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US regulator fines Kinder Morgan for breaking 27 safety rules

The U.S. federal Department of Transportation has fined Kinder Morgan nearly a million dollars in civil fines for breaking 27 U.S. pipeline safety rules.

The Houston-based firm, the continent's third largest energy company, currently wants to triple the capacity of its Trans Mountain pipeline in a controversial bid to bring more Alberta bitumen to the port of Vancouver for export to China.

According to the Pipeline and Hazardous Materials Safety Administration (PHMSA), the violations took place between 2007 and 2009 during the hectic construction of the Rockies Express pipeline.

The 42-inch diameter natural gas pipeline now pumps shale and tight gas from heavily drilled western landscapes to eastern consumers in the U.S.

Unlike PHMSA, the National Energy Board, Canada's federal pipeline regulator, performs two conflicting roles: it approves new pipelines and regulates existing ones. PHMSA does not approve lines, it only monitors their technical safety and fines companies for breaking the law. 

As one consequence of its dual mandate the NEB has no system for fining pipeline companies for violating Canadian laws. Since 1959, the agency has only shut down two pipelines. 

Moreover the NEB, which has been operating since 1959, did not begin posting its safety and environmental actions until the fall of 2011.

Since 2008, the board says it has issued 24 safety orders against pipelines owned by Enbridge, TransCanada and Kinder Morgan for a variety of infractions. None of the companies were fined and most of the safety orders were not publicly available when issued.

In July 2011, for example, the NEB ordered Kinder Morgan to reduce pressure on the 60-year-old Trans Mountain pipeline after a leak appeared on a pipe that failed to operate properly after a pump station expansion in 2005.

The NEB later ordered Kinder Morgan to check "long seam weld cracking" on all pre-1970s pipe installed on the line by December 2013.

In 2012 PHMSA fined Enbridge, a Calgary-based firm, a record $3.7 million for a total of 24 violations of pipeline regulations related to largest onshore oil spill in U.S. history in Kalamazoo, Michigan. The spill of diluted bitumen cost nearly $1 billion to clean up and the river remains contaminated.

Given the number of ongoing problems on the Rockies Express line, Kinder Morgan must develop a plan to "address the potential for remaining girth weld defects resulting from inadequate radiography or delayed cracking that was not identified during girth weld remediation activities."

Improper welding practices and inspections for pipelines were the subject of two part-Tyee series last year based on documents and complaints registered with Canadian and U.S. regulators by Evan Vokes, a Calgary-based mechanical engineer. The NEB confirmed the allegations against TransCanada, Vokes' former employer, and ordered "remediation measures."

Kinder Morgan wants to boost the capacity of the Trans Mountain pipeline from 300,000 to 890,000 barrels a day with a $5-billion expansion. The upgrade would increase the number of international oil tankers in the port of Vancouver.

Local communities, First Nations and environmental organizations have criticized the expansion plans, saying a larger bitumen highway will multiply risks to the environment, community health as well as violate of indigenous rights and sovereignty.

After Kinder Morgan experienced a major pipeline leak and an oil tanker spill near Burnaby in 2007 and 2009, citizens have raised questions about the adequacy of company's monitoring and accident response programs.

In recent years Kinder Morgan has profited from the "energy sprawl" generated by increased production of lower quality unconventional hydrocarbons such as bitumen and shale gas. As such Kinder Morgan has become a major shipper of condensate, a gasoline-like hydrocarbon, much in demand in Canada's bitumen industry.

Bitumen, a junk crude, is so thick and heavy that it will not move through a pipeline without being diluted by higher quality fuels such as condensate.

The Eagle Ford Shale, an unconventional gas resource that requires heavy hydraulic fracturing, now yields large volumes of highly valued condensate which Kinder Morgan hopes to ship to Canada via two proposed pipeline networks by 2014.

But the NEB recently raised serious concerns about the fitness and integrity of one of the proposals, the Cochin Pipeline. It also questioned the adequacy of crack detection methods employed by Kinder Morgan.

The more bitumen that Canada exports, the more dependent the country becomes on imported condensate and higher quality hydrocarbons from the U.S. or the Middle East.

Currently, a lot of condensate needed to move bitumen comes from shale gas fields where hydraulic fracturing blasts open deep rock with millions of gallons of water, sand and toxic chemicals. The process can contaminate groundwater, cause earthquakes and leak vast amounts of methane.

Canada now imports about 300,000 barrels of condensate a day in order to export its bitumen. Expected demand could grow as high as 670,000 barrels a day in the absence of any public policy to upgrade and refine raw bitumen within Canadian borders.

PHMSA posted its ruling on Kinder Morgan on its website last November where it went largely unreported in the Canadian press.  

Andrew Nikiforuk has been writing about the energy industry for two decades and is a contributing editor to The Tyee.

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