Canadian energy distributor Enbridge Inc. (ENB - Free Report) recently expressed its dissatisfaction over a state agency's judgment related to its plan to replace the 50-year old Line 3 oil pipeline in Minnesota.
The replacement program of Line 3 oil pipeline received the green signal from the Canadian federal government in November 2016. However, the U.S. regulatory board has a different opinion. It declared in September 2017 that both the existing and planned lines are not required for the state's oil demand. The Minnesota Department of Commerce said that the state's demand for oil has remained more or less the same in the past decade, which contradicts Enbridge's belief that the pipeline is critical to serve oil refineries in Minnesota and its periphery.
The situation has led the Minnesota Public Utilities Commission to consider whether certifying the project is a necessity as the environmental and tribal groups have opposed the pipeline strongly. Most importantly, the pipeline's potential impact on the pristine waters, a place for the Native Americans to harvest rice, is being considered. The U.S. regulatory board stated that the benefits from the pipeline are not enough to justify the risks involved in the project.
Importance of the Project
The Line 3 pipeline is part of Enbridge's pipeline network that ships around 3 million barrels of oil on an average per day from Canada across Northern Minnesota. A portion of this oil serves two refineries in Minnesota. The rest of the oil goes to other refineries located in the Midwest and other places.
The pipeline needs frequent maintenance as it is quite old. To increase the pipeline's safety and its volume, Enbridge proposed the plan of replacement. It believes the approval of the replacement project will help the refineries in Minnesota and the regional oil market. Moreover, Enbridge believes that the jobs created through the project and following its completion will be important for the state's economy.
The capital cost of the project in Canada is estimated to be C$5.3 billion while the portion in the United States will cost $2.9 billion. The pipeline will transport light, medium and heavy crude oil. The fate of the pipeline's Minnesota portion depends on the Public Utilities Commission's verdict, which will be out in April 2018.
Headquartered in Calgary, Alberta, Enbridge is a leading energy infrastructure company. One of its businesses is the transportation of energy through the most extensive and advanced crude and liquids pipeline system that spreads across 17,511 miles globally. Through the Mainline and Express pipelines, the company transports 2.8 million barrels of crude every day, which accounts for almost 68% of the Canadian crude oil production that is transported to the United States.
Enbridge has lost 1.5% of its value year to date against 3.1% growth of its industry.
Zacks Rank and Stocks to Consider
Enbridge currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the oil and energy sector are Enbridge Energy, L.P. (EEP - Free Report) , Par Pacific Holdings, Inc. (PARR - Free Report) and Canadian Natural Resources Limited (CNQ - Free Report) . Enbridge Energy and Par Pacific sports a Zacks Rank #1 (Strong Buy) while Canadian Natural has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Enbridge Energy’s earnings for 2017 are expected to surge 24.2% year over year. The partnership delivered a positive earnings surprise of 7.7% in the second quarter of 2017.
Par Pacific’s sales for the third quarter of 2017 are expected to increase 28.5% year over year. The company delivered a positive average earnings surprise of 9.1% in the last four quarters.
Canadian Natural’s sales for the third quarter of 2017 are expected to increase 82.3% year over year. The company delivered a positive earnings surprise of 46.9% in the second quarter of 2017.
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