BEFORE THE MINNESOTA OFFICE OF ADMINISTRATIVE HEARINGS 600 North Robert Street St. Paul MN 55101

Transcription

1 BEFORE THE MINNESOTA OFFICE OF ADMINISTRATIVE HEARINGS 00 North Robert Street St. Paul MN 1 FOR THE MINNESOTA PUBLIC UTILITIES COMMISSION th Place East, Suite 0 St Paul MN 1-1 IN THE MATTER OF THE APPLICATION OF ENBRIDGE ENERGY, LIMITED PARTERNSHIP FOR A CERTIFICATE OF NEED FOR THE LINE REPLACEMENT PROJECT IN MINNESOTA FROM THE NORTH DAKOTA BORDER TO THE WISCONSIN BORDER Docket No. PL/CN-1-1 OAH Docket No SURREBUTTAL TESTIMONY OF KATE O CONNELL ON BEHALF OF MINNESOTA DEPARTMENT OF COMMERCE DIVISION OF ENERGY RESOURCES OCTOBER, 01

2 SURREBUTAL TESTIMONY OF KATE O CONNELL IN THE MATTER OF THE APPLICATION OF ENBRIDGE ENERGY, LIMITED PARTERNSHIP FOR A CERTIFICATE OF NEED FOR THE LINE REPLACEMENT PROJECT IN MINNESOTA FROM THE NORTH DAKOTA BORDER TO THE WISCONSIN BORDER MPUC Docket No. PL/CN-1-1 OAH Docket No TABLE OF CONTENTS I. INTRODUCTION... 1 II. PURPOSE AND SCOPE... 1 III. OVERALL OBSERVATIONS... A. Accurate Representations of Department s Testimony... B. Roles of Department Witnesses... IV. RESPONSES TO REBUTTAL TESTIMONIES... A. Enbridge Mr. Paul Eberth.... Ms. Laura Kennett Mr. Art Haskins.... Mr. Allan Baumgartner Mr. Neil Earnest.... Mr. John Glanzer.... Mr. Jack Fleeton.... Dr. Richard Lichty.... Mr. Chris Johnston...

3 . Mr. Barry Simonson.... Ms. Bitta Bergland... 1 B. Shippers for Secure, Reliable, and Economical Petroleum Transportation: Mr. Paul Kahler and Mr. Edward Shahady... V. CONCLUSIONS AND RECOMMENDATIONS... 1

4 I. INTRODUCTION Q. Please state your name, occupation, and business address. A. My name is Kate O Connell. I am the Manager of the Energy Regulation and Planning Unit of the Minnesota Department of Commerce, Division of Energy Resources (Department). My business address is th Place East, Suite 0, Saint Paul, Minnesota, 1. Q. Did you file Direct Testimony in this matter? A. Yes. II. PURPOSE AND SCOPE Q. What is the purpose of your Surrebuttal Testimony? A. I respond to portions of the rebuttal testimonies of the following witnesses: Mr. Paul Eberth (Enbridge); Ms. Laura Kennett (Enbridge); Mr. Art Haskins (Enbridge); Mr. Allan Baumgartner (Enbridge); Mr. Neil Earnest (Enbridge); Mr. John Glanzer (Enbridge); Mr. Jack Fleeton (Enbridge); Dr. Richard Lichty (Enbridge); Mr. Chris Johnston (Enbridge); O Connell Surrebuttal / 1

5 Mr. Barry Simonson (Enbridge); Ms. Bitta Bergland (Enbridge); and Mr. Paul Kahler and Mr. Edward Shahady (Shippers for Secure, Reliable, and Economical Petroleum Transportation, of Shippers). III. OVERALL OBSERVATIONS Q. What are your overall observations? A. In reviewing rebuttal testimonies, I noted in a few areas that witnesses inadvertently omitted key parts of my Direct Testimony such that the rebuttals actually respond to somewhat different testimony than I filed. As a result, to ensure that the record is accurate, a portion of my Surrebuttal Testimony consists of providing a correct representation of my Direct Testimony and demonstrating how Enbridge s rebuttals do not lead to the conclusion that Enbridge has shown a need for the Proposed Project. In addition, I note an apparent confusion about the roles of Dr. Fagan, Mr. Dybdahl and myself on behalf of the Department in this case, despite the introductory information in my Direct Testimony at, so I delineate those roles again A. ACCURATE REPRESENTATION OF DEPARTMENT S TESTIMONY Q. Please provide an example where your Direct Testimony appears not to be correctly represented. A. Several witnesses inaccurately stated or implied that I recommended that the Minnesota Public Utilities Commission (Commission) require Enbridge to shut down the O Connell Surrebuttal /

6 existing Line, with no replacement. 1 For example, Mr. Earnest stated: nowhere does Ms. O Connell discuss the impact of denial [of the Proposed Project] combined with permanent removal of the existing Line from service, as she seems to imply is the preferred option. (Emphasis added.) Enbridge Ex. at, Schedule 1 (Earnest Rebuttal). Likewise, Mr. Fleeton stated the following in his rebuttal of my testimony taking Line out of service prior to Line Replacement being constructed Enbridge Ex. at (Fleeton Rebuttal) and removing existing Line without a replacement as if I had made such a recommendation Q. Did you recommend that the Commission require Enbridge to take the existing Line out of service? A. No. As a result, Mr. Earnest is correct in noting that the Department did not analyze the effects of shutting down existing Line with no replacement, since the Department did not make such a recommendation. Instead, I provided the following question and answer: Q. Wouldn t the continued operation of the existing Line also have an impact on tribal resources? A. Yes, along with all other resources along the route of the existing Line. Thus, in light of the serious risks of the existing Line and the limited benefit that the existing Line provides to Minnesota refineries, Minnesota would be better off if Enbridge proposed to cease operations of the existing Line, without any new pipeline being built. However, that is not what Enbridge proposes. Unfortunately, as discussed above, Enbridge does not even propose to cease operation of the existing Line, even with the high environmental risks and economic costs. Instead, despite the extensive testimony 1 O Connell Surrebuttal /

7 about risks of operating the existing Line, Enbridge proposes to continue operating the existing Line unless the Commission grants Enbridge a certificate for its proposed Project. DER Ex. at - (O Connell Direct) (emphasis added). Emphasized above is the important portion that has been omitted in reference to my Direct Testimony. This testimony points to Enbridge s responsibility to determine that it will no longer operate existing Line Q. Why didn t you recommend that the Commission require Enbridge to take existing Line out of services? A. I am not aware that the Commission has the authority to do so, particularly since the existing Line never received a certificate of need in Minnesota. Further, I am not aware that Enbridge has either consented to the Commission s jurisdiction in this regard or identified any basis by which the Commission could require Enbridge to cease operations of existing Line. Moreover, as I discussed in my Direct Testimony at page, line to page 1, line, the Consent Decree does not require Enbridge to cease operating the existing Line and does not determine that there is a need for the capacity of a new Line. Mr. Eberth confirms that the Department of Justice (DOJ) does not have the permitting authority to grant approvals for the replacement of Line. Enbridge Ex. at 1 (Eberth Rebuttal). O Connell Surrebuttal /

8 Q. What do you conclude regarding responsibility as to the continuing operations of the existing Line? A. It is Enbridge s business decision whether or not Enbridge will continue to operate the existing Line as an active pipeline in accordance with the Consent Decree. See Enbridge Ex. at Schedule 1 (Eberth Rebuttal). In my opinion, Enbridge s repeated assertions that the Company will cease operations of the existing Line (abandon in place) only if Enbridge gets what it wants in this proceeding puts the cart before the horse regarding a certificate of need and appears to be inconsistent with statements by various Enbridge witnesses as to potential problems that may occur with the continued operation of the existing Line. See, for example, Enbridge Ex. at 1 (Eberth Rebuttal) ( ongoing integrity management efforts will become increasingly difficult, intrusive, and expensive the longer the existing Line remains in operation. ); Enbridge Ex. at (Bergland Rebuttal) ( common sense suggests... that operating any 0- year old pipeline, let alone one that is subject to an ongoing maintenance program designed to address known issues as is the case for the existing Line, has relatively greater potential for release than operating a newly constructed, modern pipeline. ) Q. What do you mean by saying that Enbridge s stance puts the cart before the horse regarding a certificate of need? A. Enbridge asserts, with no support, that a state government agency has the responsibility to decide whether an asset owned by a corporation will continue to operate. Mr. Eberth stated: It is now up to Minnesota regulators whether and when Line is O Connell Surrebuttal /

9 1 replaced in this state. Enbridge Ex. at 1 (Eberth Rebuttal). I discuss Mr. Eberth s interpretation of the Consent Decree further below. Rather than this approach of relying on a state government agency to make a business decision about the risks of operating its existing Line, Enbridge should determine whether it will or will not shut down existing Line and, if it chooses to do so, when existing Line would be shut down. Based on that business decision, the issue before the Commission would be whether a new pipeline is needed and, if so, whether any alternatives can meet the need at the date determined by the Company. As it stands now, Enbridge can continue to operate existing Line under the Consent Decree. Further, the facts in this proceeding indicate that Enbridge has not demonstrated its case for need, as I discuss this issue further below and list at the end of this testimony B. ROLES OF DEPARTMENT WITNESSES Q. You stated above that it appears there was confusion about the roles of Dr. Fagan, Mr. Dybdahl and yourself in this proceeding. Please spell out the roles each witness played in the Department s testimony. A. Regarding Enbridge s assertion that there is a need for another expansion of the Enbridge Mainline system, Dr. Fagan addresses high-level questions about the accuracy of Enbridge s demand forecasts and certain aspects of the effects of Proposed Project on use of rail. Her testimony helps address whether Enbridge met the requirements of Minnesota Rule.0, subpart A(1). O Connell Surrebuttal /

10 Mr. Dybdahl s testimony addresses issues related to insurance and financial guarantees that could help protect Minnesota s environmental interests if the Proposed Project is approved. I use information from Dr. Fagan s analysis along with other information, including highly sensitive trade secret data, to assess whether Enbridge met the remaining components of Minnesota Rule.0. I also include Mr. Dybdahl s recommendations in the list of conditions the Commission may consider to help the Proposed Project meet the need requirements. For ease of reference, I show the entire list. To be clear, I do not adopt Mr. Dybdahl s recommendations, but I rely on Mr. Dybdahl to support the recommendations. 1 IV. RESPONSES TO REBUTTAL TESTIMONIES A. ENBRIDGE 1. Mr. Eberth Q. Which issues do you address regarding Mr. Eberth s Rebuttal Testimony? A. I address Mr. Eberth s discussion of concerns about continued operations of the existing Line, timing language in the Final Consent Decree, greenhouse gas emissions, and the DuPont Bradley Curve. As a result, my Surrebuttal Testimony does not respond to the Rebuttal Testimony of Ms. Lim; instead, I defer to Mr. Dybdahl for that response. O Connell Surrebuttal /

11 i. Continued operations of existing Line Q. What does Mr. Eberth state regarding continued operations of the existing Line? A. Mr. Eberth makes several statements that raise concerns about the continued operations of existing Line, such as: Under the no action alternative, Enbridge would continue to operate existing Line, addressing the ongoing integrity issues with increasing dig and repair activities. Landowners and the environment would continue to be impacted year-over-year, and shippers in Minnesota and neighboring states would continue to experience apportionment. Enbridge Ex. at (Eberth Rebuttal) Even though it is possible to actively manage the integrity of a 0-year-old pipeline like existing Line, to operate it on a safe basis, a newer pipeline will have much less susceptibility to integrity threats based on the use of modern materials, construction, and inspection practices. Enbridge Ex. at (Eberth Rebuttal) As we look to the future, ongoing integrity management efforts will become increasingly difficult, intrusive, and expensive the longer the existing Line remains in operation. Enbridge Ex. at 1 (Eberth Rebuttal). Despite these concerns, and despite being given an opportunity to specify the date by which Enbridge would cease operations of existing Line, Enbridge has chosen not to do so. Q. Did Mr. Eberth clarify the status of the Consent Decree and provide a copy of the final version? A. Yes. I appreciate that Mr. Eberth provided this information. O Connell Surrebuttal /

12 Q. Does the Consent Decree require Enbridge to continue operating existing Line? A. No, the Consent Decree does not require Enbridge to continue operating existing Line Q. Does the Consent Decree prohibit Enbridge from operating existing Line? A. No. The Consent Decree places limits on Enbridge s use of existing Line but does not prohibit the Company from using Line. Specifically, the limits are that Enbridge may transport only light crude oil, and only up to 0,000 bpd. Moreover, the costs of maintaining existing Line are expected to increase over time. These are elements of the Consent Decree that I indicated in my Direct Testimony would encourage Enbridge to consider ceasing operations of existing Line. However, the Consent Decree does not prohibit Enbridge from operating existing Line, as I stated in my Direct Testimony, which Enbridge did not refute: If, based on the facts in this proceeding, the Commission finds that Enbridge did not show a need for the proposed Project, including the proposed increase in size of the crude oil pipeline, the May, 01 Consent Decree does not require construction of a new pipeline; Enbridge may still operate the existing Line. In this event, Enbridge would have to comply with the requirements of the May, 01 Consent Decree as to continued operation. DER Ex. at (O Connell Direct). Q. Does the Consent Decree require a replacement of operating existing Line? A. No. As Mr. Eberth acknowledges, the [Department of Justice] does not have the permitting authority to grant approvals for the replacement of Line. Enbridge Ex. at 1 (Eberth Rebuttal). O Connell Surrebuttal /

13 Q. Does the Consent Decree require the Commission to approve Enbridge s proposal in this proceeding? A. No, the Consent Decree does not bind the Commission regarding Enbridge s request in this proceeding. Q. What do you conclude, given these facts about the Consent Decree? A. Given that Line transports only up to 0,000 bpd of light crude and given that light crude is typically not apportioned, existing Line appears to contribute little to the capacity of the Enbridge Mainline. Yet, even with the limits on existing Line, as noted above, refiners in the Minnesota District have been operating and continue to operate near capacity Q. Does Enbridge reach a similar conclusion? A. No. Mr. Eberth stated Enbridge s view of the Consent Decree: The Consent Decree requires that the original Line be taken out of service only if Enbridge receives approvals for the replacement of Line and constructs and places the replacement Line into service. (Emphasis added.) That is, Enbridge proposes to continue operating existing Line unless the Commission grants the Company s requests in this proceeding. As discussed above, this approach puts the cart before the horse regarding certificates of need. O Connell Surrebuttal /

14 ii. Timing in Consent Decree Q. You asked Enbridge to clarify a timing matter in the Consent Decree. Did Mr. Eberth provide Enbridge s interpretation of the language in the Final Consent Decree? A. Yes, Mr. Eberth responded to this request on page 1 of his Rebuttal Testimony. As discussed below, while I cannot agree with the interpretation in his testimony, I appreciate that Mr. Eberth provided the response. Q. Please describe this issue. A. As discussed in more detail on pages 1-1 of my Direct Testimony, I asked Enbridge to explain how long the operational restrictions identified in the Consent Decree would be in effect on existing Line if Enbridge decides to continue operating the line Q. What did Mr. Eberth state in his Rebuttal Testimony? A. Mr. Eberth provided two interpretations of the language in the Consent Decree. First, as to paragraph 0 of the Consent Decree, Mr. Eberth stated the Company s view that: The longevity of the conditions is dependent on the Commission s decision in these dockets. The conditions placed on original Line by the Consent Decree, paras. (c) and (d), will remain in effect until the sooner of either: (i) the Project becomes operational, at which time the original Line must be permanently decommissioned per the Decree, paras. (b) and (e); or (ii) if no replacement line is approved for construction, until the Consent Decree is terminated. The Consent Decree may terminate no sooner than four years from May, 01, as stated in Section XX, para. 0 of the Decree, which specifies the process for Decree termination following Enbridge s satisfaction of certain conditions, the concurrence of the United States, and Court approval. O Connell Surrebuttal /

15 Enbridge Ex. at 1 (Eberth Rebuttal). Q. Do you agree with Mr. Eberth s statement? A. In part; however, Mr. Eberth left out a third, important option: The conditions placed on original Line by the Consent Decree, paras. (c) and (d), would cease if (iii) Enbridge determines that the cost and risk of maintaining original Line exceed the benefits. In other words, Enbridge omits the business decision to cease operation of Line that has been and continues to be available to the Company Q. What is the second language interpretation you wish to address? A. I asked Enbridge to provide an interpretation of paragraph 0, which states as follows: Notwithstanding termination of other provisions of the Consent Decree, the restrictions on any resumption of operation of Original US Line or Original Line B to transport oil, gas, diluent or any hazardous substance shall remain in effect and enforceable until years after the Effective Date or until Defendant has satisfied the requirements for termination specified above, whichever is later. (Emphasis added) Mr. Eberth provided the following interpretation of paragraph 0: Id. Paragraph 0 is remnant language originally included in the Consent Decree when an earlier version of the Decree provided limited circumstances under which portions of the original Line could be used in the future. While Paragraph 0 remains in the Final Consent Decree, it is superseded by the clear and unambiguous language stating that Enbridge is permanently enjoined from operating original Line once the replacement Line is placed into service (see para. (e) of the Consent Decree). As I understand it, Paragraph 0 no longer has any meaningful application within the Final Consent Decree. O Connell Surrebuttal / 1

16 Q. Is Mr. Eberth s interpretation of the Final Consent Decree consistent with the language in the Consent Decree? A. I do not agree that paragraph 0 has no meaning. It does not seem appropriate to refer to language in a Consent Decree as remnant and attempt to dismiss any meaning within the document. It is unclear whether the requirements in the Consent Decree would terminate as to the operation of the Original Line until all requirements for termination have been satisfied. iii. Greenhouse gas emissions Q. What does Mr. Eberth state regarding greenhouse gas emissions? A. Mr. Eberth summarizes Mr. Glanzer s testimony regarding operations of the proposed -inch pipeline; I address those issues in response to Mr. Glanzer, below. Mr. Eberth also confirms that Enbridge will not use its Neutral Footprint Program for this project, if it is approved. That is, even though Enbridge s electricity consumption in Minnesota will increase under its Proposed Project, Enbridge will no longer offer to offset its higher electricity use with renewable power. Instead, Enbridge proposes to award an unspecified amount of grants to communities in North Dakota, Minnesota, and Wisconsin along Enbridge s Preferred Route. Enbridge Ex. at (Eberth Rebuttal). Thus, I continue to recommend that the Commission require Enbridge to apply the Company s neutral footprint, as the Commission determined in its August 1, 01 Order Clarifying Neutral Footprint Objectives and Requiring Compliance Filing: 1. To fulfill its kwh-for-a-kwh requirement, Enbridge Energy, Limited Partnership shall acquire renewable energy as defined in Minnesota O Connell Surrebuttal / 1

17 Statutes section 1B., subdivision 1(c), to offset all the incremental increase in nonrenewable energy consumed by the Phase project since the project became operational.. Beginning no later than October 1, 01, Enbridge shall make annual filings regarding its compliance with its neutral footprint objectives. Regarding Enbridge s kwh-for-a-kwh requirement, these filings shall include a calculation of (a) the incremental increase in Enbridge s energy consumption due to the Phase project and (b) the share of that energy that comes from nonrenewable sources.. By November 1, 00, and annually thereafter, Enbridge shall document in a manner that precludes double-counting that it has complied with the kwh-for-a-kwh requirement. Enbridge may rely on renewable energy credits from its own generators, or from a third party offering verifiable renewable energy credits. Verification shall be from the Minnesota Renewable Energy Trading System or another entity the Commission determines to be substantially equivalent to M-RETS. 0 iv. DuPont Bradley Curve Q. What is the DuPont Bradley Curve and what is its importance in this proceeding? A. The DuPont Bradley Curve (Bradley Curve) is intended to help companies examine and improve their safety culture. Safety culture can be described as what employees do when no one is watching. Attachment 1 to this testimony is a graphic of the Bradley Curve. Mr. Eberth stated that Enbridge engaged DuPont Sustainable Solutions, a respected operations consulting service, to help us make substantial and lasting improvements to all dimensions of our safety systems and performance, including our safety culture. Enbridge Ex. - at 0 (Eberth Rebuttal). Further he stated that Enbridge had three rounds of assessments, gap analysis, and focused planning and implementation aimed at dramatically improving our safety culture over the -year O Connell Surrebuttal / 1

18 period of 0 through 01. Id. Based on these assessments, Mr. Eberth stated that Enbridge improved its score from ( Dependent on the Bradley Curve) to ( Independent ) Q. What does this information mean? A. I believe this information indicates that Enbridge has been attempting to use reasonable outside resources to improve its safety culture. Such resources can be very useful in gaining perspectives and in changing operations, particularly if employees are given adequate support for their work on an ongoing basis and if corporate incentives are appropriately focused on safety. While I am unable to assess how effective these efforts are in practice, the scores reported for Enbridge indicate that the Company s assessment increased from a Dependent culture, where: People see safety as a matter of following rules that someone else makes. Incidents decrease [compared to a Reactive culture] and management believes that safety could be managed if only people would follow the rules. DER Ex. at S-1 (O Connell Surrebuttal). To an Independent culture, where: Individuals take responsibility for themselves. People believe that safety is personal, and that they can make a difference with their own actions. This reduces incidents further [compared to a Dependent culture]. Id. O Connell Surrebuttal / 1

19 1 Enbridge s Liquids Pipeline Business Unit, which is responsible for operating the Company s liquids pipeline system, has not yet reached the Interdependent culture, where: Teams of employees feel ownership for safety, and take responsibility for themselves and others. People do not accept low standards and risk-taking. They actively converse with others to understand their point of view. They believe true improvement can only be achieved as a group, and that zero injuries is an attainable goal. Id. However, Mr. Eberth stated that Enbridge s Control Center Operations did reach a score in 01 indicating an Interdependent culture Q. What is your response to this information? A. I support Enbridge s efforts to improve its safety culture, particularly given the evidence that the Company needed improvement in that regard. I agree with Mr. Eberth s statement that improvements in safety culture needs to be an area of continual focus for Enbridge. Enbridge Ex. at 1 (Eberth Rebuttal) Ms. Kennett Q. Which issues do you address regarding Ms. Kennett s Rebuttal Testimony? A. I address Ms. Kennett s response to my discussion of her Direct Testimony and her discussion about the timing of a shutdown of existing Line. Q. What does Ms. Kennett say regarding your Direct Testimony? O Connell Surrebuttal / 1

20 A. Ms. Kennett stated that she believes I mischaracterized her Direct Testimony when I stated that, Ms. Kennett provides what appears to be compelling information that continued transport of crude oil by the existing Line may lead to increasing risks of rupture and, therefore, risks to the environment in the near future. The concern in her Rebuttal Testimony was that her Direct Testimony did not state that continued transport of crude oil by the existing Line may lead to increasing risks of rupture in the near future. Instead, she noted that her testimony maintained that Line can continue to operate safely with timely maintenance Q. How do you respond? A. I considered Ms. Kennett s Direct Testimony to be helpful in this proceeding, so I appreciate the opportunity to be clear about the portion of Ms. Kennett s Direct Testimony that led to my statement. Ms. Kennett is correct that her Direct Testimony did not state that continued transport of crude oil by the existing Line may lead to increasing risks of rupture in the near future. Rather, that statement reflects my impression, having read Enbridge s Application and her testimony Q. Please explain the basis for forming your impression. A. The sentence in my Direct Testimony just prior to the statement that concerns Ms. Kennett is taken from Enbridge s Application: Section.1.1 of the Company s Application concludes, that, [w]hile Line can be safely operated under a dig and repair maintenance regime, the extensive number of digs and repairs along the entire pipeline would still not remove the O Connell Surrebuttal / 1

21 pressure restrictions. Enbridge Ex. at - (Application). DER Ex. at # (O Connell Direct). In light of this statement in Enbridge s Application, the discussion in Ms. Kennett s Direct Testimony on page, line 1 through page, line was concerning. For example, I was concerned about Ms. Kennett s statement that she consider[s] Line to be in the deterioration stage (Stage ), as external corrosion growth is increasing in an exponential fashion. Ms. Kennett defines Stage as Terminal where the Rate of deterioration is increasing rapidly and is not easy to predict. Enbridge Ex. at (Kennett Direct) Q. In your view, what is the relevance of these statements? A. All of this information led me to question why Enbridge has not decided, for what seem to be valid business reasons, to cease operations of existing Line : However, despite this information, the fact remains that Enbridge has not committed to cease operation of the existing Line. That is, Enbridge has not stated that it will retire the existing Line, and the Consent Decree does not require such retirement. Instead, Enbridge s testimony indicates that the Company is prepared to continue operating the existing Line. For example, Mr. Eberth stated: If the Project is not approved, Enbridge will continue to operate Line in a safe and reliable manner; however, the worsening condition of the pipeline is causing an increasing amount of maintenance and repair that would not only inconvenience landowners and impact the environment, but would also be economically inefficient. Further, ongoing maintenance will not restore the operating capabilities of Line, leaving Enbridge s customers without adequate, reliable, and efficient transportation capacity to reduce apportionment. Enbridge Ex. at (Eberth Direct) O Connell Surrebuttal / 1

22 Instead, as Ms. Kennett confirmed, Enbridge maintains that Line can continue to operate safely with timely maintenance. As discussed above, this approach to relying on a government agency to make what should be a reasonable business decision does not make sense. That said, I appreciate Ms. Kennett s commitment to ensure against unsafe operations Q. Is there anything else you would like to discuss regarding Ms. Kennett s Rebuttal Testimony? A. Yes. Ms. Kennett stated that, In the U.S., there has not been a significant release because of cracking or corrosion since 00. Enbridge Ex. at (Kennett Rebuttal). However, to be clear, in 00 and in 01, the Pipeline and Hazardous Materials Safety Administration (PHMSA) issued Corrective Action Orders against Enbridge for two spills related to Enbridge s pipeline system. There may be other actions (such as Notices of Probable Violation, Notices of Amendment, Warning Letters or Notices of Proposed Safety Orders); this discussion focuses only on Corrective Action Orders Q. What happened in the 00 PHMSA enforcement action? A. PHMSA s Corrective Action Order indicated that Enbridge spilled,000 to,000 barrels of crude oil just west of the city of Cohasset. PHMSA s Corrective Action Order stated in its findings that: continued operation of this pipeline without corrective measures would be hazardous to life, property and the environment. Additionally, because of the location of the pipeline with respect to populated and environmental O Connell Surrebuttal / 1

23 areas, and the uncertainties as to cause of the failure, I find that a failure to issue expeditiously this Order, requiring immediate corrective action, would result in likely serious harm to life, property, and the environment. DER Ex. at S- (O Connell Surrebuttal). This case was closed over five years later, in 00. This spill occurred on Line, rather than Line, but was still part of the Enbridge Mainline system Q. What happened in the 01 PHMSA enforcement action? A. In 01, PHMSA issued a Corrective Action Order against Enbridge regarding Line 1, which is also part of the Enbridge Mainline System. In this case, PHMSA found that operation of the -inch diameter Line 1 would be hazardous to life, property, and the environment without immediate corrective action. The facts in that case caused considerable concern for PHMSA: During construction of the Affected Pipeline in 1, radiography of girth welds revealed lack-of-fusion defects in the ERW seams at multiple locations along the Affected Pipeline. On January 1, 00, a rupture of the Affected Pipeline occurred in Atwood, Wisconsin, releasing 1,00 barrels of crude oil. The rupture was located at M.P. 1., approximately one mile downstream of Respondent s Owen pump station in Clark County, Wisconsin. The OPS investigation of the 00 failure found that a pre-existing lack-of-fusion defect in the ERW seam had grown to failure by a fatigue mechanism due to cyclic loads and that the chemical and mechanical properties of the pipe joint fracture surface also had indications of low toughness of the ERW seam. Following the January 1, 00 failure, Respondent utilized ultrasonic crack detection technology to assess the Affected O Connell Surrebuttal / 0

24 Pipeline. Multiple crack anomalies associated with the ERW seam were reported by the inline inspection (ILI) vendor. Based on the ILI results, Respondent made repairs to the Affected Pipeline for a 1. x MOP factor of safety. Calculations performed by Respondent in 00 predicted that Line 1 would not fail for a minimum of years based on a crack growth analysis that considered the operating pressure spectrum. Respondent performed an ILI of the Affected Pipeline in the area of the Failure in 0 utilizing high-resolution geometry and magnetic flux leakage (MFL) tools. An ultrasonic crack detection technology ILI inspection was scheduled to be performed in the area of the failure in August 01. The history of failures on Respondent s Lakehead Pipeline system, of which the Affected Pipeline is a part, the defects originally discovered during construction, and the 00 failure indicate that Respondent s integrity management program may be inadequate. DER Ex. at S- (O Connell Surrebuttal) Q. What actions did PHMSA take in response to these concerns? A. PHMSA required Enbridge to take a number of actions, including one that appears to have led to Enbridge s engagement of a consultant on the DuPont Bradley curve to improve Enbridge s safety culture, as Mr. Eberth discusses and as discussed above. Specifically, one of PHMSA s requirements was that Enbridge must: Within 0 days following receipt of this Order, complete an evaluation utilizing multiple root cause failure analysis techniques, including a Management Oversight and Risk Tree (MORT) analysis, to determine the underlying causes and contributing factors to the Failure, including preventive measures employed by Enbridge. Within days of receipt of this Order, submit a list of proposed independent thirdparty contractors for prior approval by the Director, along O Connell Surrebuttal / 1

25 with contractor qualifications and scope of work. The scope of the evaluation must include, but not be limited to: Enbridge s procedures; failure, operating and maintenance history; use of safety factors; review of ILI results; application of assessment methods, analysis and monitoring of pressure cycles in determining assessment intervals and operating pressures; decision processes regarding repair methods, including pipe replacement; a detailed review of the adequacy of the operator s spill prevention plans; and a detailed review of all emergency response activities, including initial controller response. 1 1 Id. PHMSA closed this case more recently, on July 0, Q. Do you have any observations about the facts PHMSA indicated regarding Line 1? A. Yes. I note that Enbridge represented to PHMSA, its federal safety regulator, that Calculations performed by Respondent in 00 predicted that Line 1 would not fail for a minimum of years based on a crack growth analysis that considered the operating pressure spectrum. While I would expect that it may be difficult to predict when a pipeline will fail, Enbridge s overly optimistic view of Line 1 adds more concern to the fact above regarding Enbridge s assessment that Line is already in Stage of a -stage system. Again, it appears that Enbridge has sufficient business reasons to cease operations of Line in the near future, regardless of the determinations in this proceeding. O Connell Surrebuttal /

26 . Mr. Haskins Q. Which issues do you address regarding Mr. Haskins s Rebuttal Testimony? A. I address Mr. Haskins s response to my recommendation that, if the Commission wishes to condition Enbridge s proposal in order to help the Proposed Project meet the need requirements, the Commission should require Enbridge to add two (rather than one) pipeline maintenance shops between Bemidji, Minnesota and Superior, Wisconsin. I also address Mr. Haskins s questions as to what differentiates this case from previous Enbridge pipeline cases Q. What did Mr. Haskins say in response to your recommendation to add a second pipeline maintenance shop? A. Mr. Haskins objects to this recommendation, stating that Enbridge s emergency response plans comply with all applicable laws, regulations, and rules. These plans are developed for a purpose and, to my knowledge Ms. O Connell does not have expertise in this area such that her position is more credible than those who have developed the rules and guidance. Enbridge Ex. at (Haskins Rebuttal). He does acknowledge, however, that there would be more equipment and personnel along the Preferred Route if this second PLM [pipeline maintenance] Shop were added Q. What is your response to Mr. Haskins s Rebuttal Testimony regarding the addition of another pipeline maintenance shop? O Connell Surrebuttal /

27 1 1 1 A. I appreciate Mr. Haskins s acknowledgement that there would be more equipment and personnel if a second pipeline maintenance shop were added. However, I still support my recommendation that Enbridge add a second pipeline maintenance shop between Bemidji and Superior. I note that Mr. Haskins s objection did not point out any provision under PHMSA s regulations that would limit Enbridge to having only one additional pipeline maintenance shop. Instead, his response sounds remarkably like the Dependent Stage in the Dupont Bradley Curve, where: People see safety as a matter of following rules that someone else makes. By contrast, since Enbridge is attempting to move beyond this low-scoring Dependent Stage in the DuPont Bradley Curve, considering this recommendation in light of the Independent Stage would mean more people (meaning those at the second pipeline maintenance shop), who would be involved in ensuring that safety is personal and would make a difference with their own actions. Similarly, the Interdependent Stage would mean that a company would not accept low standards Q. Are there other reasons why Enbridge should support the recommendation for a second new pipeline maintenance shop? A. Yes. While Mr. Haskins appears to be satisfied with slower response times due to greater distances, he does not dispute that having an additional pipeline maintenance shop would reduce response times. In fact, he notes on page of his Rebuttal Testimony that, The first step [in an emergency response] is to assess the site to O Connell Surrebuttal /

28 confirm the scope of the incident. Having an additional pipeline maintenance shop would assist Enbridge in this first step of emergency responses. Given that Enbridge proposes to route its Proposed Project in many areas where no crude oil pipeline exists, east of Park Rapids, the addition of one more pipeline maintenance shop in this area seems warranted, even if it goes beyond the minimum requirements of the rules. As noted in Mr. Haskins s Schedule 1 of his Rebuttal Testimony, my response to Enbridge s request indicated that there are (driving) miles from Bemidji, MN to Superior, Wisconsin, which is over three times the average distance from Thief River Falls to Clearbrook ( miles) and from Clearbrook to Bemidji ( miles) Q. What did Mr. Haskins state about this certificate of need case compared to prior certificates of need? A. Mr. Haskins stated that Ms. O Connell s position in this case is markedly different than testimony she has overseen in other cases, including but not limited to her significant involvement in the Department s testimony about Enbridge s Alberta Clipper and Southern Lights projects and the Minnesota Pipeline Company ( MPL ) Reliability Project. In the Enbridge Projects, the Department did not propose that Enbridge needed to build additional PLM Shops, including between Clearbrook and Superior. Enbridge Ex. at (Haskins Rebuttal). O Connell Surrebuttal /

29 Q. How do you respond to Mr. Haskins s claim that the Department s position in this case is markedly different than in prior cases? A. Mr. Haskins overlooks or is unaware of the material factors that differentiate this case from other cases. All proceedings before the Commission are fact-intensive, so the proposals in each case need to be examined in light of those facts. For example, Mr. Haskins lists Enbridge s Alberta Clipper and Southern Lights projects and the Minnesota Pipeline Company (MPL) Reliability Project. I address each of those projects below Q. How were the facts in the MPL Reliability Project materially different than the facts in this proceeding, as to the Department s recommendation for an additional pipeline maintenance shop? A. The MPL Reliability Project (Docket No. PL/CN-1-0), which Mr. Haskins calls an even starker contrast to the Department s recommendation in this proceeding, involved the addition of pumping stations to an existing pipeline. The materially different facts in that case is that the MPL Reliability Project did not involve establishing a new crude oil pipeline corridor, as Enbridge proposes here. Similarly, the other recent Enbridge cases (Docket Nos. PL/CN-1-0 and PL/CN-1-1) involved additions of In the Matter of the Application of Minnesota Pipe Line Company, LLC for a Certificate of Need for the Minnesota Pipe Line Reliability Project to Increase Pumping Capacity on the Line Crude Oil Pipeline in Hubbard, Wadena, Morrison, Meeker, McLeod, and Scott Counties. In the Matter of the Application of Enbridge Energy, Limited Partnership for a Certificate of Need for the Line Station Upgrade Project in Marshall, Clearwater, and Itasca Counties. In the Matter of the Application of Enbridge Energy, Limited Partnership for a Certificate of Need for the Line (Alberta Clipper) Station Upgrade Project - Phase - in Marshall, Clearwater, Itasca, Kittson, Red Lake, Cass, and St. Louis Counties. O Connell Surrebuttal /

30 pumping stations to an existing Line, where the crude oil pipeline corridor already existed. Q. How were the facts in the Enbridge s Alberta Clipper and Southern Lights Projects materially different than the facts in this proceeding, as to the Department s recommendation for an additional pipeline maintenance shop? A. Like the MPL Reliability Project, Enbridge s 00 Alberta Clipper and Southern Lights projects (Docket No. PL/CN-0-) were proposed to be routed in an existing crude oil pipeline corridor Q. How do you contrast the facts in Enbridge s recent Sandpiper proposal, which involved establishing a new crude oil pipeline corridor, to the facts in this proceeding? A. It is true that the Sandpiper case (Docket No. PL/CN-1-) involved establishing a new crude oil pipeline corridor. However, there were two sets of materially different facts, regarding 1) need and ) ability to meet legal requirements Q. How were the facts regarding need different in the Sandpiper case compared to the facts in this proceeding? In the Matter of the Application of Enbridge Energy, Limited Partnership, and Enbridge Pipelines (Southern Lights) LLC for a Certificate of Need for the Alberta Clipper Pipeline Project and the Southern Lights Diluent Project. In the Matter of the Application of North Dakota Pipeline Company LLC for a Certificate of Need for the Sandpiper Pipeline Project in Minnesota. O Connell Surrebuttal /

31 A. First, in the Sandpiper case, Enbridge had contracts approved by the Federal Energy Regulatory Commission (FERC) that required interconnections at Clearbrook, Minnesota and Superior, Wisconsin. Second, I am aware of no evidence in that case that the demand for crude oil would decrease at any time. Thus, there was no need to attempt to condition that certificate of need, as in this case, to try to help the project demonstrate that it could meet Minnesota s requirements. By contrast, in this proceeding, Enbridge has not demonstrated a need for its Proposed Project, given at least the following: 1) Enbridge may continue to operate existing Line, ) Enbridge does not commit to ceasing operations of existing Line, ) Enbridge insists that the Company can operate existing Line safely, ) Dr. Fagan s Report regarding Enbridge s forecasted demand for crude oil (discussed further below), ) Dr. Fagan s statement that refineries in Minnesota, North Dakota, South Dakota and Wisconsin as a group have been operating at high levels of utilization, which indicates that they are not short of physical supplies of crude oil, and also that they have little room to increase total crude runs, ) refineries in Minnesota, North Dakota, South Dakota and Wisconsin have little room to increase total crude runs even with the material limitations on existing Line, (transporting only light crude, limited to 0,000 bpd), ) Dr. Fagan s statements that Minnesota demand for refined products appears unlikely to increase in the long term, and Minnesota and its O Connell Surrebuttal /

32 neighbors are generally not short of physical supplies of refined products, and are not likely to be short of supplies in the future (except for temporary interruptions), ) Other various aspects of Dr. Fagan s analysis, including Figure, Refinery utilization rates and Dr. Fagan s analysis beginning on page of her Report regarding various factors affecting demand for crude oil products including effects of electric vehicles on the demand for gasoline, and ) Information in my highly sensitive, trade secret Direct Testimony that demonstrates specifics about service provided to Minnesota refineries via existing Line, given the types of crude oil shipped to those refineries Q. How were the facts regarding the ability to meet legal requirements different in the Sandpiper case compared to the facts in this proceeding? A. In the Sandpiper case, information about the effects of the proposal on natural and socioeconomic environments were handled differently than in this proceeding. Those differences in the Sandpiper case meant that, despite the Department recommending approval and the Commission granting approval, the Minnesota Court of Appeals remanded that case back to the Commission to require a more extensive consideration of environmental factors. Thus, in this proceeding, not only are issues regarding need different, but the factors under MN Rule.0 are addressed in a more comprehensive manner in light of the Court of Appeals decision, relying on the information in the FEIS. O Connell Surrebuttal /

33 . Mr. Baumgartner Q. What issues did Mr. Baumgartner address? A. Mr. Baumgartner responded to my request that Enbridge provide further discussion regarding the location of its back-up control center, along with further information about cyber security Q. What did Mr. Baumgartner s testimony indicate? A. Mr. Baumgartner stated that: both primary and back-up control centers operate on separate independent electrical grids, have multiple layers of redundancy relating to IT Networking Infrastructure, and have emergency back-up generators capable of providing power for extended periods of time. Enbridge Ex. at 1 (Baumgartner Rebuttal). In addition, he stated the importance of timely transitions and the efficiencies of the configuration as it currently stands Q. What do you conclude? A. I appreciate Mr. Baumgartner s response, which I conclude addresses the critical factor of reliability of electricity supplies. Moreover, given the physical differences between an electrical grid (such as MISO operates) and a crude oil system, I conclude that Enbridge s response fully addresses the concerns raised in my Direct Testimony. As a result, I conclude that no condition is needed in this regard to enable the Proposed Project to meet the requirements of Minnesota s certificate of need rules. O Connell Surrebuttal / 0

34 Q. Did Mr. Baumgartner address any other issue? A. Yes, Mr. Baumgartner responded to my recommendation regarding cyber security, in response to my statement that, while I expected that Enbridge has methods and systems in place regarding cyber security, Enbridge did not discuss this issue in the record Q. What did you recommend? A. Similar to the other recommendations listed on pages - of my Direct Testimony, if the Commission wishes to consider whether conditions could allow it to find that a need for the Proposed Project exists, I recommended that the Commission consider, as a condition to mitigate risk of harm to Minnesotan s natural and socioeconomic environments, requiring Enbridge to provide reasonable assurance to the Commission that it has adequate cyber security systems in place, and to update this reasonable level of assurance periodically. DOC Ex. at (O Connell Direct) Q. How did Mr. Baumgartner respond? A. Mr. Baumgartner stated that Enbridge is committed to preventing, detecting and responding to cyber security risks and threats. Enbridge Ex. at (Baumgartner Rebuttal). However, he also stated that Enbridge does not believe it would be prudent to provide the Commission will updates beyond what is presented above where he refers to his brief, high-level discussion. Id. at. O Connell Surrebuttal / 1

35 1 1 Q. How do you respond? A. First, I appreciate that Mr. Baumgartner provided a high-level response. Second, I appreciate the commitment statement he provided, as quoted above. Third, as I indicated in my Direct Testimony, I certainly understand the need to protect information about cyber security. In part, that is why the recommendation is written in more general terms. To be clear, the recommendation is not intended to require Enbridge to disclose its cyber security system to the Commission in any manner that could jeopardize the system itself; that is why the phrase reasonable level of assurance is used. Instead, it is simply intended that Enbridge provide reasonable assurance to the Commission that it employs cyber security measures, such as Mr. Baumgartner provided in his Rebuttal Testimony, and to respond if the Commission requests further reasonable assurance in the future. I hope this clarification addresses Enbridge s concern Mr. Earnest Q. What issue does Mr. Earnest address? A. Mr. Earnest responds to Dr. Fagan s and my direct testimonies as to whether Enbridge met its burden to demonstrate need for its Proposed Project. I respond to the aspects of Mr. Earnest s Rebuttal Testimony that pertain to my Direct Testimony. 0 1 Q. What are the areas you wish to address in Mr. Earnest s Rebuttal Testimony? O Connell Surrebuttal /

36 A. Mr. Earnest provided a summary of his responses to my Direct Testimony, all of which I address below: Ms. O Connell identifies three alleged shortcomings in the Company s discussion to date, namely: (1) that the Company has not committed to ceasing operations of the existing Line ; () that the Company s analysis of the demand for crude oil products is flawed ; and () that the Company s analysis of the No-Action Alternative does not accurately state the effect of denial of the certificate of need on Minnesota s refineries, given the analysis by Dr. Fagan. Ms. O Connell also suggests, on page of her Direct Testimony, that recently approved increases in the capacity of Enbridge s Line can meet any claimed need for the restored capacity associated with LR Program. None of these statements is supportable. Enbridge Ex. at (Earnest Rebuttal) Q. How do you respond to the issue regarding Enbridge s commitment to cease operations of existing Line? A. As Mr. Earnest correctly notes in his Rebuttal Testimony, Mr. Eberth and others address the extent to which Enbridge has committed to ceasing operations of existing Line. As a result, my surrebuttal of Mr. Eberth, Ms. Kennett, Mr. Haskins and Mr. Glanzer addresses this issue. Q. How do you respond to the issue regarding your statement that Enbridge s analysis of the demand for crude oil was flawed? A. To be clear, I stated, the Company s analysis of the demand for crude oil products is flawed, as discussed in Dr. Fagan s testimony. (Emphasis added.) DER Ex. at O Connell Surrebuttal /

37 (O Connell Direct). Thus, as I stated in my Direct Testimony, I relied on Dr. Fagan s analysis to conclude that Enbridge s forecast was flawed. Q. Were there specific statements in Dr. Fagan s Report that led you to conclude that the forecast was flawed? A. No, I relied on her Report as a whole, including the informative charts and graphs. Below I provide some examples of information that lead to my conclusion that Enbridge s demand forecast was flawed Q. Mr. Earnest stated that he was puzzled by your testimony at page. Are you able to assist? A. I believe Mr. Earnest meant to refer to page of my Direct Testimony, since the quote he cites above is on that page. As he explained on page of his Rebuttal Testimony, he believed that I intended to refer to the demand for refined products such as gasoline when I used the phrase demand for crude oil products. To be clear, as I explained in my Direct Testimony and above, I relied on Dr. Fagan s Report to reach my conclusion that Enbridge s forecast of demand for the Proposed Project is flawed Q. Mr. Earnest suggested that you agree that the Company did not need to provide a forecast of refined product demand based on your response to an information request. Is this representation of your testimony accurate? O Connell Surrebuttal /

38 A. No. As stated above, Dr. Fagan provided the Department s assessment of Enbridge s forecasted demand for the Proposed Project. Thus, Dr. Fagan addresses issues regarding demand for crude oil and demand for crude oil products; as stated in my Direct Testimony and above, my testimony used the information in her Report. 1 Q. How do you respond to Mr. Earnest s rebuttal regarding your statement as to Line? A. As noted above, Mr. Earnest represented my Direct Testimony as stating that recently approved increases in the capacity of Enbridge Line can meet any claimed need for the restored capacity associated with [the] LR Program. While I understand that Mr. Earnest is focused on his conclusions regarding demand for crude oil, what I stated in my Direct Testimony should be stated accurately and viewed in its context Q. What did your Direct Testimony state? A. My testimony did not state that recently approved increases in the capacity of Enbridge Line can meet any claimed need for the restored capacity associated with [the] LR Program. Instead, after concluding that Enbridge did not demonstrate need for the Proposed Project, I stated: Thus, regarding Minnesota Rule.0, subp. A(), at least as to the proposed increase in capacity of the existing Line, it appears that the increases in the capacity of Enbridge s Line, for which the Commission granted I note that I offer this and the following two questions and answers as surrebuttal testimony to the statement on page of Mr. Earnest s Rebuttal Schedule 1 that I assert that previous Enbridge expansions, which are full, already appear to be meeting the claimed need for the LR Program. O Connell Surrebuttal /

39 Enbridge certificates of need, are already meeting that claimed need. DER Ex. at (O Connell Direct). Q. Why do you conclude that Enbridge did not demonstrate need for the Proposed Project? A. I provided above in my response to Mr. Haskins a list of reasons for concluding that the facts regarding need in this proceeding are insufficient to demonstrate need for the Proposed Project. In that response, I noted that I would provide more information about my reliance on statements from Dr. Fagan s Report regarding Enbridge s forecasted demand for crude oil. I discuss that information here. As I noted above, I relied on statements from Dr. Fagan s Report in reaching my conclusions about Enbridge s forecasted demand for the Proposed Project. Thus, I highlight some examples of information from Dr. Fagan s Report that lead me to conclude that Enbridge s demand forecast was flawed, which as noted above is one of a number of reasons that I concluded that Enbridge did not demonstrate that its Proposed Project is needed. Dr. Fagan s conclusion that Enbridge s demand forecast did not consider more than one potential future for oil supply, demand, or infrastructure DER Ex. at Schedule 1, page (Fagan Direct), Dr. Fagan s conclusion that Enbridge s demand forecast provided no specific outlook at all for refined product demand Id., O Connell Surrebuttal /

40 Dr. Fagan s conclusion that Enbridge s analysis assumes that there will be no pipeline expansions for 1 years (from 01 to 0) in Canada, which is inconsistent with historical records of expansions Id., Dr. Fagan s conclusion that the model solves for the highest price for crude at the supply location, but this does not guarantee that the solution price is high enough to incentivize actual long-term production of crude oil. Id. at. The implications that Dr. Fagan listed in her Report in light of these issues with the demand forecast were important factors that I considered in my analysis as to whether Enbridge met Minnesota s need requirements: The implications of the reports assumptions for supply, demand, and pipeline capacity, and the forecasted utilization of the Enbridge Line project, are not as conclusive in terms of their support for need for the project, for two important reasons: 1) Minnesota district (Minnesota, North Dakota, South Dakota, and Wisconsin) refineries as a group have been operating at high levels of utilization, which indicates that they are not short of physical supplies of crude oil, and also that they have little room to increase total crude runs. Thus, the whole proposed incremental increase in capacity of 0 thousand barrels per day ( b/d ) for the Enbridge Line project is not likely to be used in Minnesota. ) Minnesota demand for refined products appears unlikely to increase in the long term, based on outlooks we will show in Section. Minnesota and its neighbors are generally not short of physical supplies of refined products, and are not likely to be short of supplies in the future (except for temporary interruptions). Again, this implies the incremental O Connell Surrebuttal /

41 Id. at. pipeline capacity would not be wholly used to meet local refined product demand. Q. Do you have any responses to the information in Mr. Earnest s Rebuttal Report provided in Schedule 1 of his Rebuttal Testimony? A. Yes, I respond to his concern that the Department is taking a different view of apportionment in this proceeding, and the impact of no action, particularly on Minnesota refineries Q. What did Mr. Earnest state regarding the Department s perspective on apportionment? A. On page 1 of his Rebuttal Schedule 1, Mr. Earnest stated that DOC-DER has considered the implications of apportionment in prior proceedings, suggesting that the assertion of apportionment was the sole reason for the Department to support Enbridge s proposed capacity expansion of Line in Docket No. PL/CN Q. Is his representation of the Department s position in that proceeding accurate? A. Mr. Earnest is correct that the Department considered apportionment as one factor, but he misses the more important point in that proceeding that the record included information in surrebuttal testimony demonstrating that refineries in the Minnesota district and surrounding areas were expanding the refining capacity of their facilities. O Connell Surrebuttal /

42 Increases in refinery capacity demonstrated that there was a need to expand the capacity of Enbridge s Mainline system to serve the refineries. Specifically, Ms. Otis s Surrebuttal in that case stated that BP had recently added,000 bpd of capacity to refine heavy crude oil at its Whiting refinery and that Flint Hills Resources refinery planned to add,000 bpd heavy crude oil refining expansion. This increase of 0,000 bpd of heavy crude oil refining capacity in the Midwest was the key factor that resulted in the Department changing its recommendation of denial of the capacity expansion to approval Q. What did Mr. Earnest state regarding the impact of the No Action Alternative on Minnesota refineries? A. Mr. Earnest stated the following on page of his Rebuttal Schedule 1: In my opinion, none of the potential alternative pipelines are certain to be built, although the degree of uncertainty varies. In effect, these witnesses are arguing that the ALJ and the Commission should reject the LR Program because another pipeline might get built (and the crude oil supply might not grow enough to fill the alternative pipeline). However, none speak to the impact on Minnesota refineries or the security of Minnesota energy supply if the LR Program is rejected and none of the alternative pipelines actually get built. (Emphasis added) Q. How do you respond? A. I note that my highly sensitive, trade secret testimony did in fact address how Minnesota refineries would be affected by the Proposed Project. While it is my O Connell Surrebuttal /

43 understanding that Mr. Earnest may not have access to this information, I provide my statement here to ensure that the record accurately reflects that I did provide this analysis. I used that information, along with Dr. Fagan s Report, to conclude that Enbridge did not demonstrate a need for its Proposed Project. I note that this response also addresses Mr. Earnest s statements on pages - of his Rebuttal Schedule Q. What did your analysis in your highly sensitive, trade-secret Direct Testimony state regarding how Minnesota refineries would be affected by the Proposed Project? A. While I refer to pages - of my highly sensitive, trade secret Direct Testimony for the full response, I highlight several public factors here: Enbridge s mainline system has been delivering supplies to Clearbrook and Superior even with Line capable of delivering only up to 0,000 bpd of light crude; Regarding the proposed incremental increase of 0,000 bpd, Department witness Dr. Fagan observed that the Minnesota district refineries as a group have been operating at high levels of utilization, which indicates both they are not short of physical supplies of crude oil, and that they have little room to increase total crude runs ; It is my understanding that Enbridge counsel has access to highly-sensitive, trade secret data filed in Commission Docket No O Connell Surrebuttal / 0

44 It appears that the Proposed Project, if it delivered crude oil to Clearbrook, would provide efficiency benefits by offering Minnesota refiners more options to move crude oil, thus improving the efficiency of existing Line and the Enbridge Mainline System. I noted that efficiency is a component of Minnesota Rule.0, subpart A, but in my understanding must be considered in light of the other requirements in Minnesota statutes, rules and law to address the effects of the proposed facility on the natural and socioeconomic environments. I also provided my opinion that adequacy, reliability and efficiency reflect different components of need, with different levels of importance. I continue to hold this view. Regardless, no matter what the aspect of need, it is my understanding that it is still necessary to consider all applicable requirements in Minnesota statutes, rules, and laws to address the effects of the Proposed Project on the natural and socioeconomic environments. My overall conclusions in my direct testimony reflect my analysis of Enbridge s Proposed Project under the Minnesota need criteria Q. What is the final issue you address regarding Mr. Earnest s Rebuttal Schedule 1? A. Mr. Earnest stated the following on page of his Rebuttal Schedule 1: Ms. O Connell also asserts that a graphical error in depicting the capacity of SA-0 seems to suggest that Enbridge created greater estimates of apportionment in its analysis. Ms. O Connell errs. The graphs say nothing about apportionment. To assess apportionment, an estimate of nominations is required; nominations and apportionment are not presented in any of the graphs. O Connell Surrebuttal / 1

45 Q. What statement is concerning to Mr. Earnest? A. The statement that concerned him is on page of my Direct Testimony, in which I stated regarding the apportionment estimates in the charts, the Applicant used an incorrect capacity figure, which seems to suggest that Enbridge undersized SA-0 relative to shipper demand, creating greater estimates of apportionment in its analysis Q. Is Mr. Earnest s assessment of your Direct Testimony correct? A. No; evidently, Mr. Earnest misunderstood my testimony. The statement was in response to the question: Did the Department observe any issues with the Company s analysis? The response, including the sentence above, was an overview of the discussion on the subsequent few pages. Specific to the apportionment issue, beginning on page, line, I stated the following: Q. Earlier you stated that Enbridge used the incorrect capacity level to represent use on SA-0; please explain. A. Similar to the graph scaling issue above, Enbridge s response to Department Information Request No. contained a graphical representation of SA-0 that appeared to be inconsistent with assumptions for the proposed Project, namely 0,000 bpd in average capacity, as shown below. Enbridge applies a percent utilization factor to the 0,000 bpd figure for the proposed Project, which results in effective capacity of approximately 00,000 bpd. O Connell Surrebuttal /

46 Chart : Skewed Representation of Capacity of SA-0 Enbridge Mainline via SA kb/d Source: Muse Heavy Crude Oil Light Crude Oil Pipeline Capacity In Chart, the Applicant understated capacity for SA-0 at 0,000 bpd even though its model calculated effective demand of approximately 00,000 bpd. DER Ex. KO- (O Connell Direct) Enbridge s representation of apportionment is shown in Chart by the fact that the assumed pipeline capacity (black line) is lower than the total crude oil (sum of Enbridge s assumed amounts of heavy and light crude) that would attempt to be transported through the pipeline. Since Enbridge understated the capacity of the SA-0 pipeline, the represented amount of apportionment in the graph Enbridge provided is overstated. I provided a corrected representation in Chart on page 1 of my Direct Testimony, shown below for ease of reference and comparison. I note that, in his Rebuttal Testimony, Mr. Earnest corrected Enbridge s assumptions about the amounts of heavy and light crude oil that would flow through an SA-0 pipeline. The above reflects the information Enbridge originally provided to the Department, but given the correction in Mr. Earnest s Rebuttal Testimony, the amounts of light and heavy crude represented in Charts and should be switched with each other. O Connell Surrebuttal /

47 Chart : Corrected Enbridge SA-0 Capacity Enbridge Mainline via SA kb/d Source: Muse Heavy Crude Oil Light Crude Oil Pipeline Capacity. Mr. Glanzer Q. What issues did Mr. Glanzer address? A. Mr. Glanzer responded to my testimony regarding Enbridge s lack of commitment to cease operations of existing Line, the effects of removing existing Line from service, and Enbridge s proposal to use a -inch pipeline to replace a -inch pipeline. 1 1 Q. What did Mr. Glanzer state regarding operations of existing Line? A. Mr. Glanzer stated that removing existing Line from service without a replacement would increase apportionment on the Enbridge Mainline System. 1 1 Q. How do you respond? O Connell Surrebuttal /

48 1 1 1 A. First, as indicated in my Direct Testimony and at the beginning of this testimony, I have not recommended that the Commission require Enbridge to shut down existing Line. Instead, as discussed throughout both my Direct and Surrebuttal testimonies, Enbridge is not required to cease operations of existing Line without a replacement, has not committed to ceasing operations of existing Line and continues to assert that the Company can safely operate existing Line. Second, Mr. Glanzer s Rebuttal Testimony provides an additional reason for Enbridge to reach the business decision to cease operations of existing Line. Specifically, Mr. Glanzer stated on page of his Rebuttal Testimony that An adequate pipeline system would have no to low apportionment due to the availability of sufficient pipeline capacity that is flexible in its ability to balance fluctuations in light/heavy nominations or other market fluctuations. By his own definition, existing Line is inadequate, since it is not flexible in its ability to balance fluctuations in light/heavy nominations or other market fluctuations Q. How do you respond to Mr. Glanzer s statement on page that [s]hutting down Line before putting the Project in service would be similar to dismantling a bridge to a critical location before its replacement is built? A. As noted above, that is not my recommendation. Moreover, this statement misrepresents how a certificate of need functions, as discussed above. For example, as Enbridge s own testimony represents, existing Line is inadequate, limited in both the amount and type of crude oil it can transport, expensive to maintain, and Enbridge O Connell Surrebuttal /

49 states that it would cause increasing disruptions over time to continue to operate. That being the case (and given Enbridge s testimony that the cost of maintaining existing Line is likely to exceed the costs of a new pipeline in a decade or so), it would be a reasonable business decision for the Company to decide to shut down existing Line. If Enbridge were to do so, then the certificate of need proceeding would have a clear indication that existing Line will shut down, along with the expected date by which it would shut down. From that point, the certificate of need process could assess whether a new pipeline is needed. However, the facts in this case are that no entity has required Enbridge to cease operations of existing Line and Enbridge has stated its clear intention to continue operating existing Line in a safe manner Q. Has Enbridge identified any means by which the Commission could require Enbridge to cease operations of existing Line? A. Not that I ve seen. Moreover, I m not aware that Enbridge has agreed to submit to an order by the Commission that Enbridge must cease operations of existing Line. Thus, the first issue continues to be whether Enbridge has established any need for the Proposed Project. 1 0 Q. Did Mr. Glanzer provide other statements in reference to need? O Connell Surrebuttal /

50 A. Yes, he did. For example, on page of his Rebuttal Testimony, Mr. Glanzer stated that Enbridge has a historical record of approaching the Commission when expansions are forecast to be needed, and in fact, the approved projects fill up as forecast Q. How do you respond? A. I agree with Mr. Glanzer that Enbridge was able to justify increases in capacity in prior cases, which the Department supported. However, as I discussed above in my response to Mr. Haskins, the facts in this proceeding are different, not only because there are inadequacies in the case regarding need, but also because this proceeding involves much greater concerns as to Enbridge s proposal to establish a new crude oil pipeline. I provide the consolidated responses I provided to Mr. Haskins and Mr. Earnest above, for ease of reference: In this proceeding, Enbridge has not demonstrated a need for its Proposed Project, given at least the following: 1) Enbridge may continue to operate existing Line, ) Enbridge does not commit to ceasing operations of existing Line, ) Enbridge insists that the Company can operate existing Line safely, ) Dr. Fagan s Report regarding Enbridge s forecasted demand for crude oil, including the following: i. Dr. Fagan s conclusion that Enbridge s demand forecast did not consider more than one potential future for oil supply, demand, or infrastructure DER Ex. at Schedule 1, p. (Fagan Direct), O Connell Surrebuttal /

51 ii. iii. iv. Dr. Fagan s conclusion that Enbridge s demand forecast provided no specific outlook at all for refined product demand Id., Dr. Fagan s conclusion that Enbridge s analysis assumes that there will be no pipeline expansions for 1 years (from 01 to 0) in Canada, which is inconsistent with historical records of expansions Id., Dr. Fagan s conclusion that the model solves for the highest price for crude at the supply location, but this does not guarantee that the solution price is high enough to incentivize actual long-term production of crude oil. Id. at v. The implications that Dr. Fagan listed in her Report in light of these issues with the demand forecast were important factors that I considered in my analysis as to whether Enbridge met Minnesota s need requirements: The implications of the reports assumptions for supply, demand, and pipeline capacity, and the forecasted utilization of the Enbridge Line project, are not as conclusive in terms of their support for need for the project, for two important reasons: Minnesota district (Minnesota, North Dakota, South Dakota, and Wisconsin) refineries as a group have been operating at high levels of utilization, which indicates that they are not short of physical supplies of crude oil, and also that they have little room to increase total crude runs. Thus, the whole proposed incremental increase in capacity of 0 thousand barrels per day ( b/d ) for the Enbridge Line project is not likely to be used in Minnesota. Minnesota demand for refined products appears unlikely to increase in the long term, based on outlooks we will show in Section. Minnesota and its neighbors are generally not short of physical O Connell Surrebuttal /

52 supplies of refined products, and are not likely to be short of supplies in the future (except for temporary interruptions). Again, this implies the incremental pipeline capacity would not be wholly used to meet local refined product demand. Id. at. ) Dr. Fagan s statement that refineries in Minnesota, North Dakota, South Dakota, and Wisconsin as a group have been operating at high levels of utilization, which indicates that they are not short of physical supplies of crude oil, and also that they have little room to increase total crude runs, ) refineries in Minnesota, North Dakota, South Dakota, and Wisconsin have little room to increase total crude runs even with the material limitations on existing Line, (transporting only light crude, limited to 0,000 bpd), ) Dr. Fagan s statements that Minnesota demand for refined products appears unlikely to increase in the long term, and Minnesota and its neighbors are generally not short of physical supplies of refined products, and are not likely to be short of supplies in the future (except for temporary interruptions), ) Other various aspects of Dr. Fagan s analysis, including Figure, Refinery utilization rates and Dr. Fagan s analysis beginning on page of her Report regarding various factors affecting demand for crude oil products including effects of electric vehicles on the demand for gasoline, and ) Information in my highly sensitive, trade secret Direct Testimony that demonstrates specifics about service provided to Minnesota refineries via existing Line, given the types of crude oil shipped to those refineries. O Connell Surrebuttal /

53 In addition to the above issues related to need, it is my understanding that it is also necessary to take into account a more extensive examination of environmental factors through a FEIS, as the Minnesota Court of Appeals required on appeal of the decision in the Sandpiper proceeding Q. What did Mr. Glanzer state regarding the Company s proposal to replace a -inch pipeline with a -inch pipeline? A. Mr. Glanzer made several statements. For example, Mr. Glanzer asserted that I recommended that the Commission approve a inch rather than inch pipe on the basis that Enbridge hasn t demonstrated it can deny shippers the additional capacity. Mr. Glanzer also stated that [c]hanging the outer diameter of the Project from - inch[es] to -inch[es] would not impact the capacity of the Project. Either a -inch or -inch replacement would be designed with an annual capacity of 0 kbpd, with a design capacity of kbpd Q. Did Mr. Glanzer correctly represent your conclusions regarding the size of the facility in this proceeding? A. No, for several reasons. First, what I concluded was under Section VII, Conditions If Commission Wishes to Consider as Integral to Finding Need, where I stated overall as to these conditions: while I do not conclude that conditions would cure Enbridge s lack of a need showing based on information available at this time, the Commission could consider the following conditions to mitigate risk of harm to O Connell Surrebuttal / 0

54 Minnesotans natural and socioeconomic environments, and ensure that conditions integral to any finding of need In this context, regarding the size of a pipeline, the condition was that the Commission should find that there was no showing of need for a -inch pipeline and, thus, require Enbridge to install no more than a -inch pipeline to replace the existing -inch existing Line pipeline. Second, while Mr. Glanzer is correct that one of the concerns I raised as to size was that Enbridge did not demonstrate how the Company could deny shippers access to the full capacity, the relevant factor for this proceeding was the fact, as I stated in my Direct Testimony at page 1: [T]he Commission certifies the capacity of a pipeline, not the stated intention as to operation. Once a facility is certified for construction and built, the Commission does not monitor how much the owner uses the facility. That is, once a large energy facility is in place, the Commission does not prevent the owner from using the facility up to its full design capacity. Thus, a proposed -inch pipeline means that the Commission is being asked to certify as needed what Enbridge refers to as the full design capacity of,000 bpd, irrespective of whether Enbridge moves more or less crude oil than this amount through the pipeline. Q. Having corrected the representation of your Direct Testimony, how do you respond to Mr. Glanzer s statement that [e]ither a -inch or a -inch replacement would be designed with an annual capacity of 0 kbpd, with a design capacity of kbpd.? A. Mr. Glanzer s Rebuttal Testimony appears to acknowledge that Enbridge is asking the Commission to certify the full design capacity of,000 bpd for the new Line. Mr. Glanzer s statements about how Enbridge intends to use the facility in practice let O Connell Surrebuttal / 1

55 alone how the Commission would enforce any such limitation are simply statements. For example, Enbridge does not suggest any means by which such a limitation would be monitored or enforced, nor whether Enbridge would submit to such regulation. Thus, while Enbridge continues to call its proposal a replacement of the existing Line, the Company really proposes to build a larger pipeline, with a design capacity of,000 bpd. I continue to recommend that, if the Commission determines a need in this proceeding, the replacement pipe should be no more than inches in diameter, the same size as the existing Line Mr. Fleeton Q. What issues did Mr. Fleeton raise that has not already been addressed above? A. Mr. Fleeton raised two issues: first, Mr. Fleeton stated that I seem to have overlooked the effects of denial on Enbridge s shippers or those in neighboring states; second, Mr. Fleeton raised a concern about a word I used in reference to the Representative Shipper Group Q. What did Mr. Fleeton state regarding the effects of denial? A. On page of his Rebuttal Testimony, Mr. Fleeton stated his concern that I overlooked or downplayed the effects of denial on Enbridge s customers or those in neighboring states. 1 I note that the response above also pertains to the Rebuttal Testimony of Mr. Mittlestadt. O Connell Surrebuttal /

56 1 Q. How do you respond? A. First, as discussed above, the onus is on Enbridge to demonstrate the need for its Proposed Project. As listed above, the facts in this proceeding do not demonstrate a need for the Proposed Project. Second, Mr. Fleeton appears to overlook the other CN requirements, such as demonstrating that the consequences to society or approving the project, including the effects on the natural and socioeconomic environments, are more favorable than denial. Without that showing (and the other requirements), the Commission is not required to grant a certificate of need. While such demonstration was relatively straight-forward in the cases where pipeline owners proposed to expand the capacity of existing pipelines, all of which the Department supported, it is much more difficult to do so when an owner proposes to establish a new crude oil pipeline corridor Q. What concern did Mr. Fleeton raise regarding a word you used in reference to the Representative Shipper Group? A. Mr. Fleeton is concerned that I stated that the Representative Shipper Group is made up of some of Enbridge s shippers Q. How do you respond? A. Mr. Fleeton is correct that I stated that some of Enbridge s customers make up the Representative Shipper Group. In addition, I stated on pages - of my Direct Testimony that: O Connell Surrebuttal /

57 Members of this group include government agencies that market their royalty production, producers, marketers and refineries seeking to ensure that their crude oil gets to market at the most reasonable cost. [Enbridge Ex. at (Fleeton Direct)]. However, not all shippers belong to this group Id. at. Q. How does Mr. Fleeton describe this group? A. Mr. Fleeton stated that, because this group is made up of shippers moving over percent of the volume on the Enbridge Mainline, he concludes that the group includes the vast majority of Enbridge Mainline Shippers. While I might reserve that characterization of vast majority for a group that was made up of shippers moving over 0 percent of the volume, I do not object to Mr. Fleeton s characterization. The more important point, which Mr. Fleeton did not dispute, is the statement in my Direct Testimony that this group does not determine either whether there is a need for a new facility or where the facility would be located if there were such a need Dr. Lichty Q. What did Dr. Lichty state in regard to your Direct Testimony? A. Dr. Lichty corrected the statement on page of my Direct Testimony, where I stated that Enbridge estimated the number of direct, indirect and induced full-time equivalent (FTE) positions as a result of the Proposed Project as 1,00 during the construction phase and an on annual basis. Specifically, he stated that these estimates are spread over three states: North Dakota, Minnesota and Wisconsin and not solely in Minnesota. O Connell Surrebuttal /

58 Q. How do you respond to Dr. Lichty s correction? A. I appreciate Dr. Lichty s correction. Thus, to be clear, Dr. Lichty estimates that, FTEs would be directly created over three years and three states as a result of this Proposed Project. If these amounts were spread evenly over each year and each state, the annual direct FTEs in Minnesota if the Proposed Project were approved is. However, since there are relatively few miles in North Dakota, I would expect most of the jobs would be in Minnesota and Wisconsin, resulting in a higher number of jobs Q. Is there another issue you wish to address in Dr. Lichty s Rebuttal Testimony? A. Yes, Dr. Lichty was concerned that I could not confirm Enbridge s benefit calculations. Enbridge Ex. at (Lichty Rebuttal). That statement was not intended to be either a criticism or support for Dr. Lichty s work. It is merely a statement about Enbridge s estimates. I note that the Department s FEIS estimates a lower level of FTEs. It is not known at this time how many people Enbridge would actually hire if the Commission grants Enbridge s request, which be the most important factor that will affect the level of indirect and induced employment in that circumstance Mr. Johnston Q. What issue do you address regarding Mr. Johnston s testimony? A. I address Mr. Johnston s discussion regarding establishing a decommissioning fund as a condition the Commission could consider to help the Proposed Project establish need. O Connell Surrebuttal /

59 Q. What was your recommendation to help the Project meet the requirements to establish need? A. Because there are risks to the natural and socioeconomic environments with the Proposed Project, if the Commission approves a new pipeline, I recommended that the Commission require Enbridge to establish a decommissioning trust to pay for the costs of decommissioning the Project when it reaches the end of its economic usefulness. As I discussed further in my Direct Testimony on pages, the intended purpose of this fund would be to help ensure that sufficient funding would be available to decommission any new pipeline. Enbridge estimated the amount to be approximately $ million and noted that the amount may be updated to best approximate future costs of removal and monitoring Q. What did Mr. Johnston say in response to your recommendation? A. Mr. Johnston stated that it is not necessary to establish a separate trust fund because [b]ased on its extensive experience in the crude oil transportation industry, Enbridge expects that it will own assets and investments that will generate sufficient cash flow to fund the abandonment activities necessary to safely deactivate the Line Replacement Project in Minnesota at the end of its useful life. Enbridge Ex. at (Johnston Rebuttal). He also noted some logistics that would be involved in establishing a trust fund. 1 Q. How do you respond? O Connell Surrebuttal /

60 1 1 1 A. As I stated in my Direct Testimony on page, although Enbridge is currently viable and has, along with predecessor companies, operated continuously for decades, there are risks that the market for crude oil may diminish in the future. If the market for crude oil erodes significantly, Enbridge may be unable to operate, in which case it is unclear what entity would be responsible for the decommissioning and monitoring of the Proposed Project if it is no longer in service. The creation of a retirement trust fund would help insulate Minnesota taxpayers if Enbridge is no longer in business and would provide the Applicant with a pool of funds to aid in the future cost of removing the pipe from service. This fund would also protect taxpayers from potentially unlimited expenses in relation to monitoring the decommissioned Project if Enbridge, or a successor firm, ceases to be a going concern. I don t dispute that there would be logistics involved in setting up a decommissioning trust fund; however, Mr. Johnston does not indicate that any steps are insurmountable and none appear to be insurmountable Mr. Simonson Q. What issues do you discuss in this section that haven t already been addressed above? A. I address Mr. Simonson s response to my testimony regarding access to all shut-off valves, loss of electrical power at valves, pipe thickness, and removal of exposed segments of existing Line, as conditions the Commission could consider to help the Proposed Project establish need. O Connell Surrebuttal /

61 Q. What did you recommend regarding access to shut-off valves? A. I stated on pages 1-1 of my Direct Testimony that shutoff valves are an important line of defense in the event of a discharge, and thus recommend that Enbridge discuss its timely access to shutoff valves, that the Commission consider in determining need whether to require Enbridge to have road access, or access that does not require the use of equipment or machinery, to reach all shutoff valves in Minnesota, and that Enbridge discuss the steps the Company could take to provide power to valves if there is an interruption in power from the electrical grid or otherwise Q. What did Mr. Simonson say regarding access to shut-off valves? A. He stated that all valves and facilities are designed to have maintained access roads and protective fences. Enbridge Ex. at 1 (Simsonson Rebuttal). He also stated that, if there were a loss of power, an alarm would be sent to line operators, who would be responsible to initiate communications to the On-call personnel with first responder responsibilities. The On-call first responder personnel are to remain within a one-hour radius (at the legal speed limit) for their respective area being covered. Id Q. How do you respond? A. I appreciate Mr. Simonson s responses and conclude that he addressed these issues reasonably. I also view his response regarding actions if an alarm is sent to provide further weight to my recommendation regarding an additional pipeline maintenance shop. O Connell Surrebuttal /

62 Q. What did you recommend regarding the wall thickness of the proposed pipeline? A. To mitigate risks of harm to the natural and socioeconomic environments and provide greater assurance against risk of environmental harm resulting from spills, I recommended that the Commission consider in determining need a condition requiring thicker pipeline diameter along the entire right-of-way in Minnesota. DER Ex. at - (O Connell Direct). Q. Did Mr. Simonson agree with your recommendation regarding wall thickness? A. No. Among other things, he stated that Enbridge s Proposed Project meets federal requirements, and that Enbridge has already purchased the pipe it intends to use in this Project. Enbridge Ex. at 1 through (Simsonson Rebuttal) Q. How do you respond? A. The fact that Enbridge already purchased the pipe should not be weighed in this proceeding, since Enbridge took the business risk to obtain the pipes prior to receiving a certificate of need. However, the main purpose of my recommendation regarding a thicker wall pipe was to provide greater assurance to the public against potential environmental harm. It appears that thicker walled pipes may be unlikely to provide that assurance to the public in any case; as a result, I no longer make any recommendation regarding thicker walls. (Nonetheless, I continue to recommend that any new pipeline be limited to inches in diameter.) 1 1 I note that the response above also pertains to Mr. Mittlestadt s Rebuttal Testimony. O Connell Surrebuttal /

63 1 Q. What did you recommend regarding exposed pipes? A. I stated that, if the Commission considers conditions integral to finding and granting a certificate of need, separate from conditioning a finding of need based on Enbridge s commitment to remove existing Line for the entire right-of-way in Minnesota, the Commission should require Enbridge to remove all exposed segments of existing Line in Minnesota. I stated that: granting a CN for an additional pipeline without requiring current risk of harm to the environment posed by Enbridge s exposed pipe throughout the state would be adding to, rather than mitigating, risks of harm to Minnesota s natural and socioeconomic environments. DER Ex. at (O Connell Direct) Q. Did Mr. Simonson agree? A. It s difficult to tell. Mr. Simonson stated that the Company is aware and plans to work with all governing bodies on a mitigation strategy for exposed pipe, current and potential. Enbridge Ex. at 0 (Simonson Rebuttal). While this statement seems positive, he did not provide a date by which any information about a mitigation plan or execution of a mitigation plan would be accomplished. In addition, Mr. Simonson stated that federal requirements regarding the depth of soil cover apply only at the time of construction, with reliance on periodic monitoring of exposed pipe and repairs before the next periodic inspection. Id. He also stated that Enbridge regularly monitors depths of cover and exposed pipe segments on all of its active lines. Id. However, meeting only the minimal requirements would be more like O Connell Surrebuttal / 0

64 the Dependent Phase in the DuPont Bradley Curve, discussed above in the discussion regarding Mr. Eberth s Rebuttal Testimony. Given the sensitive areas in which Enbridge s crude oil pipelines are located, including significant watersheds (e.g. Mississippi, Red River and Great Lakes), that approach does not appear to be adequate, particularly given that Enbridge did not mention until questioned that the Company had any exposed pipe, let alone instances for existing Line, totaling, feet in Minnesota. 1. Ms. Britta Bergland Q. What issues do you discuss in this section that haven t already been addressed above? A. Overall, I address Ms. Bergland s responses to my testimony regarding environmental issues Q. What is the first response you address? A. On page, Ms. Bergland states that, in her view, the primary environmental concerns associated with a crude oil pipeline project are the direct and indirect impacts to the natural, socioeconomic and cultural environments that result from construction and operation of such a project. As a result, she considers my statement that [t]he primary concern with any form of transportation of oil is the risk of accidental release to be off the mark due to its low likelihood of occurring. Enbridge Ex. at - (Bergland Rebuttal). O Connell Surrebuttal / 1

65 Q. How do you respond to Ms. Bergland s observations about the appropriate role of environmental reviews? A. I would agree with Ms. Bergland that, if a need for a new crude oil pipeline were demonstrated, the appropriate focus at that point would be on the direct and indirect impacts to the natural, socioeconomic and cultural environments that result from construction and operation of such a project. However, the context for the statement that concerns Ms. Bergland is my analysis of whether Enbridge has demonstrated a need for the proposed Project under the criteria in Minnesota Rules part.0 in the first place Q. What part of the CN rule criteria were you examining when you made that statement? A. I made that statement in assessing whether Enbridge met these criteria in the rule: the consequences to society of granting the certificate of need are more favorable than the consequences of denying the certificate, considering: (1) the relationship of the proposed facility, or a suitable modification of it, to overall state energy needs; () the effect of the proposed facility, or a suitable modification of it, upon the natural and socioeconomic environments compared to the effect of not building the facility; Minn. R..0(C). Q. What did you conclude regarding the relationship of the proposed facility, or a suitable modification of it, to overall state energy needs? O Connell Surrebuttal /

66 A. As I noted above, while I refer to pages - of my highly sensitive, trade-secret Direct Testimony for the full response, I concluded that: Enbridge s mainline system has been delivering supplies to Clearbrook and Superior even with Line capable of delivering only up to 0,000 bpd of light crude; Regarding the proposed incremental increase of 0,000 bpd, Department witness Dr. Fagan observed that the Minnesota district refineries as a group have been operating at high levels of utilization, which indicates both they are not short of physical supplies of crude oil, and that they have little room to increase total crude runs ; It appears that the Proposed Project, if it delivered crude oil to Clearbrook, would provide efficiency benefits by offering Minnesota refiners more options to move crude oil, thus improving the efficiency of existing Line and the Enbridge Mainline System. I note that, while efficiency is a component of Minnesota Rule.0, subpart A, the proposal in my understanding must be considered in light of the other requirements in Minnesota statutes, rules, and law to address the effects of the proposed facility on the natural and socioeconomic environments Q. What did you state regarding the effect of the proposed facility, or a suitable modification of it, upon the natural and socioeconomic environments compared to the effect of not building the facility? O Connell Surrebuttal /

67 A. I began my analysis by stating that [t]he primary concern with any form of transportation of oil is the risk of accidental release, which is the sentence that concerns Ms. Bergland. See DER Ex. at 0 (O Connell Direct). In other words, the context for this statement was not, as I understand Ms. Bergland to have assumed, that a need for a pipeline facility had been demonstrated and where it would then become necessary to consider the direct and indirect impacts to the natural, socioeconomic and cultural environments that result from construction and operation of such a project (quoted above from Ms. Bergland s Rebuttal Testimony). Instead, I am evaluating the consequences to society of granting a CN for the Proposed Project and, to that end, I believe that an important concern for the Commission to consider as to whether to grant a CN for the Proposed Project is the risk of accidental release from transportation of crude oil. In other words, in a more technical way, the question was whether or not the effect of the proposed facility, or a suitable modification of it, upon the natural and socioeconomic environments compared to the effect of not building the facility would mean that the consequences to society of granting the certificate of need are more favorable than the consequences of denying the certificate. Thus, the context for this sentence is not where a need has been demonstrated for the Proposed Project. As indicated in my response above to Mr. Glanzer, I listed reasons, with addition sub-parts as to why Enbridge did not demonstrate that the Proposed Project is needed. O Connell Surrebuttal /

68 Q. Ms. Bergland noted in several places that she believes more environmental analysis should have been done. What did you rely on for your statements about environmental effects? A. To be clear, I relied on the high-level results of the Final Environmental Impact Statement (FEIS) for assessments of environmental impacts. 1 Since my focus was on a high level, I did not repeat all, or even most, of the information. However, I considered the FEIS to provide important information for the Commission to consider. For example, my statement that [t]he primary concern with any form of transportation of oil is the risk of accidental release is consistent with the overview statement in the FEIS that: During the transport of crude oil by pipeline and by the alternative modes of rail and truck transportation, unplanned events may occur that can result in a release of crude oil. Although the probability of a large or major oil release at any specific location is extremely low, the probability of a release of some type along the entire pipeline during its lifetime is not low. In addition, the consequences of a large release can be significant. Therefore, in addition to the analysis of potential Project impacts during construction and normal operations, the potential for unanticipated releases and the potential consequences of such releases must be considered in this Environmental Impact Statement (EIS). FEIS, Chapter, -1. In addition, further support for my statement regarding the potential for damage to forests, wild rice and fish and wildlife habitats, which Ms. Bergland discusses on page of her Rebuttal Testimony is found within the FEIS. 1 I note that this statement also responds to some of the questions in Mr. Wuolo s testimony as to environmental analyses. O Connell Surrebuttal /

69 Q. Ms. Bergland states that you did not fully explain why you stated that your concerns about environmental impacts appear to be higher on the Clearbrook-to-Superior segment than on the Neche-to-Clearbrook segment. How do you respond? A. I answered this question in my Direct Testimony on pages 1- as follows: Q. Why do you believe there are higher concerns regarding Enbridge s proposed Project on the Clearbrook-to-Superior segment than on the Necheto-Clearbrook segment? A. If a need is found in this proceeding, the Neche-to- Clearbrook segment would involve work entirely in an existing crude oil pipeline corridor. The FEIS identifies risks to forests and wildlife habitats that are involved with construction on an existing or new pipeline; but notes that these risks can be partially mitigated by use of best management practices during construction, by restoration, and by corridor sharing wherever possible. However, in the Clearbrook-to-Superior segment, significant sections of the Applicant s preferred route would use a corridor in which no crude oil pipeline currently exists, resulting in impacts to these and other resources, as discussed in the FEIS. Q. Are there concerns about establishing a new crude oil pipeline corridor? A. Yes. Establishing a new corridor for crude oil pipelines would create a higher probability of using the corridor for other new or rerouted pipelines. Moreover, a decision about whether to build new, long-lived infrastructure for the transportation of oil comes at a time when oil use appears to be leveling off or declining, as indicated by Department Witness Dr. Fagan s testimony. As indicated above, Enbridge s Proposed Project would use its existing crude oil pipeline corridor from Neche to Clearbrook, but would establish a new crude oil pipeline O Connell Surrebuttal /

70 corridor in a large portion of the Clearbrook-to-Superior segment. The FEIS also discussed this issue further: A significant portion of the Applicant s proposed Project would be located outside the existing Mainline corridor, and a portion of the route would require a new right-ofway, causing habitat fragmentation and expanding the total acreage of land and resources exposed to the risk of a potential accidental release from a pipeline. Continued use of existing Line avoids these impacts. Continued use of existing Line also avoids the construction impacts associated with clearing a -foot-wide right-of-way and trenching hundreds of miles across Minnesota. FEIS, at ES-1 (Executive Summary). If a new pipeline corridor is permitted for this Project outside of the existing Enbridge Mainline, the new corridor creates an opportunity for future corridor sharing that could ultimately result in an accumulation of multiple pipelines within the corridor chosen for the Line Project. This would be particularly the case with the Applicant s preferred route, RA0-AM, and RA-0. In the case of RA-0AM or the Applicant s preferred route, adding another pipeline in the corridor would result in additional clearing in forested areas with slightly more disturbed habitat and affected watersheds, but in relatively more populated areas. Id at ES-. Q. Ms. Bergland identified you as an SA-0 proponent. Is that a correct characterization? A. No. I stated the following at the end of the alternatives analysis: Q. Please summarize your analysis of alternatives in this proceeding. A. First, regarding the No-Action Alternative, the Department s analysis indicates that Enbridge has not O Connell Surrebuttal /

71 yet established a need for the proposed Project. The Company has not committed to ceasing operations of the existing Line ; further, the Company s analysis of the demand for crude oil products is flawed, as discussed by Dr. Fagan, and the analysis of the No- Action Alternative does not accurately state the effects on Minnesota s refineries. Second, if there were the level of need asserted by Enbridge, I conclude that the truck and rail alternatives would not be reasonable compared to the proposed Project. Third, if the Commission determines that a need exists, I conclude that Enbridge has not demonstrated that the pipeline alternatives of Keystone XL or Spectra pipelines could not reasonably meet that need. Thus, these pipeline alternatives should not be dismissed if a need is determined. DER Ex. at 1- (O Connell Direct). I listed only the Keystone XL and Spectra pipelines as alternatives that should not be dismissed if a need is determined. 0 1 Q. Ms. Bergland stated that environmental review of projects such as this, and the associated alternatives analysis, cannot stop at arbitrary state borders. Enbridge Ex. at (Bergland Rebuttal). How do you respond? A. Ms. Bergland offered no basis for the Minnesota Commission to assess environmental factors in other states. As noted above, I rely on the FEIS for its review of the environmental impacts of constructing the proposed Project Mr. Paul Kahler and Mr. Edward Shahady Q. To what issues do you respond in Mr. Kahler s and Mr. Shahady s Rebuttal Testimonies that have not already been identified above? O Connell Surrebuttal /

72 A. I believe my testimony above responds to most of the issues stated in Mr. Kahler s and Mr. Shahady s testimonies, as to need, how this case differs from prior cases, and the importance of consideration of environmental factors. However, I respond to their discussion of the importance of an interconnection at Clearbrook Q. What did Mr. Kahler state regarding an interconnection at Clearbrook? A. Mr. Kahler stated that Both the Flint Hills Pine Bend refinery and the Andeavor s St. Paul Park refinery rely on the Minnesota Pipe Line for transportation of Western Canadian crude oil. The Minnesota Pipe Line connects to the Mainline in Clearbrook, Minnesota, and delivers crude oil to both Flint Hills and Andeavor. Without a connection at Clearbrook, both refineries will be deprived of benefits of the Project s increased capacity. Shippers Ex. at (Kahler Rebuttal). Q. Do you dispute this statement regarding the importance of the interconnection at Clearbrook to Minnesota refineries? A. No, I agree with Mr. Kahler that the interconnection at Clearbrook is important to Minnesota refineries. As I stated in my Direct Testimony on page : As indicated in Enbridge s response to Information Request 1, [a]ll Enbridge Mainline System deliveries at Clearbrook are destined to Minnesota Pipe Line. Minnesota Pipeline is jointly owned by the two Minnesota refineries (Flint Hills Resources and St. Paul Park refinery, owned by Andeavor, formerly Northern Tier Energy), which receive crude oil through the interconnection at Clearbrook. Thus, this interconnection serves the purpose of delivering crude oil to the Minnesota refineries. (Footnote omitted) O Connell Surrebuttal /

73 Q. Do you agree with Mr. Kahler s statement on page 1 that the existing Line is not capable of accommodating any increase in the demand for heavy crude? A. While I do not discuss the demand for crude oil in the future, I agree that the existing Line is not delivering heavy crude. Thus, as stated above, given that Line transports only up to 0,000 bpd of light crude and that light crude is typically not apportioned, existing Line appears to contribute little to the capacity of the Enbridge Mainline Q. Would Minnesota benefit if a new Line were capable of transporting both heavy and light crude? A. I refer to pages - of my highly sensitive trade-secret testimony for the detailed response. However, the more limited public response, as indicated above, is that: Enbridge s mainline system has been delivering supplies to Clearbrook and Superior even with Line capable of delivering only up to 0,000 bpd of light crude; Regarding the proposed incremental increase of 0,000 bpd, Department witness Dr. Fagan observed that the Minnesota district refineries as a group have been operating at high levels of utilization, which indicates both they are not short of physical supplies of crude oil, and that they have little room to increase total crude runs ; It appears that the proposed Project, if it delivered crude oil to Clearbrook, would provide efficiency benefits by offering Minnesota refiners more options to move crude oil, thus improving the efficiency of existing Line and the Enbridge Mainline System. I note that, while efficiency is a valid component of Minnesota Rule.0, subpart A, the proposal must be considered in light of the other requirements in Minnesota statutes, rules and law to address the effects of the proposed facility on the natural and socioeconomic environments. O Connell Surrebuttal / 0

74 I note that the conclusion above and in my Direct Testimony is in agreement with Mr. Shahady s Rebuttal Testimony at page that Minnesota would receive efficiency benefits. However, as discussed above, that fact alone does not determine need. Q. Since you agree that there would be efficiency benefits of delivering crude oil to Clearbrook, and you noted above that the segment from Neche to Clearbrook would use an existing crude oil pipeline corridor and thus have a lower effect on the natural and socioeconomic environments, why don t you recommend that the Commission approve a new Line segment from the Minnesota border to Clearbrook? A. I do not recommend such approval as Enbridge has not proposed to build a pipeline segment; the Company s Proposed Project covers Minnesota from west to east V. CONCLUSIONS AND RECOMMENDATIONS Q. What do you conclude, based on your Direct and Surrebuttal Testimonies? A. I conclude the following. First, in this proceeding, Enbridge has not demonstrated a need for its Proposed Project, given at least the following: 1) Enbridge may continue to operate existing Line, ) Enbridge does not commit to ceasing operations of existing Line, ) Enbridge insists that the Company can operate existing Line safely, ) Dr. Fagan s Report regarding Enbridge s forecasted demand for crude oil, including the following: O Connell Surrebuttal / 1

75 i. Dr. Fagan s conclusion that Enbridge s demand forecast did not consider more than one potential future for oil supply, demand, or infrastructure DER Ex. at Schedule 1, p. (Fagan Direct), 1 1 ii. iii. iv. Dr. Fagan s conclusion that Enbridge s demand forecast provided no specific outlook at all for refined product demand Id., Dr. Fagan s conclusion that Enbridge s analysis assumes that there will be no pipeline expansions for 1 years (from 01 to 0) in Canada, which is inconsistent with historical records of expansions Id., Dr. Fagan s conclusion that the model solves for the highest price for crude at the supply location, but this does not guarantee that the solution price is high enough to incentivize actual long-term production of crude oil. Id. at v. The implications that Dr. Fagan listed in her Report in light of these issues with the demand forecast were important factors that I considered in my analysis as to whether Enbridge met Minnesota s need requirements: The implications of the reports assumptions for supply, demand, and pipeline capacity, and the forecasted utilization of the Enbridge Line project, are not as conclusive in terms of their support for need for the project, for two important reasons: Minnesota district (Minnesota, North Dakota, South Dakota, and Wisconsin) refineries as a group have been operating at high levels of utilization, which indicates that they are not short of physical supplies O Connell Surrebuttal /

76 of crude oil, and also that they have little room to increase total crude runs. Thus, the whole proposed incremental increase in capacity of 0 thousand barrels per day ( b/d ) for the Enbridge Line project is not likely to be used in Minnesota. Minnesota demand for refined products appears unlikely to increase in the long term, based on outlooks we will show in Section. Minnesota and its neighbors are generally not short of physical supplies of refined products, and are not likely to be short of supplies in the future (except for temporary interruptions). Again, this implies the incremental pipeline capacity would not be wholly used to meet local refined product demand. Id. at. ) Dr. Fagan s statement that refineries in Minnesota, North Dakota, South Dakota, and Wisconsin as a group have been operating at high levels of utilization, which indicates that they are not short of physical supplies of crude oil, and also that they have little room to increase total crude runs, ) refineries in Minnesota, North Dakota, South Dakota, and Wisconsin have little room to increase total crude runs even with the material limitations on existing Line, (transporting only light crude, limited to 0,000 bpd), ) Dr. Fagan s statements that Minnesota demand for refined products appears unlikely to increase in the long term, and Minnesota and its neighbors are generally not short of physical supplies of refined products, and are not likely to be short of supplies in the future (except for temporary interruptions), ) Other various aspects of Dr. Fagan s analysis, including Figure, Refinery utilization rates and Dr. Fagan s analysis beginning on page of her O Connell Surrebuttal /

77 Report regarding various factors affecting demand for crude oil products including effects of electric vehicles on the demand for gasoline, and ) Information in my highly sensitive, trade secret Direct Testimony that demonstrates specifics about service provided to Minnesota refineries via existing Line, given the types of crude oil shipped to those refineries. As a result, I conclude that Enbridge did not meet its burden of proof to show that its Proposed Project is needed. Second, it is my understanding that it is also necessary to take into account a more extensive examination of environmental factors through a FEIS, as the Minnesota Court of Appeals required on appeal of the decision in the Sandpiper proceeding. A commitment to build a new Line would likely result in a net increase in GHG emissions, compared to not building the facility, due to two factors: 1) increased throughput of crude oil through the state overall and ) ability of the existing 0,000 bpd to ship heavy crude rather than solely light crude. There would be economic benefits to: o those who would be employed in working on the proposed Project, o local businesses that would supply goods and services to the employees (and possibly to the Applicant), and o the counties in which the Project would be built, to the extent that the Applicant pays a higher level of property taxes. There would be increased risks to high-quality water resources, both surface waters and ground waters, wild rice, potential damage to forests, fish and O Connell Surrebuttal /

78 wildlife habitats. Overall, these increases in risks would be higher on the Clearbrook-to-Superior segment, in the areas where Enbridge proposes to establish a new crude oil pipeline corridor, than on the Neche-to-Clearbrook segment, where Enbridge proposes to use its existing crude oil pipeline corridor. There would also be risks of contributions to climate change from direct and indirect project emissions, as well as lifecycle greenhouse gas emissions from any incremental oil usage facilitated by the project. There would be disproportionate and adverse impacts to tribal communities if the project were built, no matter which route is used, and even if the proposed Project is not built. There would also be effects on people and businesses that would need to be relocated, but the effects would be higher on the Clearbrook-to-Superior segment than on the Neche-to-Clearbrook segment. During construction of the proposed Project, there may be increased traffic congestion in places along with effects on cropland Q. If the Commission concludes that, with conditions, the proposed Project should not be denied due to a higher level of socioeconomic costs compared to benefits, what do you recommend instead? A. At a minimum, if the Commission reaches such a conclusion, the Commission should use or consider the conditions listed below. I note that several of the conditions listed in my O Connell Surrebuttal /

79 Direct Testimony have been addressed, so I either removed those items or modified the wording below: require Enbridge to install no more than a -inch pipeline to replace the existing -inch pipeline; require Enbridge to add two pipeline maintenance shops if any new pipeline, on any route, extends beyond Clearbook; require Enbridge to provide the updated, final Field Emergency Response Plan for the Superior Region (it is my understanding that Enbridge agreed to do so); require Enbridge to provide any periodic updates that the Commission may request in the future of Enbridge s reasonable assurance that it has adequate cyber security systems in place (given the clarification above that the recommendation is not intended to require Enbridge to disclose its cyber security system to the Commission in any manner that could jeopardize the system itself. Instead, it is simply intended that Enbridge provide reasonable assurance to the Commission that it employs cyber security measures, such as Mr. Baumgartner provided in his Rebuttal Testimony, and to respond if the Commission requests further reasonable assurance in the future.); require Enbridge to remove all exposed segments of existing Line in Minnesota; require Enbridge to report annually to the Commission about any exposed pipeline segments and identify how Enbridge will meet federal requirements; O Connell Surrebuttal /

80 require Enbridge to apply the neutral footprint approved in the second upgrade to Line (Docket No. EL/CN-1-1) to increased electricity use; require Enbridge to establish a decommissioning trust; and require Enbridge to implement the recommendations regarding insurance as identified by Department Witness Mr. Dybdahl. Q. Does this conclude your Surrebuttal Testimony? A. Yes. O Connell Surrebuttal /

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