Opinion: Closing Line 5 comes with high cost
Enbridge is attempting to improve the safety and reliability of a portion of its Line 5 pipeline through the Straits of Mackinac. This segment of pipeline has never leaked and is inspected regularly by Enbridge. These inspections (as reported by federal pipeline regulatory officials) have found the pipe in very good condition.
In response to concerns of the effects of a potential major oil spill, Enbridge has decided to make a safe pipeline even safer. The company came to an agreement with the State of Michigan to construct a new pipeline at the Straits and house it in a protective tunnel more than 100 feet into bedrock below the lake bed. This would virtually eliminate the chance of a leak into the Straits area. The tunnel is expected to take five years to complete; one year for geotechnical investigations, two years for final design and permitting, and two years for construction. Enbridge also has agreed to shoulder 100 percent of the projected $500 million cost.
Regardless of the agreement, Gov. Gretchen Whitmer has openly suggested that Enbridge shut down Line 5 within two years — before the tunnel and replacement is complete. She has also suspended state agency actions on the new tunnel. In addition, Attorney General Dana Nessel has stated she will take legal action to close the entire pipeline.
The economic benefits of the new pipeline are substantial compared to the costs of halting the use of the existing pipeline.
Transportation of oil is two to three times more expensive by rail than pipeline, and four times more expensive by truck. According to the 2017 Alternatives Analysis for the Straits Pipelines report, more than 2,000 tanker trucks would be required to deliver each day what Line 5 transports in Michigan. Even if this were feasible, it would add to already poor road conditions (especially when the trips are doubled for a round trip), traffic congestion, increased risk for more accidents threatening human life and would certainly result in substantial cost increases for fuel and the myriad of products and services for which fuel is an input.
Closing Line 5 would risk the loss of more than half of the jet fuel for Detroit Metro Airport, with rising prices for fuel and the possible need for redirecting Detroit flights. It would also threaten the closure of Toledo’s refineries. As no other alternative is readily available, this would result in the loss of several billion dollars in economic output and thousands of skilled-trade jobs in the region.
The Fraser Institute has also found that shipping by pipeline is environmentally safer than by rail or truck. Consequently, halting the operation of Line 5 would come at a substantial cost to consumers and could actually increase environmental hazard, as shutting down the pipeline would do nothing to reduce the need for oil.
The elimination of Line 5 would have substantial negative effects on Michigan’s economy. For example, Enbridge’s capital expenditures for all of its assets in Michigan exceed $90 million annually. Its operating and administrative expenses exceed $225 million, it spends $8 million on Michigan worker salaries, and pays local and state government units more than $60 million in annual property taxes.
These highly probable negative impacts on Michigan and regional economies need to be honestly compared to the highly unlikely potential cost from a spill.
While there is a remote possibility of a leak from Line 5 in the next five years, the cost to our economy by halting the pipeline rather than proceeding with the construction of a new line embedded in a tunnel 100 feet below the water line is likely to be substantially greater than any potential benefit. And the long-term gain by making the pipeline in the Straits virtually impervious to damage will pay dividends to the Michigan economy for decades to come.
Gary Wolfram is the William Simon Professor of Economics at Hillsdale College.