The propane-by-rail market would likely have enough slack to replace pipeline flows into Michigan if the state carries through with a threat to force Enbridge to decommission the 540,000 b/d Line 5, according to S&P Global Platts Analytics.
The future of Line 5 is in doubt after talks broke down last week between Enbridge and Michigan Governor Gretchen Whitmer's office.
In March, Whitmer made good on a campaign promise to halt Enbridge's project to build a utility corridor under the Straits of Mackinac. The tunnel would address environmental safety concerns surrounding the 65-year-old pipeline and house a future replacement.
The system remains a key route for light crude and NGLs to the US Midwest and Ontario, including up to 75% of Michigan's propane demand.
"Ultimately, the question is more about logistics and connecting propane production, whether in Canada or in the US, to demand," Platts Analytics senior NGL analyst Andrew Neal said Monday.
Enbridge spokesman Michael Barnes said Monday that the Line 5 tunnel project is "the best long-term opportunity to secure the energy needs of the state while making an already safe pipeline even safer."
He said a 2017 analysis commissioned by the state found no viable alternative to moving the products carried by Line 5 on other pipelines, rail or truck.
Platts Analytics estimates Line 5 carries 20,000-30,000 b/d of propane from Canada into the US Great Lakes, with roughly half the volume coming off the pipe at fractionators in Clearbrook, Minnesota; Superior, Wisconsin; and Rapid River, Michigan. The rest is re-exported to Canada, where it and moves into storage facilities spanning the border between eastern Michigan and southern Ontario.
Neal said most of the product comes off the pipe in Minnesota or Wisconsin, before it reaches Michigan. Much of the volume bound for storage near Sarnia, Ontario, likely ends up back in Michigan for consumption, but refined product pipe networks in the Chicago area and around Detroit and Northwest Ohio can supply propane as well, he said.
"Overall that 20,000-30,000 b/d pales in comparison to the 1.7 million b/d of propane production in the US at present," Neal said. "Demand for propane in Michigan isn't growing, but the Sarnia storage complex provides important optionality to ship product into the Great Lakes and Northeast."
Whitmer, a Democrat who took office in January, had promised to dismantle an agreement reached in October between Enbridge and the state's term-limited governor at the time to build the utility corridor.
