News

Enbridge Not Positioned to Pay for Gateway Oil Spill: Report

BC taxpayers could be on hook for massive clean-up costs says economist Allan.

By Andrew Nikiforuk, 5 Jun 2012, TheTyee.ca

Economist Robyn Allan

Former ICBC CEO Robyn Allan prepared risk report by request of the Joint Panel Review of Enbridge's proposed Northern Gateway pipeline project.

Related

Enbridge has under-estimated the risk of a bitumen spill along its technically challenging Northern Gateway Project and ignored the company's spill history in the United States in its risk studies, concludes a prominent economist.

In a new report directly requested by the Joint Panel Review studying the controversial project, Robyn Allan, former CEO of the Insurance Corporation of British Columbia, also concludes that Enbridge doesn't have adequate insurance coverage or the corporate structure to cover a multi-billion dollar spill either.

"There is no reason to believe Enbridge would be directly responsible for the cost of any spill based on the limited partnership structure. This structure allows profits to flow to Enbridge, but from what I have seen in the documents, not spill liabilities." explains Allan.

In the event of a catastrophic event Northern Gateway exists as a stand-alone company that might have to shut down due to multi-billion clean-up costs, a scenario that puts the public of British Columbia at severe risk, adds Allan.

"The provincial government should be asking hard questions about pipeline insurance risks and clean-up costs but they aren't."

The Kalamazoo calamity

On May 18, 2010 Enbridge's Line 6B, which supplies refineries in the Great Lakes with Alberta bitumen, ruptured and spilled 20,000 barrels of diluted bitumen, a poorly studied mix of hydrocarbons, into Michigan's Kalamazoo River. Clean-up and remediation costs now total $765-million but only three of 39 miles of river contaminated have been reopened.

Yet Enbridge's current insurance policy only covers $575-million worth of damages or nearly $200 million less than the Kalamazoo spill. The Northern Gateway project alone would cross nearly 700 fish-bearing watercourses in some of the nation's most mountainous terrain.

In its public submission to the NEB the Enbridge offers "no assurance that the insurance coverage we maintain will be available" due to the risks of spills and leaks on other pipelines owned by the Calgary-based company throughout North America.

Another issue not properly addressed by the company concerns the poorly studied behavior of diluted bitumen in waterways. Although condensate rapidly evaporates, the heavy crude actually sinks to the bottom of a river making it harder, more damaging and costly to clean-up over time.

As a result the difficult hydrocarbon creates a variety of unusual risks "that the insurance industry is only beginning to come to terms with," notes Allan.

ENBRIDGE'S SAFETY ASSURANCES

An Enbridge web page boasts of the company's safety record in 2010, the same year its pipeline burst pouring at least 877,000 barrels of Alberta diluted bitumen into a tributary of Michigan's Kalamazoo River. The accident so far has cost more than $765 million to clean-up and 36 miles of the river remain closed to the public.

Enbridge's website doesn't reference the Kalamazoo disaster as it makes its case mathematically: "In 2010 Enbridge safely transported 950 million barrels of hydrocarbons with a safety record better than 99.99 per cent. That's a powerful demonstration of our commitment to safety."

The same page promises safety measures along the Northern Gateway pipeline route stretching from Alberta to Kitimat on B.C.'s northern coast, including use of high quality materials and high tech leak detectors. "Response" measures include:

"Installing safety control valves on either side of major water crossings to ensure the pipeline can be quickly shut down;

"Monitoring the system 24/7 and responding immediately to any changes in pressure;

"Individually engineering water crossings to allow for substantial extra depth of cover and increased pipe wall thickness in these areas;

"Pipeline Emergency Response equipment and personnel will be stationed at numerous locations along the pipeline system;

"Local emergency responders will be trained to assist with any potential spill scenario and full scale response exercises will be held annually with these organizations;

"Plans will be prepared in advance to identify potential control points along every watercourse...

"If an incident should occur, Northern Gateway will be there quickly to control, contain and clean up."

A graphic at the bottom of the web page urges "Support Northern Gateway."

Response and safety concerns

Pipeline response and safety also aren't properly addressed by Enbridge in its submissions says Allan.

After the Kalamazoo spill the US Environmental Protection Agency found "Enbridge did not have adequate resources on site to deal with the magnitude of the spill" during the initial hours of response.

Recent testimony by Enbridge officials before the U.S. National Transportation Safety Board also reveal that the "company suffers from a corporate culture that places growth as priority above operational safety," adds Allan.

Company managers recently told the U.S. regulator that their staff took 17 hours to respond to the leak and spillage due to poor technical support, lack of training, inadequate knowledge of pipeline procedures as well as a worrisome overall employee retention rate.

Leon Zupan, senior vice president of operations, admitted during testimony that the spill caught the Calgary-based company totally unprepared: "we had people that were really trying hard to do what they thought was the right thing but they needed more technical support, they needed more management support, they needed more technical training and they needed to be clear about what our expectations were in terms of the people directly under my control and pipeline control."

As a consequence, a major accident that should have taken a total of 13 minutes to identify and contain according to Enbridge's own manuals, actually took more than three quarters of a day to locate. None of these revelations appear in Enbridge's application to build the Northern Gateway Project.

Given the exhaustive examination and documentation on the Kalamazoo spill compiled by the US National Transportation Safety Board, Canada's National Energy Board, the agency responsible for pipeline safety here, should "initiate its own analysis and detailed review on Enbridge pipeline integrity as a matter of urgent priority," Allan writes.

'Greater capacity means greater risk'

On its Northern Gateway website Enbridge calls its pipeline safety standards "world class" (see sidebar).

In documents tabled for the federal pipeline inquiry Enbridge argues that it is not possible to predict the financial cost of a spill and therefore the company does not have to quantify the risk.

Allan calls this attitude irresponsible and untenable. "If Enbridge is unable or unwilling to undertake a financial quantification of the risk it poses to the Canadian public, First Nations and the environment, then by extension the company should not be able to offer an estimate of the economic impact of this project on the Canadian public and First Nations."

Northern Gateway, a set of pipelines designed to export bitumen and import Middle Eastern light oil, has a designed capacity to carry 60 per cent more crude than currently being assessed as well as 40 per cent more condensate. "Greater capacity means greater risk," adds Allan.

Allan recommends that Northern Gateway "obtain stand alone pollution liability insurance for all perils assessed and priced by the insurance market" worth at least $1 billion. "That should be the floor."

Allan also recommends that Northern Gateway be required to meet the pollution claim of third parties in preference to equity investors and lenders.

Under current arrangements the company's Limited Partnership limits the exposure to the multi-billion project. "Should a pollution claim exceed the ability of Northern Gateway to pay, the partners could elect to shut the project down, particularly if the pipeline capacity is not being utilized fully, and if oil transportation capacity has been overbuilt."

The Joint Review Panel asked Allan for answers to several questions about safety and risk after her January 30 submission raised substantial questions about the pipeline's economics, insurance coverage and corporate structure. That report, "An Economic Assessment of Northern Gateway," made national headlines.

Enbridge has just launched a multi-million dollar campaign to convince British Columbians to support a Chinese funded pipeline that would deliver raw Alberta bitumen to the port of Kitimat where it would be loaded on supertankers bound for refineries largely owned by the Communist Party of China for sale in heavily price subsidized gasoline markets.  [Tyee]

37  Comments:

Login or register to post comments

  • crankypants

    50 weeks ago

    Tip of the iceberg

    This may well be only the tip of the iceberg regarding the Northern Gateway pipeline.

    Who determines how much insurance is required and what would this insurance cover? Would it cover only the costs of cleanup or cleanup and remediation, if that is even feasibly possible? Would an insurer only cover certain causes of a spill? Would negligence be covered? Would an act of god such as an earthquake be covered?

    So many questions, so few answers.

    "Trust me", which seems to be the mantra of both our Federal Government and Enbridge, seems to be a very hollow argument to even consider this venture.

  • Forest_Lover

    50 weeks ago

    Someones not telling the whole story

    Why would a federal and provincial government risk so much alienation of its populace over the extreme anti-environmental fallout from the pipeline and all of Harper's de-regulation of the resource sector???
    I think that possibly looming on the horizon is a crisis that governments are not telling us about, either fiscally or with the environment. Why else would they risk so much for so little? Too divide a counrty and province for the sake of a few jobs? They must know that there is much a stake here which is not in the big picture. Canadians will eventually stand up to this movement to destroy our coast, oceans and planet but at what cost to Harper and Clarks reputation? It is a gamble with something else in the mix which they are not telling us. What is that other factor?

  • ron wilton

    50 weeks ago

    We Are The People

    I agree with 'Forest Lover' that some very unseemly information is being withheld from us by the powers that be and their impotent msm poodles, regarding their maniacal fervor for this environmental disater in the making.

    Both Harper and Clark's reputations, fatally flawed from the beginning, are now already mortally wounded, and the mad scramble by Harper's moor hounds like Duncan, Oliver, kent, et alia, to somehow mollify us with their mindless, quixotic frothings, only makes us more suspicious.

    Clearly it is up to the people of BC to join forces with our First Nations brothers and sisters, and with steely resolve, be prepared to confront these traitorous, shallow, imbecilic miscreants at every depth and level of their depravity.

    Whatever it takes, we will not sell our souls to this corporate propelled juggernaut, nor break the faith that our ancestors bequeathed to us, and we in turn must preserve for future generations.

    This war is being fought on many fronts, whether it be Enbridge, Marine Harvest, CN/BC Rail and perhaps as yet unknown others, but each battle must be won and will be won, by the people.

    Whatever it takes.

  • MEW

    50 weeks ago

    Who gets the oil is irrelevant

    A great article until it gets to the last paragraph.

    This pipeline is wrong whether the oil goes to a capitalist country or a Communist. It is wrong whether the people are Chinese or Caucasian. It is wrong if we shipped the tar to India's capitalist economy.

    It is wrong whether it is financed from Wall Street or Fleet Street just as much as if it was financed by banks in Beijing or Hong Kong.

    Cheap shots against China do nothing to enhance the debate and merely look like bias against the country and its people.

  • RickW

    50 weeks ago

    I doubt if it could be called "under-estimated"

    Quote:
    Enbridge has under-estimated the risk of a bitumen spill along its technically challenging Northern Gateway Project

    That would imply that some effort, however feeble, had actually been applied to a risk assessment.

  • Barryeng

    50 weeks ago

    I agree with forest_lover and Ron Wilton

    Also consider the computer hacking scandal from not too long ago. If, as has been suggested, it was the Chinese hackers who broke into our government computers, did they find something very damaging to or about Harper? Why else would he be so willing to destroy Canada to appease the Chinese?

  • Odie Kermode

    50 weeks ago

  • gomer

    50 weeks ago

    Where will those pipes be

    Where will those pipes be manufactured? Just wondering if the steel that fails will come from the scrap from the BC forest industry sent to China.

  • snert

    50 weeks ago

    Here's a great opportunity.

    Risk assessment is a valid issue. Rather than pull the usual whining and snivelling about how the pipeline should never be built why not focus on ensuring that the risk assessment is carried out as thoroughly as possible and that the best possible spill mitigation procedures are in place.

    It wouldn't hurt, either, to have a clear understanding of just who might be held accountable both physically and financially in the event of an actual spill.

    The vast majority of people have no concept of risk tolerance. They very seldom, if ever, stop to think about the threat that they are under as they hurtle down a two lane highway towards opposing traffic.

    The risks are manageable so the project should go through. Risk tolerance is a far bigger issue and it is MHO that there are a number of hypersensitive people trying to run unproductive interference with the project.

    -------------------------------------------

    Below is a rather disturbing video of just how fast a day can go bad. Watch it then re-evaluate your risk tolerance. Don't make the mistake of blaming the driver that lost control. Fault is not the point.

    http://rmirror.net/r/videos/comments/q5hu9/car_accident_nsfl/

  • RickW

    50 weeks ago

    The risks are manageable so the project should go through.

    Well, isn't that just silly! Now - if the risks involved were to be suffered by those creating the risks, that is acceptable.

    Reminds me of a story I heard recently about the Giant mine in Yellowkife. Seems that upper management of the mine had accoommodations built on the minesite, some 10 miles out of town, while the lowly workers had to find accommodation in town and drive that 10 miles every day. Now, some decades later, those managers are dead of heavy metal poisoning, et al, while the grunts aren't faring nearly as badly.

    Justice served after a fashion. But today's management leads from behind. And in the case of Enbridge, that would be from Calgary and points south, while they get to offload the risk to anyone but themselves.

  • Skywalker

    50 weeks ago

    Sorry but, who gets the oil IS relevant.

    I think the fact that it is all for export is relevant because there is then so little benefit. It would certainly be relevant if it were fuelling an economy in direct competitions with Canada. It would certainly be relevant if it were fuelling an economy that oppresses its people or we would be sending it to North Korea and maybe we are indirectly. It is all relevant because it is a Canadian resource and last I heard Alberta was in Canada. It is all relevant because to get it out Alberta needs to go across B.C.and B.C bears all the risk and none of the benefits.

  • Cynic

    50 weeks ago

    "The risks are manageable..."

    "The risks are manageable..." How do you know?

    There hasn't been a satisfactory answer to why not build the refineries in Alberta. If the resource is so vast and valuable, it's in the national interest to refine it ourselves for our own needs and export any surplus. Getting it to eastern Canada is far easier over relatively flat terrain. We all know intuitively that a dilbit spill in the mountains would never be adequately cleaned up, it can't be done. Nor can a bitumen spill in the ocean.

  • oneconcerned

    50 weeks ago

    How much

    Can you bring sea life back to life with money. You could put an ocean of money on top of dead oil drenched sea life and it will not come back to life. The only thing that insurance would do would make it look like Enbridge was attempting to do something if there was an oil spill. Placating the people of BC, supposedly.

  • RockyRacoon

    50 weeks ago

    I watched the hearing Canada had after the Gulf Spill they were

    on CPAC the summer before last it was the biggest farce the NEB is the biggest farce board that was ever stacked by a government they don't accept conflict of interest and their liability is capped at 500 million or so the rest means individuals have to sue for damages as individuals could ever go against the oil companies it was a joke complete joke-IF those hearings are in the archives I would recommend everyone watch them. The most honest reports came from non profit environmental groups-the government and oil company presentations were a sham.

  • RockyRacoon

    50 weeks ago

    It is bad enough corporations try to hoodwink the public

    but when the government is in cahoots with them nothing short of a social tusammi will stop them. Hope the people of Greece get behind the Syriza Party and that whole rotten Anglo American Aristocracy is brought to the ground.
    RR

  • snert

    50 weeks ago

    Quote: Well, isn't that just

    Quote:
    Well, isn't that just silly! Now - if the risks involved were to be suffered by those creating the risks, that is acceptable.

    It matters not. You have people exposing themselves to danger on your behalf every day of the week. Did the truck driver in that video survive? Was he delivering goods to your local grocery store? What was his risk tolerance?

    You're not going to tell me that you've suddenly turned into a hypocrite, are you?

    Anytime you do anything there is risk hence the reason for assessments the sole purpose of which is not just to cancel projects.

  • snert

    50 weeks ago

    oneconcerned

    Quote:
    Can you bring sea life back to life with money.

    Certainly not, What ever gave you that idea? Time is certainly required, that and stop eating the fish.

  • snert

    50 weeks ago

    Cynic

    Quote:
    How do you know?

    The last time I checked, today, there had been no major disasters in petroleum transportation industries. It would appear that the risks were managed.

    If that can be done for one day it can be done for a thousand.

    As with nature itself we are not perfect. Shit does happen and that is why we have become pretty good at mitigating it. We are not perfect yet but we can come close sometimes.

    One also has to keep in mind that not all petroleum spills are catastrophic and the goal should be to see that that catastrophes do not happen. It is not unachievable one.

  • Skywalker

    50 weeks ago

    Oh that word "managed".

    It is so hard to pin down. Who cleaned up, who paid, what was the lasting damage, was the problem ever corrected or "managed". You know "managed" is one persons solution and another's whitewash. Managing might just be dying slower than otherwise. In Syria the some people "manage" to survive.

  • Cynic

    50 weeks ago

    "If that can be done for one

    "If that can be done for one day it can be done for a thousand."

    Ever heard of "the odds"? Every day that goes by where oil is transported guarantees the eventual catastrophic spill. I stand by my statement that oil spills in the mountains or in the ocean cannot ever be satisfactorily cleaned up. The point is, the risk is unacceptable, the cost is too high. If we weren't so deeply indoctrinated by the elite's capitalist pigism, projects like northern gateway would be unthinkable.

  • Cool Hand

    50 weeks ago

    Skywalker & Cynic

    Quote:
    Skywalker - It is all relevant because to get it out Alberta needs to go across B.C.and B.C bears all the risk and none of the benefits.

    Ahhhhhh... not sooooo fast!

    Some interesting insights from Alberta government sources about the financial benefits to be shared with BC. Still at an early "hush-hush" stage but nevertheless:

    1. The AB guvmint is contemplating assisting in the construction of a heavy oil upgrader in Kitimat - ~$5 - $10 billion capital investment;

    2. The AB guvmint is also internally looking at sharing increased oil revenues with the BC guvmint and FN as a result of higher prices/volumes of the NG pipeline- potentially $10's billions to BC and FN's;

    Nothing to sneeze at and such future propositions will likely take the matter over the top politically.

    http://www.albertaoilmagazine.com/2012/06/could-profit-sharing-get-landlocked-alberta-crude-to-the-pacific/

    Quote:
    Cynic - Every day that goes by where oil is transported guarantees the eventual catastrophic spill.

    Well blow me down. Since 1977 Alaskan pol supertankers have plied off BC's west coast, along the west coast of Vancouver Island, past Victoria, through the Straight of Juan De Fuca and into the Straight of Georgia.

    Since the 1950's, the Trans-Mountain pipeline traverses BC on a longer route than the proposed Northern Gateway pipeline. More importantly, it traverses the massive fish-bearing Fraser River and all its tributaries. Thousands of streams.

    And oil tankers have been delivering oil from Burnaby through the Georgia Straight since the 1950's.

    What I don't get is why you haven't protested these events over the past few decades? The proposed Northern Gateway pipeline is relatively puny compared to Alaskan oil supertankers and the Trans-Mountain pipeline.

  • RickW

    50 weeks ago

    sneert

    Quote:
    Anytime you do anything there is risk

    Yes - but it sure is nice when the consequences of risk are off loaded while the initiater pockets the cash.

  • RickW

    50 weeks ago

    snert

    As the article noted:
    "Clean-up and remediation costs now total $765-million but only three of 39 miles of river contaminated have been reopened"

    And you said:
    "The last time I checked, today, there had been no major disasters in petroleum transportation industries

    Might I also, for your benefit as well as Cool Hand's, mention the Exxon Valdez (still not cleaned up), the Amoco Cadiz in France, as well as any number of Russian oil spills.....

  • snert

    50 weeks ago

    RickW

    Emphasis on the word today.

    Quote:
    Yes - but it sure is nice when the consequences of risk are off loaded while the initiater pockets the cash.

    Well, here's you chance to do something constructive, make sure that doesn't happen___ without stopping the project.

    And then there's this.

    http://www.cbc.ca/news/canada/british-columbia/story/2012/06/05/bc-gateway-pipeline-first-nations.html

  • Cynic

    50 weeks ago

    Hard to see your point, Cool

    Hard to see your point, Cool Hand. And what's with your question "What I don't get is why you haven't protested these events over the past few decades?" What do you know about what I've been up to?

    But you go ahead and be an apologist for the powers that be. Your name is legion, fully indoctrinated, can't let go.

  • snert

    50 weeks ago

    Skywalker

    Quote:
    It is so hard to pin down. Who cleaned up, who paid, what was the lasting damage, was the problem ever corrected or "managed".

    The point of my first comment was this very same issue. Rather than waste time obstructing the project work at making sure there is a clear understanding as to who is responsible for what.

    I keep forgetting, though, that it is much easier for lazy protesters to just say 'no' than it is for them to say 'let's see if we can do this better'.

  • RickW

    50 weeks ago

    snert

    Quote:
    Rather than waste time obstructing the project work at making sure there is a clear understanding as to who is responsible for what

    Not good enough - unless the responsible party is required to immediately cease all business until the remediation work is complete. That's the ONLY "stick" that will work.

  • RickW

    50 weeks ago

    snert

    As for FN signing up, not naming which ones did so is no better than protesters wearing masks.

  • snert

    50 weeks ago

    RickW

    Quote:
    Not good enough - unless the responsible party is required to immediately cease all business until the remediation work is complete. That's the ONLY "stick" that will work.

    Ahhh, the olde stick mentality____OK.

    Quote:
    As for FN signing up, not naming which ones did so is no better than protesters wearing masks.

    I hope you didn't hurt yourself reaching for that one.

  • SierraClubCanada

    50 weeks ago

    The Importance of Accountability

    Very interesting and eye-opening article. The blatant disregard Enbridge seems to have for the health and safety of those who live BC is not acceptable. It's companies with such lax regulations as these, and events like the one in Kalamazoo, that show just how dangerous the changes to environmental law in Bill C-38 can be. Although it apparently tries to, Enbridge should never be allowed to forget the massive spill in Kalamazoo and just how unprepared they are to deal with it.

  • Frank

    50 weeks ago

    People don't want better

    Most people in BC could care less if there's oil spills along the coast or in the rivers crossed by the pipeline. That's why they vote for people like Campbell and Harper.

    When a few people raise the issue they're shouted down by those that want to bend over backwards for the oil companies.

    We'll end up doing it the way its always done here, politicians will tell us everythign will be fine, companies will get the go ahead, problems will happen and the clean-up will be half-hearted and paid for by the taxpayers but we'll be told those problems have been fixed.

    Then it'll happen again and we'll be told it was a new problem, something nobody (except radical environmentalists) could have foreseen. And that too will be paid for by the taxpayers while at the same time shareholders will be cheering at the meetings when they're told profits are higher than ever and governments are cutting their taxes.

    And on and on it'll go.

  • Frank

    50 weeks ago

    Coolhand's billions and billions

    The BC Liberal version of Carl Sagan. Every patch of dirt is worth billions and billions and after they're developed there's still never any money for things like combatting child poverty or raising welfare rates or keeping emergency wards open.

    Instead its quickly on to the next "billions and billions" scam and the hope no one remembers your last promise.

  • For a better world

    50 weeks ago

    Snert

    You should have included this CBC article that contradicts your view of native support for the pipeline.

    http://www.cbc.ca/news/canada/british-columbia/story/2012/06/06/bc-northern-gateway-first-nations.html

  • RickW

    50 weeks ago

    snert

    From For a better world's link:
    Enbridge expanded its pipeline corridor by 80 kilometres to increase its numbers

    Must be great to arbitrarily claim any land you want for your own purposes. Last I heard, the land must be allocated by government - in the name of the people.

  • kmdyson

    50 weeks ago

    profits

    this is sickening...back to feudalism....

  • crankypants

    50 weeks ago

    Frank

    One correction. They don't bend over backwards, they just drop drawers and bend over.

  • snert

    50 weeks ago

    RickW

    Quote:
    Last I heard, the land must be allocated by government - in the name of the people.

    When was the last time you spoke with any of the tribes about their land claims in the area. All Enbridge is doing is playing the game. FNs come up with the rules as they see fit. Just ask For a better world.

    • The discussion for this story is closed. No more comments can be added.