Enbridge vows to cover costs in ‘unlikely’ case of Michigan Line 5 rupture

Enbridge is disputing Michigan Attorney General Dana Nessel’s suggestion that state taxpayers “could be left holding the bag” for cleanup costs if the Candadian-based company’s twin Line 5 oil and gas pipelines were to rupture in the Straits of Mackinac. 

“The bottom line is Enbridge will take full responsibility and pay for all costs related to an incident,” Enbridge spokesman Ryan Duffy told Bridge Magazine in an email late Monday, calling the prospects of a rupture on the controversial pipeline “unlikely.” 

The vow came days after Nessel released a 120-page report raising questions about Enbridge’s financial obligations under a series of agreements its U.S.-based companies signed with then-Gov. Rick Snyder’s administration in 2018. 

The agreements aimed to pave the way for Enbridge to build a $500-million bedrock tunnel around a new section of Line 5 in the Straits — a project that Nessel and fellow Democrat Gov. Gretchen Whitmer have tried to halt. 

In one such agreement, certain U.S.-based Enbridge companies agreed to fund nearly $1.9 billion in potential damages if Line 5 ruptured.

The state commissioned Wisconsin-based American Risk Management Resources to probe that financial assurance. (The state paid $30,000 for that work, Nessel’s office told Bridge.)

The report concluded that Canadian conglomerate Enbridge Inc. had enough money to pay for such a pricey cleanup and restoration. But the report pointed out that Enbridge Inc. didn’t technically sign the agreement with the state — only its U.S. subsidiaries did. And those U.S. companies “would not have enough resources to fund a loss event of this magnitude” — unless their Canadian parent company voluntarily bailed out the companies, the report said. 

According to the report, Chris Johnston, Chief Financial Officer of Enbridge Energy Partners, L.P,  told the Minnesota Public Utilities Commission in 2017 that the Enbridge parent company isn’t obligated to honor assurances from its U.S. subsidiaries. The testimony came in a case concerning a different Enbridge pipeline.

Those findings prompted Nessel to conclude last week that: “In the event of a catastrophic oil spill, the people of the state of Michigan could be left holding the bag for more than a billion dollars in unfunded liability.”

On Monday evening, Duffy initially told Bridge that “the analysis recently released by the Attorney General leaves no doubt that Enbridge has the resources to meet this legal obligation,” pointing to the finding that the Canadian parent company could cover spill costs.

Duffy later disputed some of the report’s conclusions after Bridge asked more detailed questions. On Tuesday, Duffy sent Bridge a statement saying Enbridge’s U.S. subsidiaries could cover the cost of a spill by themselves.

“The subsidiaries that signed the 2018 agreements with the State of Michigan, including Enbridge Energy Partners L.P. , all do business in the U.S. and own billions of dollars of assets in the U.S., more than enough to cover any risk and the assurances made to the State,” Duffy’s statement said. 

“In the unlikely event of an incident on Line 5 these subsidiaries have access to all of the financial assurances described in Enbridge’s financial assurance verification report given to the State on October 4.”

Additionally, Duffy said Enbridge’s Canadian parent company would cover its subsidiaries’ cleanup liabilities if need be. He said U.S. law would require Enbridge to fund cleanups and restoration (under the Oil Pollution Act of 1990), and he pointed to a section of Enbridge’s 2018 agreement with the state that mentions potential liability for the Enbridge parent. 

That provision says: 

“Enbridge nonetheless agrees that, so long as it continues to operate the Dual Pipelines, the Enbridge entity or entities that own and operate Line 5, or the parent companies of such Enbridge entity(ies), will maintain in force financial assurance mechanisms that meet or exceed the $1,878,000,000 estimate of Enbridge’s potential total quantifiable response liability for a worst-case discharge from the Dual Pipelines that is identified in the Independent Risk Analysis.”

“If the state has concerns about the way this is set up, or questions, we'd be happy to talk and and address those concerns,” Duffy told Bridge in an interview.  “Nobody has reached out to us at this point.”

Enbridge also owned Line 6B, which broke in the Kalamazoo River in 2010, triggering one of the worst inland oil spills in U.S. history. More than 1.2 million gallons of crude oil was recovered during a four-year cleanup and Enbridge has paid $1.2 billion for cleanup and restoration.

Duffy said Enbridge’s subsidiaries and parent company combined to defray that cost. 

David Dybdahl, the expert in environmental management and insurance who authored the report Nessel released, did not respond to a message from Bridge on Tuesday. 

Kelly Rossman-McKinney, Nessel's spokeswoman, told Bridge Tuesday that "the Enbridge subsidiaries that signed the 2018 Agreements and are legally bound by it have not documented their own financial capability to cover an estimated liability of $1.878 billion." 

Rossman-McKinney shared the two-page financial assurance statement Enbridge submitted to the state last month. It discusses only the parent company's finances — in Canadian dollars. The statement says Enbridge Inc. has immediate access to $700 million in cash and $5.6 billion in "credit facility," along with $6.3 billion in "other resources." That's a total of $12.6 billion in short-term resources.

Line 5 transports up to 540,000 barrels of light crude oil and natural gas liquids per day from Superior, Wisconsin, to Sarnia, Ontario. That includes 547 miles across Michigan and 4.5 miles beneath the Straits, where it branches into two lines.  

Enbridge calls the pipeline crucial to delivering fuel across the region and argues a shutdown would particularly harm Michigan’s Upper Peninsula, which draws much of its propane from the line. 

Environmentalists and Michigan residents active in environmental issues, fear that a rupture, however slight the possibility, would create a catastrophe in the Great Lakes. They argue tunnel construction would take too long and would keep oil flowing through the Straits in the meantime.

On Oct. 31, a Michigan Court of Claims judge sided with Enbridge in its lawsuit against the state to restart plans on its tunnel. Nessel vowed to appeal.

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Comments

Harold
Wed, 11/06/2019 - 7:25am

The bottom line is that Michigan taxpayers will pay to clean up an Enbridge mistake.
- Only Enbridge's U. S. subsidiaries agreed to fund the clean.
- Those subsidiaries "would not have enough resources to fund a [major] loss event"; and
- The parent company is not obligated to make up the difference between the clean up's cost and what the subsidiaries were able to pay.

Yooper4
Wed, 11/06/2019 - 11:34am

That's not what I understood when you read the entire article. The AG 'forgot' to review the second agreement which clearly states that all parent companies are also legally liable in the event of a release per that agreement with the State? Sounds like the AG didn't do her research again and is now using more taxpayer dollars to push her political beliefs?

Matt
Wed, 11/06/2019 - 8:16am

Funny the Democrats finally found a situation where they DON"T want to see the tax payers "stuck holding the bag"! Never mind Detroit, DPS, our social security system, Medicare, Medicaid, Disability, student loans, unfunded pensions, our 22 Trillion dollar federal debt, etc, etc running wildly over projected costs, with unsustainable funding mechanisms. Now they are financial eagle eyes! I thought with MMT we didn't have to worry about this?

Rick
Wed, 11/06/2019 - 10:24am

No protest about Donnie's instant $1 trillion increase on our debt with his 'Leave No Billionaire Behind' tax cut?

Big Difference
Wed, 11/06/2019 - 12:06pm

You want us to bail out a private company from a foreign country. Your examples are all for the common good provided by the People for the People. You must take a class in logic before you make such ridiculous comments. Lastly, saving the Great Lakes is very much a bipartisan issue. The only Republicans who don't care about this are the ones who are corrupt.

Matt
Wed, 11/06/2019 - 9:18pm

One big difference is the pipeline represents a vague unquantified risk for the limited time the tunnel takes to construct and the programs you defend are absolutely heading into insolvency unless the "tax payers are put even further on the hook". And I'm not sure what good I received from bailing out DPS and City of Detroit verse letting them go into full bankruptcy? But of course this isn't the real issue here and instead just a ruse to shut down the petrol industry.

Ha Ha
Thu, 11/07/2019 - 7:45am

You still didn't address justifying a public handout to a private corrupt company headquartered in a foreign country with a horrible record of lies and environmental devastation running roughshod over our state, our country. Where is your patriotism? If you can't see what good public education is in the US, you are too dimwitted to comment on anything. Your comment about Detroit is nothing more than veiled racism.
"I'm not sure what good I received from bailing out DPS and City of Detroit verse letting them go into full bankruptcy" I'm not sure what good I received from the trillions of taxpayer dollars wasted on the illegal war in Iraq paid in large part to Erik Prince's Blackwater mercenaries.

Charlie Weaver
Thu, 11/07/2019 - 7:11pm

Which is most of them.

middle of the mit
Sun, 11/10/2019 - 11:17pm

Finally! WE have found an area and multiple areas where Matt and Republicans are WILLING TO ALLOW THE PUBLIC TO FUND CLEAN UP FOR PRIVATE CORPORATIONS WHILE THEY GIVE THEMSELVES TAX BREAKS AND BANKRUPTCY PROTECTION TO PROTECT THEMSELVES!

How do you like that rewrite Matt? It seems to be more plausible than your situation. How? Why? Let me tell you the ways.

https://www.youtube.com/watch?v=IjSTQwamo8M

Better yet, let this youtube video tell you the ways, and then realize that private industry and or charity never has and never will do it.

https://www.youtube.com/watch?v=6bMq9Ek6jnA

If not for Public schools, the PUBLIC would never be educated. How do you find a modern workforce with uneducated citizens?

Our Social Security system, mostly funded by those who make LESS THAN $130,000 PER YEAR. Over that amount and YOU ARE NOT TAXED FOR IT!

Student loans? Use your favorite search engine. Find out what it took most of America to get a college degree 50 years ago. Or 20 years ago. Before tax cut for billionaires.

Medicare and Medicaid? Isn't you conservatives that put in price controls for workers comp, and just now the same controls on what doctors are charging for auto insurance claims because you said they were onerous, but yet we couldn't do that with The Heritage Foundation Care Act (AKA Obamacare) because it would cause doctors to go out of business?

Here come your talking points hitting you in the face. I don't want to be rude, but I feel a need to remind you of what you conservatives have said. Is it rude if I use your own talking points against you?

As for the deficit? WE are spending more now to prop up Corporate conglomerate farm organizations than we are rural farmers or our Federal trade deficit.

Have fun with those facts!

Creek of Trout
Wed, 11/06/2019 - 9:06am

A vow is not an enforceable contract under law.
And here's a thought:
Does anyone know how to clean up an oil spill under 3 feet of ice in February?
Nope! Shut it Down.

Dave Frederick
Wed, 11/06/2019 - 9:16am

You can believe that pledge as much as you can believe I am 6 foot 2 inches tall, weigh a 180 pounds and have a full head of hair

Jack Johnson
Wed, 11/06/2019 - 9:18am

I'm glad that we finally have a good A.G.

Paul Jordan
Wed, 11/06/2019 - 9:40am

Enbridge should be required to post a cash bond (or prepaid insurance policy) equivalent to the costs of a clean up in case of a Line 5 spill into the Great Lakes. Faced with a financially devastating cleanup, without such a protection in the worst case Enbridge could just declare bankruptcy.

As it is, operating pipelines like this one amount to a form of gambling where the company keeps the winnings while the People/environment assumes the risk.

Subee
Wed, 11/06/2019 - 9:53am

Only a fool would trust anything Enbridge has to say. Just watch them file for bankruptcy if a breach occurs. When one keeps doing the same mistake over and over again .....insanity? Stupidity? A 20th century solution to a 21st century problem.

Gary Lea
Wed, 11/06/2019 - 10:07am

No. Enbridge has and will make empty claims. The present U.S. administration has been reducing the effectiveness of the EPA, which reinforces Enbridge's agenda, but leaves Michigan vulnerable to its empty promises. Remember: https://en.wikipedia.org/wiki/Kalamazoo_River_oil_spill

Jim
Wed, 11/06/2019 - 10:57am

Did Enbridge clean up after the Marshall spill, as required by state and federal agencies? No (credible) person has claimed otherwise.

Isn't that what this recent line of attack is about? Or is it just another red herring to continue to distract from the real debate, over the REAL solution to Line 5: the privately-funded tunnel.

leonard page
Wed, 11/06/2019 - 10:29am

in a bankruptcy, all pledges to pay are subject to adjustment or nullification. the financial assurance mechanism if 2018 is self insurance caped at $1.878 billion. the 1953 easement required THIRD PARTY mechanism (insurance bond or surety) to pay all damages. this would not be affected by bankruptcy. bottom line = the financial assurance mechanism creates a huge risk that oil spill victims get little or nothing.

water2Wine
Wed, 11/06/2019 - 11:01am

Don't fight over who will clean it up. To quote the U.S. Coast Guard during a Congressional hearing with Bill Schutte over the Enbridge violation of the easement, the Coast Guard said, "It would be impossible to clean up an oil spill in the Straits of Mackinaw". It had to do with currents and no close place to take the small amount of filthy dirty oil that they might be able to remove. Remember the recent oil contamination that took place around North Port, Leelanau Penn.? It was a boat that sunk. All the oil seeped out and the Coast Guard came with their buoys and got "a little bit of it". Yeah, forget about who is going to pay for an oil spill in the Straits, it can not be done! Nessel wants to remove the threat. That is the only smart thing to do. Enbridge needs to shut it down and remove it from all the waters of the Great Lakes. It is so obvious. Start now before the ice forms.

leonard page
Wed, 11/06/2019 - 11:40am

assume that Enbridge wants to restate the guarantee of the 1953 Easement, section J to make sure all those damaged by an oil spill are made whole. they only way to do that is to buy a third party bond, surety or insurance policy which guarantees victim payment even in the event of corporate bankruptcy.

Ironic
Wed, 11/06/2019 - 12:02pm

We need to shut down Line 5 NOW. We can't chance a rupture and Enbridge's insincere promises. Enbridge has betrayed our state in a monumental way and continues to make promises the way an alcoholic does about sobriety. Enbridge can't be trusted. No one believes Enbridge's lies. Fool me once, shame on you, Enbridge. Fool me twice, SHAME on you, Michigan! The state of Michigan must shut down Line 5 because it is way past it's intended structural lifespan and patch jobs are just too insanely risky.

Let them build a tunnel, if they want, but in the meantime, SHUT DOWN LINE 5! There are real costs to promoting the continued long-term dependence on dirty fossil fuels and the taxpayers are tired of subsidizing those costs. We help people in the UP that need fuel without helping Enbridge, selfish company that profits from bringing us ever closer to a climate change emergency. That's where we are right now according to 11,000 scientists across the world.

People not Poli...
Wed, 11/06/2019 - 12:10pm

So from these comments and the author, it looks like about one out of ten people in Michigan support Enbridge. Matt stands alone..... One has to wonder why.

Rita Mitchell
Wed, 11/06/2019 - 1:10pm

$1.2 billion to (not) clean up the Kalamazoo River, and an estimate of $1.878 billion to clean up the Great Lakes? Talk with people in Kalamazoo about the tragic leak there. Enbridge grossly underestimates its potential for damage in $$. The entire state's economy would tank with a spill in the Straits, and we're still at risk for spills in the waterways along its entire course through Michigan. Tourism, fishing, agriculture, beer(!); we don't have to take the risk to lose the jobs and and fresh water. We can shut down Line 5 now, and move to a fossil fuel free economy. Let's do it!

JimKat
Wed, 11/06/2019 - 1:44pm

A vow doesn't sound legally binding to me. Again the taxpayers of Michigan would be on the hook for a leak. It would be a catastrophe at the Straits of Mackinaw. The spill could effect to the west on the Chicago side in Lake Michigan or to the east in Lake Huron and all the way to the St. Lawrence Seaway. Eventually Lake Superior would be effected too. Ain't life great when you think of what could happen to 20% of the fresh water of the world. Is any of this worth that risk especially when we get nothing from it. Love Harold's comment where parent co. would not be liable. Wild comment from Matt's rage on blaming Democrats for everything that the GOP has done. I love, Creek of trout and 3ft. of ice in Jan. Enbridge would say the spill was at least contained. The rest of the comments indicate it needs to be shut down now like the AG suggested.

Up Loon
Wed, 11/06/2019 - 4:34pm

In my experience it would take a motion of approval from the parent corporation board of directors to obligate the company at this huge level. Absent board awareness and formal approval any promise by public relations executives or even senior corporate executives Is an empty promise.

Mrs A
Wed, 11/06/2019 - 5:26pm

It is a question of weighing potential damage against potential benefit, and the fact remains: ENBRIDGE TAKES ALL THE PROFIT WHILE MICHIGAN TAKES ALL THE RISK. I've been declaring "Shut it down now" for months, yet I would be willing to come around to a compromise position that created a detailed transition-out phase to cushion Enbridge's bottom line, one with hard timelines and specific punitive actions in case of default, plus the proviso that the U.P.'s energy needs be adequately addressed. There are many possible energy solutions for the U.P. despite the fact that everybody is used to an LP tank in the yard. I mean, consider that the U.P. is completely surrounded by shoreline wave action every moment of every day, and presumably the wind blows as well. These are infinite, permanent energy sources that need only to be captured effectively and integrated to the populace as a reliable alternative to LP gas. Yes, technological development and implementation need to happen, which is why there would be a transition period . And BTW where is so-called energy leader Enbridge in spearheading such an effort, or do they only traffic in climate-damaging fossil fuel?

We simply have to be realistic about Line 5. The juggernaut of climate change is inexorable. We have to figure out a way out that moves us, as stewards of 20% of the planet's fresh water, forward, not keeps us squabbling about legality. Enbridge has to read the handwriting on the wall.

LH
Sat, 11/09/2019 - 10:28pm

While I have reservations about Line 5 and would prefer that it didn't exist, the fact is that it does exist and we don't have the infrastructure in place to replace it if it is arbitrarily shut down. I want to see the tunnel built ASAP, as I think it's the most reasonable alternative. While "green energy" and replacements for fossil fuels sound wonderful, we should remember that every form of energy production has environmental impacts. Solar panels contain heavy metals that are a concern both during manufacturing and disposal of the panels, not to mention the visual impact of large solar facilities and the fact that Michigan generally only has an average of 4.2 peak hours of sunlight per day. Windmills have visual impacts, create noise, and impact birds and wildlife; the manufacture and disposal of windmill components is not without impact. The best renewable energy source is wood, and managed forests sequester significant amounts of carbon. But again there are manufacturing issues for wood-fired boilers, as well as the transportation of wood from the forest to where it is needed. All manufacturing processes consume energy (usually from fossil fuels) and consume raw materials that must be mined, harvested, transported, etc., and which may come from countries where there are few environmental regulations. My older car may be less fuel efficient than a new one, but the overall environmental impact may be far less because there is no need to manufacture a replacement vehicle as long as I keep it running as long as feasible. It's easy to portray fossil fuels as the problem, but nothing is without impacts. There is no easy, quick solution, and name-calling and shouting at each other doesn't move us closer to a solution in any constructive way.

Charlie Weaver
Thu, 11/07/2019 - 7:10pm

Talk's cheap.

middle of the mit
Sat, 11/09/2019 - 12:48am

I have said it once and I will say it again. if this is the path that the MI GOP wants to go down, the MI GOP needs to have a specific fund set aside, funded solely by them to negate this catastrophe that isn't going to happen. If it doesn't happen, you will collect the interest from this fund. No loss. Otherwise? Put your money where your talking points are.

And I would like Enbridge to sign a CONTRACT. Because everyone knows that CONTRACT LAW IS WHAT THIS COUNTRY IS BUILT ON, unless you are a union employee or an employee of any kind or customer of any company, because then CONTRACTS ARE SUBJECT TO CHANGE WITHOUT NOTIFICATION!

Isn't that weird?