(Adds analyst comment)
Nov 12 (Reuters) - Minnesota regulators on Thursday approved key permits for Enbridge Inc’s Line 3 crude pipeline replacement project, paving the way for federal permits from the U.S. Army Corps of Engineers after years of delays.
The Minnesota Pollution Control Agency (MPCA) announced approvals for the Line 3 project, including the contested 401 Water Quality Certification, and the Minnesota Department of Natural Resources released the final eight permits for the project.
Line 3, built in the 1960s, ships crude from a Canadian oil hub in Edmonton, Alberta, to U.S. Midwest refiners. It currently carries less oil than it was designed for because of age and corrosion. Replacing it would allow Calgary-based Enbridge to roughly double its capacity to 760,000 barrels per day.
The project still needs final permits and authorizations before construction can begin. The Canadian portion is complete, but Enbridge has run into repeated obstacles in Minnesota, where reviews have lasted about five years.
“With the 401 permit in hand, the next major step would be the receipt of the federal 404 permit, which could happen in the next few weeks,” Scotiabank analysts said in a note.
“Absent any successful legal challenges/injunctions, we believe the project is well positioned to start construction in the new year.”
Environmental groups challenged the draft water permits for the pipeline’s construction, which were approved by MPCA in February.
A shortage of pipelines has weighed on Canadian oil prices and pushed it to trade at deep discounts compared with benchmark futures in recent years, but capacity became ample this year after steep oil production cuts during the COVID-19 pandemic.
Canadian oil traders said the news was bullish for crude differentials.
“This is a good thing for sure. Finally ... it’s taken years to get permits and approvals,” one trader said. (Reporting by Devika Krishna Kumar in New York; Additional reporting by Shradha Singh in Bengaluru Editing by Chris Reese, Marguerita Choy and David Gregorio)