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One of world's largest companies fined $2.6 million for bitumen spill

The U.S. Department of Transportation has issued a $2.6-million fine to Exxon Mobil, among the world's largest company in terms of market capitalization, for nine probable violations of pipeline safety rules.

Last March the company's Pegasus line, a 65-year-old, 20-inch pipe, spilled 5,000 barrels of diluted bitumen into the suburban community of Mayflower, Arkansas.

In 2008 Exxon Mobil, a major player in the oil sands, reversed the flow on the pipeline and increased pressure in order to pump nearly 90,000 barrels of "low-quality Wabasca Heavy crude oil from Alberta" from Illinois to Texas every day.

Last spring, a 22-foot gash erupted in the pipe, spilling 210,000 gallons into the backyards of local citizens. The rupture forced 22 people to evacuate their homes as well as a multi-million dollar clean-up. Exxon Mobil demolished two homes where diluted bitumen had seeped beneath the foundations.

According to the U.S. Pipeline and Hazardous Materials Safety Administration (PHMSA), the company did not check the safety of the old converted pipeline on a regular basis.

"The operator's integrity assessment schedule failed to prioritize pipeline segments to re-assess the pipe that posed the highest risk to the high consequence areas before re-assessing lower risk segments."

Added a Nov. 6 enforcement and compliance order by PHMSA: "The operator failed to take prompt action to address all anomalous conditions on their pipeline."

The $2.6-million fine represents but a small fraction of the company's monthy $3.75-billion profits. Last year the oil titan, a key funder of the U.S. Republican party, recorded profits of $45 billion.

Earlier this year a New Hampshire jury found the company guilty of contaminating groundwater with the gasoline additive MTBE and ordered the oil giant to pay $236 million for groundwater clean-up in the state.

U.S. Arkansas Congressman Tim Griffin said in a press release that the PHMSA report raised many questions about Exxon Mobil's operating practices and called for the relocation of the pipeline.

"I visited the Lake Maumelle watershed and saw where the pipeline is exposed and potentially vulnerable, and I am more concerned than ever. I will continue to urge Exxon Mobil to relocate the pipeline away from the watershed and work with everyone involved to keep the drinking water for over 400,000 Arkansans safe."

The largest onshore oil spill in American history occurred in Kalamazoo, Michigan, when a 40-year-old pipeline owned by the Calgary-based firm Enbridge burst, spilling 20,000 barrels of diluted bitumen into the river.

Enbridge bought more than 100 homes damaged during the spill and has spent nearly $1 billion in ongoing clean-up.

Bitumen, a low-quality, heavy crude about 70 times thicker than conventional oil is exempt from the U.S. Oil Spill Liability Trust Fund. In contrast, companies transporting conventional crude must pay eight cents a barrel into the insurance clean-up fund.

Because the junk heavy crude is classed as an unconventional hydrocarbon, bitumen pipeline firms such as Exxon Mobil, Enbridge and TransCanada do not have pay into the fund.

According to a 2013 briefing paper by Oil Change International, a non-profit that exposes the true cost of fossil fuels, this subsidy is "a free ride worth over $375 million to tar sands oil producers between 2010 and 2017, including over $160 million for shippers on TransCanada's Keystone pipeline system."

Adds the briefing: "This exemption is an unnecessary subsidy, and one that ignores the elevated risks of transporting tar sands crude oil relative to conventional crude. Logically, tar sands oil transport should be subject to a higher rate than conventional oil, not exempt."

Andrew Nikiforuk is an award-winning journalist who has been writing about the energy industry for two decades and is a contributing editor to The Tyee.

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