Direct Administrative Review of the Illinois Commerce Commission No. 07-0446
The opinion of the court was delivered by: Justice Steigmann
JUSTICE STEIGMANN delivered the opinion of the court: In August 2007, respondent, Enbridge Pipelines (Illinois), L.L.C. (Enbridge Pipelines), filed an application for a certificate in good standing and other relief pursuant to section 15-401 of the Public Utilities Act (220 ILCS 5/15-401 (West 2008)). In July 2009, correspondent, the Illinois Commerce Commission, approved Enbridge Pipelines' application, which (1) certified it as a "common carrier by pipeline" and (2) authorized the construction, operation, and maintenance of an oil pipeline.
Petitioners, Pliura Intervenors and Turner Intervenors (collectively, Intervenors), appeal, both arguing that the Commission erred by determining that (1) Enbridge Pipelines was fit, willing, and able to construct, operate, and maintain an oil pipeline and (2) a public need for the pipeline existed. We disagree and affirm.
A. The Corporate Structure of Enbridge and Its Southern Access Expansion Project
Enbridge, Inc. (Enbridge), is an energy transportation and distribution corporation headquartered in Alberta, Canada, that, among other business interests, has a "liquids transportation unit." That unit's purpose, in pertinent part, is to transport oil from producers and shippers in western Canada to markets and refineries in the United States and eastern Canada through an integrated oil pipeline network that spans approximately 1,900 miles across North America. Enbridge's oil pipeline network includes its "Mainline System," which is composed of (1) the "Lakehead System"--the United States portion of its network that transports oil to seven Great Lakes states, including Illinois--and (2) the oil pipeline system of its wholly owned subsidiary, Enbridge Pipelines.
In December 2005, Enbridge began its "Southern Access Expansion Project" (expansion project), which focused on "facility improvements, expansions, and enhancements designed to ensure adequate, efficient, and economic transportation service[s] for producers, and users of crude petroleum." In April 2007, the Commission certified two of Enbridge's affiliates as common carriers by pipeline, which authorized them to construct, oper- ate, and maintain the expansion project. The first phase of the expansion project concerned the construction of a new pipeline in Wisconsin that ran parallel to the Lakehead System. The second phase concerned, in pertinent part, a new pipeline from phase one's termination point to Enbridge's terminal near Pontiac, Illinois. Enbridge claimed that when completed, the expansion project would allow it to transport an additional 400,000 barrels per day (bpd) to its Pontiac terminal.
B. Enbridge Pipeline's Application for Certificate in Good Standing
In August 2007, Enbridge Pipelines filed an application for certificate in good standing and other relief pursuant to section 15-401 of the Act (220 ILCS 5/15-401 (West 2008)). The application sought approval from the Commission to (1) construct an oil pipeline extension spanning 170 miles from its terminal near Pontiac to its 13-million-barrel oil storage facility in Patoka, Illinois, which it termed its "Southern Access Extension Project" (pipeline extension) and (2) acquire, when necessary, private property to construct the pipeline extension under eminent domain as authorized by section 8-509 of the Act (220 ILCS 5/8-509 (West 2008)).
In support of its application, Enbridge Pipelines noted that the United States Department of Energy projected a 30% increase in United States oil consumption from the 20.7 million bpd consumed in 2005 to 26.9 million bpd by 2030, based on increases in population and economic activity. Noting that Illinois (1) is a leading consumer of energy in the United States and (2) produced only 3% of the oil required to meet that demand, Enbridge Pipelines argued that the five refineries located in or near Illinois required a constant, adequate, and dependable supply of oil, which its pipeline extension could provide.
Enbridge Pipelines contended that its pipeline extension would, in pertinent part, benefit Illinois by increasing its ability to deliver Canadian oil to various Illinois markets and refineries. In particular, Enbridge Pipelines asserted that the pipeline extension would afford United States refineries an additional initial capacity of 400,000 bpd for further movement from its Patoka storage facility to various markets and refineries in the southern, eastern, and western regions of the United States. Enbridge Pipelines further noted that by obtaining and processing oil from Canada, refineries would enjoy lower supply costs, dependable sourcing, and expeditious delivery. Enbridge Pipelines claimed that such advantages benefit Illinois consumers in the form of (1) lower prices for petroleum-based products, (2) increased and consistent oil availability, (3) refinery stability that results in consistent tax revenues for local economies, (4) decreased supply disruptions caused by natural phenomenon such as hurricanes or world insurrection, and (5) additional oil delivery options through increased competition.
Enbridge Pipeline's application noted that as a publicly traded company on both the Toronto and New York stock exchanges, Enbridge had a total capitalization of $14.2 billion and earnings to common shareholders of $616 million. Appended to its application, Enbridge Pipelines included Enbridge's 2006 annual report, which documented, in pertinent part, its financial strength. In this regard, Enbridge Pipelines (1) represented that Enbridge had committed the financial capital to construct the pipeline extension and (2) touted its "clear" commitment toward that goal.
C. The Testimony and Evidence Presented to the Commission
We first note that the initial "direct testimony" in this case was presented to the Commission in the form of (1) filed written statements that documented the questions posed by the respective parties' counsel and the corresponding witnesses' answers absent the opposing party and (2) direct oral testimony at a March 2009 hearing before the Commission, in which the opposing party was afforded the opportunity to cross-examine witnesses' on their respective written and oral statements.
1. The Pipeline Extension Director's Testimony In October 2007, the director of the pipeline extension filed his testimony with the Commission, in which he confirmed that he had verified Enbridge Pipelines' August 2007 application for certificate in good standing and for other relief. In adopting the application's content as part of his oral testimony, the director reiterated that Illinois plays a "major role in the international and interstate transportation network for crude petroleum." The director claimed that the pipeline extension would enhance Illinois' role by allowing southern Illinois refineries to satisfy increased demand, which would strengthen its economy and reduce the instability that volatile markets inflict on an ever-tightening world oil supply. With regard to its financial stability, the director noted Enbridge's (1) prior construction and current operation of two oil pipelines and one natural gas pipeline in Illinois and (2) $2 billion investment to enhance its integrated oil pipeline network.
The director (1) acknowledged that he could not quantify the specific monetary benefit that would accrue to Illinois citizens if the Commission approved the pipeline extension, but (2) characterized Patoka as an "important crude oil hub" that "will enhance Illinois' position as an important part of this vital transportation network," and (3) stated that the pipeline extension was designed to deliver a maximum of 800,000 bpd.
2. Enbridge Pipeline's Expert Testimony In October 2007, Enbridge Pipeline's economics expert, who was retained to provide testimony regarding the benefits Illinois would experience if the Commission granted Enbridge Pipeline's application, filed his written testimony. The expert explained that the pipeline extension was part of the expansion project that Enbridge had undertaken. With regard to that project, the expert noted the following substantial benefits Illinois consumers would enjoy: (1) a present-value savings of $407 million based on the mitigating effect increased oil production would have on gasoline prices, distillate, and jet fuel; (2) improved regional security as dependency on uncertain oil supplies from South American and the Middle East are replaced by a stable flow of Canadian oil; (3) gains in "regional economies" based on planned refinery upgrades, oil storage expansion, and pipeline expansion as the anticipated secure supply of Canadian oil replaces the recent history of foreign oil disruptions; (4) a commitment from Illinois refineries to expand their respective facilities to accommodate the additional oil; (5) increased security and safety benefits through local and expanded oil storage facilities; and (6) additional employment opportunities.
In opining that the Commission should grant Enbridge Pipeline's application, the expert noted the following:
"[T]he [pipeline e]xtension *** is extremely important to Illinois and its consumers. In addition to providing access to a secure source of petroleum for many years to come, the [pipeline e]xtension *** will likely provide Illinois consumers with substantial savings in the event of any crisis that occurs in the future, especially if the tight spare capacity that exists today continues, as is likely, in the future."
The expert (1) explained that his $407 million present-value-savings estimate was based on the 400,000 bpd that would flow to Patoka--and eventually the "world supply"--if the Commission approved Enbridge Pipelines' application and (2) acknowledged that he had not confirmed information regarding proposed refinery upgrades ...