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Enbridge CEO Al Monaco addresses the company's annual meeting in Calgary, Wednesday, May 8, 2013.Jeff McIntosh/The Canadian Press

Enbridge Inc.'s $7-billion replacement of a major oil pipeline – its largest project to date – will boost overall shipping capacity to the United States while sharply reducing the maintenance bill on its system, the company says.

The replacement has the added benefit of allowing Enbridge to avoid a U.S. State Department presidential permit process that has led to long delays in decisions for TransCanada Corp.'s contentious Keystone XL pipeline and Enbridge's own Alberta Clipper pipeline expansion, CEO Al Monaco said.

Enbridge said it has support from its shippers to replace the 46-year-old Line 3 between Edmonton and Superior, Wisc., with new pipes. The existing line has suffered a number of ruptures over the years and currently runs well under capacity.

"It does not require a [new] presidential permit," Mr. Monaco said on Tuesday. "Of course, Line 3 already operates under an existing presidential permit, so what we're doing here is restoring Line 3 to its original condition."

Pipelines require such permits in the United States when they cross the international boundary. Assuming Enbridge wins other clearances from Canada's National Energy Board and the U.S. Federal Regulatory Commission, the new line would be in service in the second half of 2017.

The 1,660 kilometre Line 3 now moves 390,000 barrels a day, with shipments restricted by the company's view of its ability to handle higher volumes. The replacement would move up to 760,000 barrels a day.

Shippers agreed to pay a per-barrel surcharge to provide a return on the project, guaranteeing a portion of the company's earnings. The new line will give the system, which connects much of Canada's oil production to U.S. markets, more reliability, Mr. Monaco said.

"When we've got additional capacity on this particular line, it does allow for room to manage situations where you've got unplanned maintenance," he said. "It gives you a little bit more flexibility for planned maintenance, outages even."

Oil producers have been plagued by tight export capacity as major new projects are bogged down by environmental opposition and regulatory delays. Output in Alberta keeps edging closer to the industry's ability to move the volumes. One consequence has been high degrees of space rationing, known as apportionment, which has pressuring prices. Another has been a massive increase in the use of trains to move oil.

Also on Tuesday, TransCanada filed its project description for the planned $12-billion Energy East pipeline to the Atlantic coast, the first stage in its approval process. It too is aimed at increasing the volume of oil sands-derived crude to lucrative export markets while steering clear of risky U.S. politics.

TransCanada aims to make its formal application for the 4,600-kilometre pipeline to Quebec and New Brunswick by mid-year, with plans to be fully in service by late 2018.

Enbridge had expected the expansion of its Alberta Clipper pipeline, to Superior from Hardisty, Alta., to get quick sign-off for an amendment to its presidential permit. But that the process has been delayed beyond the previous target of mid-2014, Mr. Monaco said last month, due to heightened environmental scrutiny.

Environmental groups said the replacement is merely an attempt by Enbridge to skirt a U.S. review. Doug Hayes, a lawyer with the Sierra Club in Denver, said the project must be subjected to the State Department process and the same test President Barack Obama has laid out for Keystone XL – that it does not "significantly exacerbate the problem of carbon pollution."

However, it could be tricky for Washington to reject a plan to switch out old infrastructure, said David McColl, an analyst at Morningstar Inc. in Chicago. "Would the president be able to deny a permit to replace a pipeline that may or may not be aging or requiring replacement? Is he willing to put on his shoulders the risk of a rupture?" Mr. McColl said.

The Canadian portion of project will cost $4.2-billion, and the U.S. segment will cost $2.6-billion (U.S.) and be handled by its Enbridge Energy Partners affiliate.

Over all, the replacement will eliminate the need for $1.1-billion in maintenance costs through 2017, the company said. When complete, Enbridge's mainline system will be able to move 2.85 million barrels a day, up from about 2.2 million today.

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