Enbridge reaches pipeline-spill settlement with U.S. government

Six years after two major pipeline ruptures fouled rivers in the Midwest, Enbridge reached a $177-million settlement

CALGARY – Enbridge Inc. has reached a US$177-million settlement with the U.S. government six years after two major pipeline ruptures fouled rivers in the Midwest and damaged the company’s reputation.

The settlement announced Wednesday includes US$61 million in fines for violations of the Clean Water Act related to a pipeline spill near Marshall, Mich., that sent more than 3.19-million litres of crude into the Kalamazoo River — resulting in one of the costliest onshore oil spills in U.S. history.

Enbridge (TSX:ENB) has estimated cleanup costs for the spill that spread for 56 kilometres along the river to be about US$1.2 billion, including more than $551 million on response personnel and equipment and $227 million on environmental consultants.

The company has already repaid the government US$58 million for costs it incurred in the cleanup, and has agreed to pay at least an additional US$5.4 million for government costs not yet reimbursed.

Another aspect of the settlement between Enbridge subsidiary Enbridge Energy Partners and the U.S. Department of Justice and the U.S. Environmental Protection Agency saw the company agree to pay US$1 million in penalties for a pipeline rupture two months later in Illinois that sent at least 1.02-million litres of oil into tributaries of the Des Plaines River.

The settlement also includes a commitment for Enbridge to spend US$110 million on measures to prevent spills and improve operations across more than 3,200 kilometres of its pipeline system in the Great Lakes region.

“This agreement puts in place advanced leak detection and monitoring requirements to make sure a disaster like this one doesn’t happen again,” said Cynthia Giles, assistant administrator at the EPA’s enforcement branch, in a statement.

The Marshall spill raised numerous questions about Enbridge’s pipeline safety, with the company failing to respond to the leak for 17 hours despite it triggering numerous alarms in the company’s control room.

The U.S. government said the spill was in part caused by cracking on the pipeline and control-room misinterpretations, as well as “pervasive organization failures at Enbridge.”

Brad Shamla, Enbridge’s vice president of U.S. operations, said in a conference call that the company’s safety culture has changed.

“This incident caused us to take a long hard look in the mirror,” said Shamla.

“You can’t go through something like that and not change, and we did. We have experienced a significant transformation over the last six years, from our people, processes and equipment, to the safety culture that governs every action of every employee at Enbridge.”

Environmental groups were quick to pan the settlement, with the Natural Resources Defense Council calling it a “slap on the wrist,” Oil Change International saying it “pales in comparison to the huge costs the tar sands spill has placed on the community,” and the Sierra Club arguing Enbridge shouldn’t be allowed to continue or expand their “negligent and dirty business practices.”

The settlement comes as Enbridge works to replace and expand capacity on its Line 3 and Line 67 oil pipelines in the region, projects which environmental groups have tried to block.

Enbridge said the settlement directs it to continue with a full replacement of the 470-kilometre stretch of Line 3 between Neche, N.D., and Superior, Wis., a US$2.6-billion project it expects to be in service by early 2019.

The company is also moving ahead with a $7.5-billion plan to replace the 1,660 kilometres of Line 3 between Hardisty, Alta., and Superior, Wis., which the National Energy Board conditionally approved in April.

In 2014 Enbridge finished replacing the 459-kilometre 6B Line involved in the Marshall spill, and also reached a US$6.8-million settlement with landowners on a class-action lawsuit.

Last year the company also reached a settlement with the State of Michigan that included US$75 million on further river upgrades on top of the spill cleanup.

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