Enbridge to pay $177M for oil spills

Marshall — Enbridge Energy will pay $177 million as part of a consent decree with the U.S. government tied to the Alberta-based company’s 2010 pipeline rupture near Marshall — an incident that fouled nearly 40 miles of the Kalamazoo River.

Six years in the making, the settlement announced Wednesday represents a closing chapter for the largest inland oil spill in U.S. history and includes $61 million in penalty fees for the event. The agreement also addresses the impact from a second Enbridge spill — one that took place in Romeoville, Illinois, roughly two months after the Michigan spill.

The agreement is the second-largest ever reached under violations of the Clean Water Act, behind only BP’s Deepwater Horizon incident, which yielded a $20 billion settlement in October.

In agreeing to the settlement, Enbridge does not admit negligence in the matter.

Officials with the U.S. Department of Justice as well as the Environmental Protection Agency were in Marshall on Wednesday to discuss the announcement.

“This settlement will make the delivery of our nation’s energy resources safer and more environmentally responsible,” said Assistant Attorney General John C. Cruden of the Justice Department’s environment and natural resources division. “It requires Enbridge to take robust measures to improve the maintenance and monitoring of its Lakehead pipeline system, protecting lakes, rivers, land and communities across the upper Midwest, as well as pay a significant penalty.”

The Lakehead pipeline system is a network of 14 pipelines that span nearly 2,000 miles across seven states, delivering 1.7 million barrels of oil a day.

A breakdown of the dollars behind the four-year Enbridge agreement includes:

■Approximately $110 million in injunctive relief — steps taken to offset damage done by the spill and prevent further disasters.

■$61 million in penalties for the Marshall spill.

■$1 million in penalties for the Romeoville spill.

■$5.4 million for costs the government incurred during cleanup of the Marshall spill.

Wyn Hornbuckle, deputy director of the Justice Department’s Office of Public Affairs, said the penalty money included in the consent decree will go directly into the Oil Spill Liability Trust Fund — a fund operated by the U.S. Coast Guard to respond to oil disasters.

In addition, the consent agreement includes several directives for action on other Enbridge pipelines in the Great Lakes.

Among those are a series of steps affecting the company’s controversial Line 5 — a pair of underwater pipelines running beneath the Straits of Mackinac. Directives for Line 5 include installation of pipeline supports, a pipeline movement study, quarterly inspections using acoustic leak detection.

Enbridge’s Line 3 runs from Canada through Minnesota to Duluth, near Lake Superior. That line will be replaced along its U.S. footprint.

When questioned by media about the size of the penalty, federal officials said it would serve as an effective deterrent to Enbridge and other companies in the future.

“Financial accountability is something that is very important,” said Patrick Miles, U.S. attorney for Michigan’s western district. “We also want to make sure we don’t have a recurrence of events.”

The impact on Enbridge’s bottom line is unclear. Cruden joked the company cannot deduct its $62 million in penalties as a tax write-off. As for the rest of the settlement, Cruden would not discuss whether the $110 million in injunctive relief or the $5 million-plus in reimbursements could be deducted or written off.

Appearing at a news conference following the federal government’s announcement, Enbridge’s vice president of U.S. operations, Brad Shamla, said the Marshall crisis has changed the company’s culture to one that values safety and prevention like never before.

“We’ll never forget what happened in Marshall,” Shamla said. “It’s something that we’ve memorialized as a company and will continue to drive our relentless efforts to deliver on our number one priority of safety and protection of the environment, and achieving our goal of zero incidents.”

Enbridge has estimated its expense for cleanup operations, relocation of residents, home acquisitions and penalties at more than $1 billion. A large portion of that was covered by the company’s insurer.

Immediately following the announcement, some environmental groups criticized the terms, with the Natural Resources Defense Council calling it “a slap on the wrist.”

Collin O’Mara, president and CEO of the National Wildlife Federation, called it “woefully insufficient and shows that Congress and the Obama administration must work together to strengthen penalties.”

Wednesday’s deal comes nearly six years to the day — July 25, 2010 — after a ruptured underground oil line near Marshall sent more than 800,000 gallons of crude oil into a creek connected to the Kalamazoo River.

The break occurred before 6 p.m. in an area beneath Talmadge Creek — roughly a half-mile from Marshall. Despite system alarms, more than 17 hours passed before the line was completely shut down.

By the time oil had stopped its westward flow, it covered nearly 40 miles of the river from Marshall, through Battle Creek to the Kalamazoo area.

The disaster brought health concerns, fish advisories, loss of access to the river, loss of business and, in some cases, loss of homes.

Investigators with the National Transportation Safety Board said the rupture was caused by “corrosion fatigue cracks that grew and coalesced” in the 30-inch diameter pipeline. Enbridge was faulted for “pervasive organizational failures” that included allowing the “well-documented” crack defects that led to the line bursting.

Portions of the river were closed for years as crews worked to clean up and remediate the water and surrounding land. In April 2015, Gov. Rick Snyder announced the 40-mile stretch of the river that had been impacted by the spill was completely open for all recreational uses.

In May 2015, Enbridge also reached a $75 million settlement with the state.

“The state is pleased the settlement between the federal government and Enbridge contains mandated safety improvements,” Michigan Department of Environmental Quality Director Keith Creagh said. “Combined with the state settlement that included over $75 million in environmental projects in Michigan, this settlement ensures the residents and environment of Michigan will be significantly improved.”

The line rupture in Romeoville occurred in September 2010 and released 250,000 gallons of crude oil. NTSB identified the cause of the leak as “erosion caused by water jet impingement from a leaking six-inch diameter water pipe five inches below the oil pipeline.”

U.S. Rep. Fred Upton, R-St. Joseph, noted Wednesday that lawmakers expanded inspections and toughened standards for the nation’s pipelines following the spills.

“As Michiganders, pipeline safety is an issue that hits especially close to home,” Upton said. “Pipelines are critical to the essential transportation of our energy resources, but when a catastrophe can strike in the blink of an eye, we must be prepared and we must hold those responsible accountable.”

JLynch@detroitnews.com

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