TrendPulse|Enbridge’s Kalamazoo Spill Saga Ends in $177 Million Settlement

The TrendPulseCanadian pipeline company Enbridge has been fined $61 million as part of an overall $177 million settlement for a massive 2010 oil spill into Michigan’s Kalamazoo River. The spill required years and more than a billion dollars to clean up and highlighted the hazard of pumping heavy tar sands oil through pipelines.

The settlement was announced Wednesday between Enbridge and the Environmental Protection Agency and the Department of Justice. It ends nearly two years of negotiations and levies one of the largest penalties ever for an inland oil spill.

The settlement resolves Clean Water Act violations, payment of cleanup costs and requires Enbridge to spend at least $110 million on spill prevention safeguards and other improvements along nearly 2,000 miles of its pipeline system in the Great Lakes region. In addition, the company agreed to pay $5.4 million in unreimbursed costs incurred by the government in the cleanup.

Included is a separate $1 million penalty for a 2010 spill of 256,000 gallons of oil from a ruptured pipeline near the Chicago suburb of Romeoville, Illinois.

“This settlement will make the delivery of our nation’s energy resources safer and more environmentally responsible,” said John C. Cruden, an assistant U.S. attorney in 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.”

More than 1 million gallons of tar sands oil spilled into the Kalamazoo River near Marshall, Mich., when a 6-foot rupture in Enbridge pipeline 6B opened on July 25, 2010. Despite warnings of trouble, oil flowed for 17 hours before Enbridge shut down the pipeline. Because the river was reaching peak flood stage, the oil spread quickly downriver and was carried past the shoreline the next day.

Ultimately, the oil reached nearly 40 miles downriver, coating animals and fouling 4,435 acres of land near the river’s banks. It triggered a massive cleanup effort that has cost the company $1.2 billion and kept the river closed for nearly two years.

Andy Levine, a former EPA attorney in private practice in Philadelphia, said the settlement is as significant for its mandated safety improvements as it is for the size of the fine.

“In essence, the DOJ’s policy is that it is not enough to just pay a penalty,” Levine said. “The resolution of the alleged violations should be used as an opportunity to move technology and compliance forward.

“Using the leverage of the DOJ in these settlement discussions is a creative means by which to move the ball forward when perhaps a company or an industry might not otherwise do so because of capital cost or research and development cost constraints.”

By folding the safety mandates into the settlement, the DOJ tactically maneuvered around those obstacles, he said.

The fine will go into the Oil Spill Liability Trust Fund, which pays for emergency responses to oil spills and cleanup operations that the responsible party cannot fund.  Federal officials anticipate the fund will have a balance of nearly $4 billion by the end of the year.

Enbridge is worth $10.5 billion, nearly twice its valuation at the time of the spill.

Prior to the EPA fine, the company had paid $2.8 billion for clean-up costs and other fines and penalties. The company also spent $1.6 billion to replace Line 6B.

“No fine, no matter how large, is going to be sufficient to compensate the people of the Marshall region who had their lives turned upside down, houses ruined and personal and environmental health affected,” said Rebecca Craven, program director Pipeline Safety Trust, a nonprofit watchdog organization based in Bellingham, Wash.

Craven’s colleague, Carl Weimer, director of the trust, said it was fitting that the fine was the one of the largest pipeline fine ever assessed under the Clean Water Act for the largest inland oil spill.  But “we think it could and should have been larger.”

He said he hopes the safety upgrades are additional requirements and not things Enbridge had already identified to do anyway, or that are necessary for some of their capacity expansion plans.

He expressed his disappointment that none of the fine was earmarked to further improve the Kalamazoo River, or to provide for ongoing oversight by affected local governments and citizens in the region.

“We would have preferred that some of the $62 million would be targeted toward helping local government and citizens take a more active role in preventing pipeline tragedies, then just get dumped into the U.S. Treasury coffers for non-pipeline safety government spending,” Weimer said.

Residents React

The spill turned the river and little Tallmadge Creek black with oil. The air was so rank with its toxic smell that emergency hotlines were flooded with calls from people sickened by the fumes.

The scene was a chaotic mix of evacuations, armies of cleanup crews, stunned officials and anxious neighbors.

Environmental authorities opened large segments of the river beginning in 2012 while demanding more cleanup where oil had pooled on the bottom. The entire length of the river is now open with few obvious reminders of the spill.

People have moved back into some of the homes that were evacuated near the spill site, while others are trying to settle into new lives in houses far from the river.  Enbridge purchased 148 houses, five vacant parcels of land and two mobile homes along the spill route.

John La Forge, who saw the gooey oil flood up to the side of his house, scoffed at the settlement. “It was a slap on the wrist,” he said.  “They should have put Enbridge out of business.”

La Forge, a building contractor, and his family never returned to their home near the river.

“They ruined my life, but this company gets to go on with their life,” he said. “What’s a few million dollars to them?”

Deb Miller, who lost a carpet store she owned her husband on the banks of the Kalamazoo in Ceresco, Mich., is more resigned than angry about the settlement.

“No money is ever going to fix what happened,” she said. “That’s a pretty low price to put on our lives. But in all honesty, it’s more than I anticipated.”

She said she hopes the mandatory safety upgrades will prevent any future disasters.

“We have to see how they do the job,” she said. “I hope that it’s enough to be effective.”

Anthony Swift, an attorney for the Natural Resources Defense Council (NRDC), an environmental action group, said he doubted the fine was large enough to change the way Enbridge or other oil pipeline companies conduct business. He said this was worrisome in light of Enbridge’s plans to expand its tar sands pipeline system.

“The relative low fine means we will see many of the safety gaps remain,” Swift said. “Ultimately we are not likely to see a major shift from business as usual from Enbridge and companies like it.”

Swift also cautions not to lavish too much praise on the $110 million in upgrades Enbridge has agreed to perform.

“It really shouldn’t be considered an additional expense,” he said.  “It really should be considered the cost of doing business in a safer manner without being mandated.”

The Enbridge spill  was the first major pipeline accident involving diluted bitumen, or dilbit, a heavy crude oil extracted from Canada’s tar sands region.

Bitumen is a tar-like substance that must be diluted with liquid chemicals so it can flow through pipelines. When Line 6B burst, the chemicals slowly evaporated and the bitumen began sinking to the river bottom in oily globs.  Consequently, conventional clean-up methods were useless and years of dredging the river bottom to scoop up the congealed mess was required.

Michigan environmental officials, who took over the long-term job of monitoring after the EPA signed off on the cleanup in 2014, have said it could be years before they are ready to issue a final verdict on the damage done to the Kalamazoo. There will ongoing testing of the water and the floodplain for residual oil. River wildlife and plants will be monitored for any long-term effects.

Dirk Dunham, the Calhoun County Director of emergency management, remembers crying while flying over the oily black river on the first day of the spill. He said today’s announcement is nothing extraordinary because a settlement was expected.

“The overall message is that incredible work was done over the years to bring this river back to life,” he said “The state of the river today is a miracle.”

He said the majority of the people living along the river won’t be impacted by the settlement.

“The river is being used more now that before the spill,” he said. “What’s in the minds of people is the vibrant, lively river, not any settlement.”

At the time of the spill, Line 6B was 41 years old and had a documented history of problems and a long list of critical— and costly—repairs that needed to be done. The 286-mile-long pipeline ran from Griffith, Ind., to Sarnia, Ontario.

Leading up to the accident, Enbridge had failed to repair more than 300 defects it had detected on 6B, including a flaw in the pipeline in the area of the rupture that had been known to Enbridge for five years. The National Transportation Safety Board blasted Enbridge in 2011 for a “complete breakdown of safety” in connection with the Kalamazoo spill.

ICN won the 2013 Pulitzer Prize for national reporting for its four-part series, The Dilbit Disaster, which reported on the spill, the environmental dangers posed by transporting diluted bitumen and national pipeline safety issues.

How Penalties Are Assessed

The EPA is empowered under the Clean Water Act to levy fines of up to $4,300 for each barrel—the equivalent of 42 gallons—of spilled oil if the agency concludes the spill was a result of negligence. For years, Enbridge and the EPA quarreled over the amount of oil that gushed from Line 6B. The EPA at one time estimated 1.1 million gallon or 26,190 barrels while Enbridge calculated the spill was much smaller at 843,000 gallons or 20,071 barrels.

But determining the size of an oil spill is only part of a civil penalty calculation.

The EPA and justice officials have discretion to set penalties based on a number of factors that range from the seriousness of a violation to a company’s history of compliance to spill mitigation efforts undertaken by a company.

Last year, the EPA hit ExxonMobil with a $3.1 million fine for a 2013 spill of 134,000 gallons of heavy tar sands oil from the Pegasus pipeline near Mayflower, Ark.

Other fines imposed on pipeline companies as part of Clean Water Act violations include a $34 million fine in 2003 against Colonial Pipeline Company for spills that dumped more than 1 million gallons of oil and gasoline across three southern states; $25 million imposed on BP Exploration of Alaska in 2011 for two oil spills totaling 213,000 gallons that fouled the North Slope of Alaska; and a penalty of $3.2 million in 2010 against Plains All American Pipeline for 10 oil spills totaling 273,000 gallons.

The largest fine imposed by the EPA for a Clean water Act Violation came in 2013 when  BP Exploration and Production was hammered with a $1 billion fine over the blowout of the Deepwater Horizon that sent 210 million gallons of oil gushing into the Gulf of Mexico.

Enbridge began paying the penalty for the spill years before the EPA fine was levied. The Michigan Department of Environmental Quality worked out a $75 million settlement with the company in 2014 and the U.S. Department of Justice’s Environment and Natural Resources Division reached a nearly $4 settlement with Enbridge at the same time. Both settlements were designed to remediate environmental damage but do not reflect punitive penalties for harm to the Kalamazoo.

Enbridge also was hit with a $3.7 million civil penalty by the U.S. Department of Transportation in 2012.

The spill also prompted Enbridge to spend nearly a billion dollars in 2011 and 2012 to assess the safety of its entire 15,000-mile pipeline network in the United States and Canada. This money is over and above what the company has spent on fines, penalties, cleanup and repairs to its pipelines.

Enbridge has replaced the entire 210-mile length of line 6B at a cost of $1.6 billion. The project faced resistance by landowners angry with Enbridge over its condemnation of their land and destructive construction methods.

Timeline: The Enbridge Oil Spill and What Followed

1969: Pipeline 6B installed.

1999: Enbridge begins carrying diluted bitumen from Alberta’s tar sands on Pipeline 6B, part of the company’s Lakehead system.

2008: An internal Enbridge inspection identifies 140 corrosion defects on 6B.

2009: Another internal Enbridge inspection identifies 250 more corrosion defects on 6B.

July 2010: Enbridge begins dig-and-repair program on 6B in Marshall area and elsewhere.

July 25, 2010: Heavy tar sands oil begins to gush from a six-foot rupture in Line 6B.

July 26, 2010:  Enbridge turns off the flow of oil 17 hours after the break is first detected, and after it restarts the pipeline twice. Emergency responders try to contain the oil flowing into the Kalamazoo River. Residents near the spill are evacuated.

July 28, 2010: EPA reports that the size of the spill is at least 1 million gallons.

October 2010:  Enbridge places clean-up costs at $40 million.

April 5, 2011: Enbridge announces it has spent $550 million to clean up the spill.

July 19, 2011: EPA announces more than 90 percent of the oil has been removed from the Kalamazoo River, but still requires more dredging.

Sept. 27, 2011: Enbridge announces the cost of the oil spill cleanup has reached about $700 million.

April 18, 2012:  A three-mile section of the Kalamazoo River closed by the spill is reopened.

May 10, 2012: Enbridge announces a $1.6 billion project to replace Line 6B.

May 2012: Enbridge says the cost of clean-up has reached $765 million.

June 21, 2012: The Kalamazoo in opened except for a small section near Morrow Lake still closed for additional dredging.

July 2, 2012: The U.S. Department of Transportation fines Enbridge $3.7 million for 22 violations associated with the spill.

July 10, 2012: The National Transportation Safety Review Board blasts Enbridge for a “complete breakdown of safety.”

October 2013: The cost of spill clean-up reaches $1.1 billion.

August 2014:  EPA turns long-term oversight responsibly for the river to the Michigan Department of Environmental Quality.

May 13, 2015: Enbridge agrees to a $75 million settlement with Michigan environmental officials to restore waterways and wetlands fouled by the spill.

June 8, 2015: U.S. Department of Justice’s Environment and Natural Resources Division fines Enbridge $4 million to fund multiple restoration projects along the river.

May 2016: Enbridge places cleanup costs at $1.2 billion.

July 20, 2016: Enbridge fined $61 million for Clean Water Act violations and agrees to spend $110 million on safety upgrades for its Great Lakes pipeline network.