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More Canada-U.S. Pipeline Problems – Michigan’s Push to Shutdown Line 5

Woods, LaFortune LLP
Author: Nicholas Anderson, Woods, LaFortune LLP

The state of Michigan has demanded that a Canadian company, Enbridge Energy Company (Enbridge), close the portion permitted by an easement of its oil pipeline—Line 5—that crosses the Straits of Mackinac, which joins Lake Michigan and Lake Huron. Line 5 is an interstate, interprovincial, and international pipeline, owned and operated by Enbridge. It is used to transport petroleum products from Wisconsin, through Michigan, to Ontario, Québec, and further locations in Canada.[1]

Michigan’s Notice of Termination of the easement applies to a 4-mile portion of dual lines along the lake floor and ordered Enbridge to cease operation by May 12, 2021.[2]

Enbridge has refused to shut down and has taken the matter to court, invoking international treaty provisions.

In the fall of 2020, Governor Gretchen Whitmer revoked an easement permit, first granted in 1953, citing the risk of oil spills. Governor Whitmer has called Line 5 a “ticking time bomb” and her government has taken the position that the line is susceptible to boat anchor strikes and other potential hazards which could lead to massive contamination of the Great Lakes and surrounding lands. During the 68 years of the pipeline’s operation, there has never been a major leak or accident resulting in the releases of petroleum products. However, the 2010 spill of diluted bitumen from Enbridge’s Line 6 B into the Kalamazoo River seems to have been the “trigger” for local Michigan community concerns that have grown to include various environmental organizations, indigenous groups, and activists, including the National Wildlife Federation.

Enbridge has countered Michigan’s demand with an action for declaratory and injunctive relief before the United States District Court for the Western District of Michigan Southern Division (Federal Court), arguing that the state lacks the authority to terminate the Line 5 easement as the matter falls under federal jurisdiction under the Pipeline Safety Act. Enbridge argues that the U.S federal body—the Pipeline and Hazardous Materials Safety Administration (PHMSA)—is the only body with the legislative authority to impose safety regulations in this matter.[3]

Michigan has responded, arguing it has jurisdiction and that Line 5 is a matter for its own state courts. Its position is based in the claim that the ongoing operation of the pipeline violates the “public trust doctrine” and that there is a common law obligation on the state to protect waters such as the Great Lakes in favour of the public interest for navigation, hunting, and fishing.[4]

At this point, the May 12 deadline has passed as both sides are participating in court-ordered mediation. Line 5 remains in operation by Enbridge.

The Government of Canada has intervened in the Federal Court case with an amicus brief addressing both international legal issues and the potential economic damage to both Canada and the United States if Line 5 is shut down.[5] Canada’s brief raises U.S. treaty obligations pursuant to the 1977 Agreement between the Government of the United States and the Government of Canada concerning Transit Pipelines,[6] both countries’ interests related to energy security, and the well-being of the overall bi-lateral relationship. Canada argues that the Federal Court should order a hold on the litigation to allow completion of treaty-related discussions between Canada and the United States.[7] Article IX (2) provides an option for parties to settle disputes under the treaty by negotiation, other mutually agreed means, or by arbitration if the parties cannot decide within 60 days of either party’s request. As the treaty has been ratified by the U.S. Senate, Canada argues that it governs as a matter of U.S. law.[8]

Canada argues that the treaty underscores the right of Canada and the United States to issue regulations that are “just and reasonable” under Article IV and that the state of Michigan is neither the appropriate regulatory authority, nor is it purporting to “regulate” in this matter. This is putting the United States in a position that Canada also asserts is violation of Article II(1),[9] which states that no public authority in the territory of either party shall institute any measures “…which are intended to, or which would have the effect of, impeding, diverting, redirecting or interfering with in any way the transmission of hydrocarbon in transit.”[10]

Citing the 68-year record of operation without a major accident and the projected extensive damage to Canada’s energy security and hydrocarbon supply chain caused by a shutdown, Canada asks the Federal Court to “exercise its remedial discretion” in a way that “gives substantial weight to the overall public interest and the balance of harm” that would result if Michigan’s termination order was permitted to take effect.[11] It argues that public interest is not served by the loss of relatively safe and reliable access of fuel to Central Canada and parts of the Northern United States, “ … businesses, employees, consumers, and potentially the environment, would suffer … and a hastily and unduly imposed shutdown would undermine the confidence in reciprocal, enforceable, commitments and cross-border cooperation that lies at the heart of the United States-Canada relationship.”[12]

In its brief, Canada points to the long history of Canada-U.S. cooperation[13] and that it was the United States which pursued the 1977 pipeline treaty to protect a pipeline running from Alaska through Canadian territory to the U.S. Pacific-Northwest. However, the reality of the old American political adage that “all politic is local” may well hinder diplomatic efforts by Canada to have the Biden Administration weigh in its behalf. Christopher Sands, director of the Canada Institute at the Woodrow Wilson International Center, suggested that Biden may not have the political capital to oppose Governor Whitmer, who is one of his key Democratic allies and an important figure for the party. In fact, the governor was one of President Biden’s campaign co-chairs and the leader of the Democratic Party in one of the key “swing states”. She has been quoted to the effect that she hopes that the Biden Administration will support her position. The revocation of the easement was one of Governor Whitmer’s key campaign promises and her officials are pushing to have the matter decided at the state court level. Michigan state court judges are elected locally and four of the seven on the Michigan Supreme Court are affiliated with the Democratic Party.[14]

Michigan’s response to Canada’s amicus brief is not public at this point, and Enbridge and the State of Michigan are continuing with court-ordered mediation. A negotiated or arbitrated resolution pursuant to the 1977 treaty is still a possibility if the current mediation fails. That said, Governor Whitmer is also fighting against Michigan’s Act 359, which would allow Enbridge to dig a tunnel to house the line and protect it from hazards such as anchor strikes. The act, passed in the final days of former Republican governor’s administration, created the Mackinac Straits Corridor Authority and formalized a deal with Enbridge to complete a $500 million utility tunnel under the Mackinac straits to house a rebuilt Line 5. In this separate dispute, the Michigan Court of Appeal recently upheld the act in favour of Enbridge. Michigan’s Attorney General has already announced the state’s intention to apply for leave with the Michigan Supreme Court.

If Governor Whitmer prevails, Canada may still have further international legal alternatives. Although the CUSMA does not provide investor-state arbitration provisions as between Canada and the United States with respect to investment protection, the key investment obligations remain in place on a state-to-state basis.

Moreover, NAFTA’s Chapter 11 is still in force for legacy investments up to three years after the coming into force of CUSMA.[15] Enbridge may well consider bringing claims directly against the United States. The expropriation, national treatment, and minimum standard of treatment obligations may be of relevance.[16] Enbridge can seek monetary compensation under these provisions but would not be able to prevent Michigan’s termination from going into effect.

As another alternative, Canada may wish to pursue countermeasures based on the breach of its treaty rights. The leading case on countermeasures is the ICJ’s decision in Gabčíkovo–Nagymaros Dams, where the four conditions were set out. First, the countermeasure must be taken in response to a previous international wrongful act of another state and must be directed against that state. Second, the injured state must have already called upon the wrongdoing state to discontinue the wrongful act or make reparation, but the request was refused. Third, the countermeasure must be commensurate with the injury suffered, taking into account the rights in question. Fourth, the purpose of the countermeasure must be to induce the wrongdoing state to comply with its international obligation and must therefore be reversible.[17]

Although this is an option for Canada, it may be unlikely for Canada to take countermeasures against its number one ally, the United States.

Prepared by Nicholas Anderson, summer intern at Woods, LaFortune LLP (2nd year student in University of Ottawa Law School/ Carleton University joint JD/MA program). Reviewed by Michael Woods.

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[1] Enbridge Energy Ltd. v State of Michigan, 2020 USDCWDMSD, Case 1:20-cv-01141 ECF No. 1, PageID.1 Online: < https://www.eenews.net/assets/2020/11/25/document_ew_05.pdf>

[2] Enbridge Energy LP, supra note 1 at 1.

[3] U.S.C. 601101-60301 Online: < https://www.watershedcouncil.org/uploads/7/2/5/1/7251350/document_1._49us_code_chapters_601_chapters_603.pdfm_.pdf >

[4] State of Michigan v Enbridge, Complaint, Circuit Court for the 30th Judicial Circuit Ingham County. (Nov 13, 2020) at 8-9. Online: < https://content.govdelivery.com/attachments/MIEOG/2020/11/13/file_attachments/1600921/State%20of%20Michigan%20v.%20Enbridge,%20Complaint%20%2811.13.20%29.pdf>

[5] State of Michigan v Enbridge, Brief amicus curiae of the Government of Canada. May 11th 2021, online: < https://www.canada.ca/content/dam/nrcan-rncan/documents/GOC%20Amicus%20-%20FINAL.pdf>

[6] Agreement between the Government of the United States and the Government of Canada concerning Transit Pipelines. (1977) Ottawa, At Article II Online: < https://www.treaty-accord.gc.ca/text-texte.aspx?id=101884>

[7] See page 10 of the Amicus Brief.

[8] State of Michigan v Enbridge, Brief amicus curiae of the Government of Canada. May 11th 2021, online: < https://www.canada.ca/content/dam/nrcan-rncan/documents/GOC%20Amicus%20-%20FINAL.pdf>

[9] Ibid at 9-10.

[10] Agreement between the Government of the United States and the Government of Canada concerning Transit Pipelines. (1977) Ottawa, At Article II Online: < https://www.treaty-accord.gc.ca/text-texte.aspx?id=101884>

[11] See page 13 of the Amicus Brief

[12] Amicus Brief page 15

[13] Ibid at 3.

[14] Ballottpedia, “Michigan Supreme Court Elections, 2020” Online: < https://ballotpedia.org/Michigan_Supreme_Court_elections,_2020 >

[15] CUSMA, Chapter 14, Annex 14-C.

[16] Sonja Pavic, Riyaz Dattu, “Canada seeks to reform NAFTA’s investor-state dispute settlement chapter” Osler, (Aug 23, 2017) online: < https://www.osler.com/en/resources/cross-border/2017/canada-seeks-to-reform-nafta-s-investor-state-disp>

[17] Gabčikovo-Nagymaros Project, Hungary v Slovakia, Judgment, Merits, ICJ GL No 92, [1997] ICJ Rep 7, [1997] ICJ Rep 88, (1998) 37 ILM 162, ICGJ 66 (ICJ 1997), 25th September 1997, International Court of Justice [ICJ].

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