Enbridge Energy has failed to establish the need for its proposal to replace its aging Line 3 crude oil pipeline across northern Minnesota and it might be better to just shut down the existing line, the Minnesota Department of Commerce said Monday.

In filings with the state Public Utilities Commission on Monday, the agency said refineries in Minnesota and the upper Midwest already have sufficient supplies of crude oil and little capacity for processing more of it. It said Minnesota's demand for gasoline and other refined petroleum products appears unlikely to increase over the long term. And it said the proposal carries serious environmental and socio-economic risks that outweigh the benefits to Minnesota.

"In light of the serious risks of the existing Line 3 and the limited benefit that the existing Line 3 provides to Minnesota refineries, Minnesota would be better off if Enbridge proposed to cease operations of the existing Line 3, without any new pipeline being built," said a filing by Kate O'Connell, manager of the department's Energy Regulation and Planning Unit.

Decision rests with commission

The proposal by Calgary, Alberta-based Enbridge to replace Line 3, which was built in the 1960s to carry Canadian crude to its terminal in Superior, Wisconsin, has generated strong opposition from tribal and environmental groups. That's because the company's preferred route cuts through the Mississippi River headwaters region and pristine lake country where Ojibwe bands harvest wild rice, and because the new pipeline could carry tar sands oil, which they consider dirtier to produce than lighter crude. Business and labour groups back the $7.5 billion Enbridge project.

The final decision on whether to grant a certificate of need is up to the commission, which is independent of Gov. Mark Dayton's administration, though the Democratic governor appointed all five commissioners. The commission must also decide on a route. Enbridge wants to follow Line 3's existing corridor at the start of its route across Minnesota, but take a more southerly path for the rest.

The commission is scheduled to decide those questions in April after extensive further proceedings and more chances for the public to weigh in.

'Considerable controversy'

Dayton called the Commerce analysis "very comprehensive," but said he would wait for the "complete record" to emerge from the 30-day response period before declaring his view on the project. He said he was confident the commission would make a decision in the state's best interests.

"This document will arouse considerable controversy," the governor said in a statement. "That discord should be recognized as part of the wisdom of the process."

Republican House Speaker Kurt Daudt called the filings "yet another example of (Democrats) siding with extreme environmental activists while putting Minnesotans' jobs and safety at risk."

In a statement Monday evening, Enbridge said it disagreed with the state agency's filings and is reviewing the evidence.

Chance to respond

The company called the infrastructure critical, adding that it would be "replaced with the most advanced materials, most up to date technology and under superior construction methods."

The company will have a chance to file a formal response with the commission within the 30 days. But Enbridge previously said it needs to replace Line 3 because it has had to sharply restrict the volume the pipeline carries to just over half its original capacity of 760,000 barrels per day. And it said the old pipeline's maintenance needs continue to grow. It calls Line 3 a vital link for meeting the demand for Canadian oil from refineries in Minnesota, Wisconsin and elsewhere. The replacement would have a capacity of 844,000 barrels per day, the Commerce filings said.

Commerce said that if the PUC approves the project, it should require a stronger emergency response plan, thicker pipe and other safety measures, as well as more insurance coverage and other financial assurances for cleaning up major releases and decommissioning the pipeline when it reaches the end of its useful life.