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Enbridge's (ENB) Line 5 Pipe Replacement Gets Michigan's Nod

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Enbridge Inc. (ENB - Free Report) recently decided to replace its 65-year old crude pipes of Line 5 under the Straits of Mackinac. The decision has been backed by the Michigan government. The company will install a multi-use utility tunnel that is to be drilled through the bedrock of the channel and decommission the old pipes. The cost of the project is estimated in the range of $350-$500 million.

The project involves extensive engineering works and is expected to take 7-10 years for completion. Until then, around 23 million gallons of natural gas liquids and oil, which are used to make propane, will be transported through the lines daily. The cost of designing, building and maintaining the tunnel will be met by the company.

This decision is in line with the recent demands from environmental activists, who were wary of the oil line’s present state, fearing that it could lead to a potential spill. In April, the pipeline suffered damage from a ship’s anchor. Moreover, protective coating of the pipes is not intact at several places. Hence, the project further ensures safety of the pipeline as well as the water body. It will enable the company to deliver uninterrupted energy sources to the residents of the state.

The independent state agency of Michigan, Mackinac Bridge Authority (which controls operations of the Mackinac Bridge across the Straits of Mackinac) will help Enbridge to receive necessary government permits for the project. Once the project is completed, the agency will own the tunnel and lease it to Enbridge for pipeline operations. Going forward, the agency may strike similar deals with providers of electric and telecommunication cables. 

Price Performance

Calgary, Canada-based Enbridge has lost 18.2% in the past year compared with 11.4% collective fall of its industry.



Zacks Rank and Stocks to Consider

Currently, Enbridge has a Zacks Rank #3 (Hold). Investors interested in the oil and gas sector can opt for some better-ranked stocks like Petroleo Brasileiro S.A. (PBR - Free Report) or Petrobras, Shell Midstream Partners, L.P. (SHLX - Free Report) and CNX Resources Corporation (CNX - Free Report) , each flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Petrobras is the largest integrated energy firm in Brazil and one of the major players in Latin America. It pulled off an average positive earnings surprise of 10.4% in the last four quarters.

Shell Midstream Partners is involved in owning, operating, developing and acquiring pipelines, and other midstream assets. The partnership delivered an average positive earnings surprise of 7.9% in the trailing four quarters.

CNX Resources is an independent oil and gas exploration and production company. The company delivered a positive earnings surprise of 250.0% in the last reported quarter.

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