Opinion | Line 5: an unnecessary and imprudent investment

What are the full costs of our continued dependence on fossil fuels?  

The answer should inform the Whitmer administration’s decisions on the future of Line 5 — the 67-year old pipeline system transporting crude oil across Michigan and under the Straits of Mackinac.

The burning of fossil fuels affects the environment and public health in ways that are well documented by scientists, economists, and public health officials. The impact from fossil fuel uses include respiratory diseases from air pollution, environmental degradation of surface and groundwater, and acidification of oceans and lakes.   

The combustion of fossil fuels also accounts for 80 percent of anthropogenic greenhouse gas emissions — by far, the predominant cause of the evolving climate crisis.

Economists call these effects of fossil fuel development and combustion “negative externalities” that are not accounted for in the commodity prices of fossil fuels but are, nevertheless, very real costs that are ultimately passed along to the public.  The International Monetary Fund (IMF) classifies negative externalities attributed to fossil fuels as “subsidies” that totaled over $4.4 trillion in 2017 alone. 

But the IMF’s accounting of the environmental and health costs associated with the use of fossil fuels is incomplete.  As the improved economics of clean energy technologies like wind and solar energy, electric vehicles, and battery storage begin to displace fossil fuel-based technologies, fossil fuel companies are leaving new categories of costly environmental and health liabilities to the public.

The oil development industry lost an estimated $280 billion between 2007 and 2018.  Since 2015, more than 200 North American oil and gas producers have filed for bankruptcy protection, leaving $130 billion in debt.  As these oil and gas developers terminate operations, they leave a legacy of hugely expensive problems to the public.

In addition to devalued landscapes and contaminated water and soils, failed oil and gas companies will leave an estimated 2.6 million abandoned oil and gas wells to the public requiring an estimated $280 billion to properly close.  Until properly closed – a highly unlikely occurrence in the foreseeable future —the wells will leak millions of tons of residual methane, a greenhouse gas 28 times more potent than carbon dioxide.

Long-term market trends and recent events strongly suggest the need for fossil fuel-related infrastructure is decreasing significantly.  Yet Enbridge, Inc. and its subsidiaries want to construct a tunnel to extend the life of Line 5 for 99 years while petroleum industry economists are warning that peak oil demand is near or may have already arrived.  

British Petroleum’s chief economist recently indicated that BP would undertake a fundamental restructuring of its business model to invest in zero-carbon energy sources.  The world’s 8th largest bank, BNP Paribas, reports “that the economics of oil for gasoline and diesel vehicles versus wind-and solar-powered EVs are now in relentless and irreversible decline, with far-reaching implications for both policymakers and the oil majors.” 

The world’s major auto manufacturers are indicating that electric drivetrains will dominate their future manufacturing investments, while the International Energy Agency (IEA) projects that adoption of electric vehicles (EVs) will result in reduced oil demand of 2.5 – 4.2 million barrels per day by 2030.

For Enbridge, the major transporter of tar sand oil from Canada, the future is bleak.

Seventeen major tar sands projects have been cancelled in the last several years while several international oil companies are divesting their interests in Alberta tar sands.  Meanwhile, California has announced a future ban on the sale of petroleum powered vehicles, joining 18 countries and 25 metropolitan areas that have announced their intention to ban future sales of vehicles with internal combustion engines.  

The global insurance industry is signaling that they will no longer invest in or insure tar sands related projects and pipelines.  Zurich Insurance Group join announced an updated fossil fuel policy, cutting both insurance and investment support for companies significantly involved in tar sands or oil shale. And global leader AXA is “phasing out of insurance coverage for new coal construction projects and oil sands businesses.

All of these market trends put the question of whether there is a future market need for Enbridge’s current carrying capacity in its Line 5 pipeline system.