Two oil spills between late July and last week in Michigan and Illinois are expected to significantly raise prices at Midwestern gas pumps even as they raise questions about the aging infrastructure of pipelines delivering oil and natural gas from Canada to Midwestern refineries.
The two broken pipelines are owned by one company: Enbridge Energy Partners of Calgary, Alberta, a firm that is poorly regarded by environmentalists for a large, and increasing, number of spills that have dumped millions of gallons of crude into the environment over the past decade.
The company is the largest from Canada to deliver oil and natural gas into the United States. The majority of its oil and gas ends up in the Midwest, at refineries located in Illinois, Indiana, Kansas, Minnesota, Ohio, Oklahoma, and Wisconsin.
In late July, a pipeline owned by Enbridge connecting Sarnia, Ontario to Griffith, Ind. ruptured, sending over 800,000 gallons of oil into the Kalamazoo River in southwest Michigan. Last Thursday, another Enbridge pipeline ruptured in Romeoville, a suburb of Chicago, releasing 256,200 gallons of oil. The US Environmental Protection Agency says the leak was stopped Monday.
The cause of the Illinois spill is not yet known, but preliminary reports regarding the earlier Michigan spill show that corrosion may have played a part in the release of oil. The Pipeline and Hazardous Materials Safety Administration, an agency operating under the US Department of Transportation, told Enbridge in January that the pipeline did not comply with federal regulations. The pipe was manufactured in 1969 and received a dozen federal citations and warnings for safety violations since 2002.
The Midwest spills coincide with a natural gas pipeline that erupted outside San Francisco last week, killing 4 people and destroying over 30 homes. Although the National Transportation Safety Board investigation to root out a cause is ongoing, the agency reports that the pipeline, owned by PG&E Corp. of San Francisco, was built in 1956. The Enbridge pipe in Illinois started operating in 1968.
Aging national network
These incidents are drawing attention to the aging network of liquid and natural gas pipelines in the US. According to the Pipeline Safety Trust, a nonprofit advocacy group in Bellingham, Wash. that promotes fuel transportation safety, the majority of both natural gas and liquid pipelines in the US were installed before 1970. The peak installment years for both kinds of pipelines were between 1950 and 1969, a time period that accounts for about 40 percent of the pipelines built between 1920 and today.
Pipelines dating back as much as 60 years are an issue “because they don’t have the same kind of steel, the same kind of anti-corrosion coating that new pipelines do,” says Carl Weimer, executive director of the Pipeline Safety Trust.
Mr. Weimer argues that increased federal regulation is needed to maintain and repair the aging infrastructure. Current pipeline inspections are limited to special sections located in “high consequence areas,” a designation having to do with population density near the pipelines. According to Weimer, the designation only covers 44 percent of liquid pipelines and just 7 percent of natural gas pipelines of the total number that exist in the US. The majority of pipelines that do not fall under that category do not get checked.
However the numbers show inspections are crucial. Between 2002-2008, over 34,000 anomalies on pipelines were discovered and repaired due to internal company inspections, he says. Weimer warns that state and federal regulating agencies don’t have “enough resources to verify the companies are doing the right thing” with the findings that result from the inspections.
Enbridge plays a significant role in providing for the daily energy needs of US consumers. There are 9,500 miles in its pipeline network that delivers liquid crude in the Midwest. Canada is the largest exporter of oil to the US, delivering 2.2 million barrels, or 92.4 million gallons, a day, which represents about 10 percent of daily oil consumption here, according to the US Energy Department in June.
Mark Zupan, dean of the Simon Graduate School of Business at the University of Rochester in Rochester, N.Y., says the reason why Canada plays such a major role in US oil imports is its proximity and low cost of operating and maintaining shipping channels. Mr. Zupan says the Enbridge pipeline that broke last week had a daily capacity of delivering up to 670,000 barrels, or 28 million gallons per day. Having it out of commission for what is an expected six to eight weeks will have “an appreciable impact on supply,” he says.
Despite such a prominent role as a major US oil supplier, Enbridge has a tarnished reputation among environmentalists who cite its high volume of spills, 610 between 1999 and 2008 according to federal and company data, which is responsible for about 132,000 barrels, or 5.5 million gallons of oil released into the environment. According to a May 2010 report on the company by the Polaris Institute, an Ottawa think tank, the company had 93 spills in 2008 alone, a 43 percent increase from the previous year.
Federal regulators are increasing their attention on the company. The Pipeline and Hazardous Materials Safety Administration, an agency that operates under the US Department of Transportation, is denying the company’s plans to restart the Michigan and Illinois pipelines unless they go through a rigorous safety review. In August, Enbridge was fined $2.4 million for violations of federal pipeline safety regulations related to a 2007 pipeline explosion that killed two workers in Clearbrook, Minn.
The Chicago area spill will raise Midwest gas pump prices about 30 cents per gallon, and its impact on prices is expected to last for about two months, says Tom Kloza, editor of the Oil Price Information Service, a service that tracks petroleum pricing. Mr. Kloza says that the oil spill in the Gulf of Mexico, which released a much greater volume of oil, is a factor in the spike because of the increased public and government scrutiny.
“If this was not 2010 and we did not have the legacy of BP,” the combined Enbridge spills “would probably inspire a little bit of a market pop and not be measured out in weeks and months,” he says.
Because the Gulf Coast has a greater supply of oil and easier access to foreign supplies, gas prices along the coast remained stable, Kloza says. This makes it different than the Midwest market, which primarily depends on its Canadian suppliers.