trillion when the Trudeau government took office in 2015. The interest costs on that debt will rise from $53.4 billion last year to an expected $76.1 billion by 2029/30. Several analyses have noted this means federal interest costs will rise from 1.7 per cent of GDP to 2.1 per cent.
These are all worrying statistics about the indebtedness of the federal government. However, they ignore a key statistic—interest costs as a share of revenues. When the Trudeau government took office, interest costs consumed 7.5 per cent of revenues. This means taxpayers were foregoing 7.5 per cent of the resources they sent to Ottawa (in terms of spending on actual programs) because these monies were used to pay interest on debt accumulated from previous spending.
Under the new budget plan, this wedge between what the government collects in revenues versus what is actually spent on programs will rise to 13.0 per cent by 2029/30. Put differently, slightly more than one in every eight dollars sent to Ottawa will be used to pay interest on debt for past spending. This is one way governments get into financial problems, even crises, by continually increasing the share of revenues consumed by interest payments.
A second and fairly consistently misrepresented aspect of the budget pertains to large spending initiatives such as Build Canada Homes and Build Communities Strong Fund. The former is meant to increase the number of new homes, particularly affordable homes, being built annually and the latter is intended to provide funding to provincial governments (and through them, municipalities) for infrastructure spending. But few analysts question whether or not these programs will produce actual new spending for homebuilding or simply replace or “crowd-out” existing spending by the private sector.
Let’s first explore the homebuilding initiative. At any point in time, there are a limited number of skilled workers, raw materials, land, etc. available for homebuilding. When the federal government, or any government, initiates its own homebuilding program, it directly competes with private companies for that skilled labour (carpenters, electricians, etc.), raw materials (timber, concrete, etc.) and the land needed for development. Put simply, government homebuilding crowds out private-sector activity.
Moreover, there’s a strong argument that the crowding out by government results in less homebuilding than would otherwise be the case, because the incentives for private-sector homebuilding are dramatically different than government incentives. For example, private firms risk their own wealth and wellbeing (and the wellbeing of their employees) so they have very strong incentives to deliver homes demanded by people on time and at a reasonable price. Government bureaucrats and politicians, on the other hand, face no such incentives. They pay no price, in terms of personal wealth or wellbeing if homes, are late, not what consumers demand, or even produce less than expected. Put simply, homebuilding by Ottawa could easily result in less homes being built than if government had stayed out of the way of entrepreneurs, businessowners and developers.
Similarly, it’s debatable that infrastructure spending by Ottawa—specifically, providing funds to the provinces and municipalities—results in an actual increase in total infrastructure spending. There are numerous historical examples, including reports by the auditor general, detailing how similar infrastructure spending initiatives by the federal government were plagued by mismanagement. And in many circumstances, the provinces simply reduced their own infrastructure spending to save money, such that the actual incremental increase in overall infrastructure spending was negligible.
In reality, some of the major and large spending initiatives announced or expanded in the Carney government’s first budget, which will accelerate the deterioration of federal finances, may not deliver anything close to what the government suggests. Canadians should understand the real risks and challenges in these federal spending initiatives, along with the debt being accumulated, and the limited potential benefits.
Jason Clemens
Executive Vice President, Fraser Institute
Jake Fuss
Director, Fiscal Studies, Fraser Institute
From the Fraser Institute
By Jake Fuss and Austin Thompson
The Carney government’s first budget tabled on Tuesday promises to “supercharge” homebuilding across the country. But Ottawa’s flagship housing initiative—a new federal agency, Build Canada Homes (BCH)—risks “supercharging” federal debt instead while doing little to boost construction.
The budget accurately diagnoses the root cause of Canada’s housing shortage—costly red tape on housing projects, sky-high taxes on homebuilders, and weak productivity growth in the construction sector. But the proposed cure, BCH, does nothing to fix these problems despite receiving a five-year budget of $13 billion.
BCH’s core mandate is to build and finance affordable housing projects. But this mission is muddled by competing political priorities to preference Canadian building materials and prioritize “sustainable” construction materials. Any product that needs a government preference to be used is clearly not the most cost-effective option. The result—BCH’s “affordable” homes will cost more than they needed to, meaning more tax dollars wasted.
Ottawa claims BCH will improve construction productivity by “generating demand” (read: splashing out tax dollars) for factory-built housing. This logic is faulty—where factory-built housing is a cost-effective and desirable option, private developers are already building it. “Prioritizing” factory-built homes amounts to Ottawa trying to pick winners and losers—a strategy that reliably wastes taxpayer dollars. The civil servants running BCH lack the market knowledge and cost-cutting incentives of private homebuilders, who are far better positioned to identify which technologies will deliver the affordable homes Canadians need.
The government also insists BCH projects will attract more private investment for housing. The opposite is more likely—BCH projects will compete with private developers for limited investment dollars and construction labour. Ottawa’s intrusion into housing development could ultimately mean fewer private-sector housing projects—those driven by the real needs of homebuyers and renters, not the Carney government’s political priorities.
Despite its huge budget and broad mandate, BCH still lacks clear goals. Its only commitment so far is to “build affordable housing at scale,” with no concrete targets for how many new homes or how affordable they’ll be. Without measurable outcomes, neither Ottawa nor taxpayers will know whether BCH delivers value for money.
You can’t solve Canada’s housing crisis with yet another federal program. Ottawa should resist the temptation to act as a housing developer and instead create fiscal and economic conditions that allow the private sector to build more homes.
Jake Fuss
Director, Fiscal Studies, Fraser Institute
Austin Thompson
Senior Policy Analyst, Fraser Institute
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