Canadian pipeline company Enbridge faces a $3.7 million penalty from U.S. regulators for "multiple" violations of safety measures stemming from a 2010 oil spill in southern Michigan. About 20,000 barrels of tar sands oil from Alberta oil fields spilled into the Kalamazoo River during the summer and crews there are just beginning to reopen some of the regional waterways. Tar sands oil, unlike conventional crude, sinks and becomes mixed with river sediment. A report from federal regulators suggested Enbridge operators misread some of the warning signs and tried to pass crude oil through Line 6B of the Lakehead pipeline system twice before the leak was confirmed. Now, the company behind the leak, which oversees major U.S. pipeline systems, faces the largest civil penalty ever proposed by U.S. pipeline authorities.
The U.S. Transportation Department's Pipeline and Hazardous Materials Safety Administration proposed a $3.7 million penalty for the 2010 oil spill. Transportation Secretary Ray LaHood said pipeline operators would be held accountable for not following the letter of the law and the PHMSA, in its investigation, found "multiple violations" at Line 6B.
Stephen Wuori, president of pipeline operations at Enbridge said, in a response to the PHMSA findings, that he appreciated the "hard work" of U.S. investigators, adding his company "always" put safety first. In mid-June, however, the company was forced to halt services on the Athabasca Pipeline in Canada after more than 1,400 barrels of tar sands oil spilled from a pumping station in Alberta province. In Canada, the company said it would rely in part on federal funds to respond to spills from its proposed Northern Gateway pipeline. Canada's environmental emergencies program now faces a $4 million cut, leaving Enbridge on the hook for any future response. Enbridge pipelines carry most of the Canadian oil to U.S. markets and the mid-June disruption left the Athabasca Pipeline about 65,000 barrels per day under capacity.
The 1,900-mile Lakehead system has access to southern U.S. refineries. Enbridge, before the PHMSA's proposed penalty, said it aims to expand and upgrade the Lakehead system, along with a series of other projects including the ballyhooed reversed Seaway system. This endeavour is part of a move to relieve the glut of oil stored at the Cushing trading hub in Oklahoma. Pipeline infrastructure in the United States hasn't been able to keep up with rising regional crude oil production. With billions of dollars invested in pipeline overhauls, the so-called spread between prices for West Texas Intermediate, the U.S. crude oil benchmark, and other grades should diminish. With more oil coming out of Cushing, refineries along the southern U.S. coast will have to rely less on foreign markets, which could bring temporary relief to the U.S. economy. With U.S. crude oil inventories at historic highs, it just might be a matter of uncorking the Cushing bottle-neck for a glass of economic champagne.
Enbridge said it's made "numerous enhancements" to its oversight of pipeline operations and conducted its own internal review since Line 6B burst in the summer of 2010. Federal investigators said in their reporting that Enbridge appeared to be following standard protocol during the Line 6B incident, suggesting the accident was the result of more than direct negligence. While the full investigation isn't finished, however, the race to uncork Cushing may have just recorded its first $37 million black eye.
By. Daniel Graeber of Oilprice.com