Enbridge denies state’s report that it could evade oil spill cleanup costs

Enbridge, St. Ignace | Susan J. Demas

Canadian oil giant Enbridge has promised to fund almost $2 billion in cleanup costs in the event of a Line 5 pipeline rupture in the Great Lakes. According to a new state-commissioned report, however, that promise may not be legally enforceable.

Dana Nessel
Attorney General Dana Nessel in Flint, July 26, 2019 | Andrew Roth

“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,” Michigan Attorney General Dana Nessel said in a statement.

Enbridge denied the report’s findings. In an email, spokesperson Ryan Duffy said the report is “not correct,” and that “Enbridge pledges to take full responsibility for the clean-up of any incident in Michigan or anywhere along our pipeline system.”

In agreements with the state of Michigan in 2018, Enbridge pledged to provide up to $1.878 billion in cleanup costs if oil from Line 5 spilled into the Straits of Mackinac. The new 120-page analysis examines the ability of Enbridge Inc. to actually pay up to that amount, and concludes that the company is not, in fact, legally required to pay it.

The Oct. 29 report was prepared by the American Risk Management Resources Network and commissioned by Nessel’s office, the Michigan Department of Environment, Great Lakes and Energy (EGLE) and the Michigan Department of Natural Resources (DNR).

Judge rules for Enbridge over state in Line 5 tunnel suit

The slippery legal slope outlined in the analysis comes back to the original easement for Line 5, granted by the state of Michigan in 1953 to a U.S. subsidiary company of Enbridge Inc. The easement made clear that only that subsidiary and its successors would be obligated to its terms. Today, the successor of that original Enbridge company is Enbridge Energy Partners L.P.

Similarly, the set of agreements Enbridge made with the state of Michigan in 2018 promising a $1.878 billion financial assurance from the oil company were signed by three of its subsidiaries: Enbridge Energy L.P., Enbridge Energy Company Inc. and Enbridge Energy Partners L.P.

Although the report finds that parent company Enbridge Inc. does indeed have the financial resources to provide the $1.878 billion, it concludes that since the agreements with the state were entered into by Enbridge subsidiary companies — and not the Canadian-based global company itself — Enbridge Inc. is “not contractually obligated” to abide by the terms of the agreements.

In other words, Enbridge Inc. could put forward $1.878 billion to clean up a potential oil spill in the Great Lakes — but it doesn’t have to. Hence, the concern from Nessel and environmentalists that the state could end up having to pay for a Line 5 oil spill after all.

Snyder’s Enbridge panel OKs plan to keep Line 5 flowing

Somewhat surprisingly, the report’s conclusion is based on Enbridge’s own testimony regarding a pipeline expansion project in another state. The chief financial officer of Enbridge Energy Partners L.P., Chris Johnston, testified before the Minnesota Public Utilities Commission (PUC) in November 2018 during a hearing for Enbridge’s plan to replace its existing Line 3 pipeline in Minnesota. 

Much like Michigan’s Line 5, the tenuous structural integrity of Minnesota’s decades-old Line 3 against the backdrop of an environmentally sensitive location has alarmed environmental activists in the state.

“In the Minnesota PUC hearing, Mr. Johnston testified that Enbridge, Inc. is not contractually obligated to stand behind the indemnity agreements of a subsidiary,” the report reads. “Based on the testimony of Mr. Johnston, the contribution of funds under an indemnity agreement made with a subsidiary would appear to be a purely voluntary endeavor for Enbridge, Inc.”

In her statement, Nessel described this finding in particular “chilling,” and said that it is evidence that Enbridge “seriously misrepresented its financial holdings when it made its deal with the Snyder Administration.”

Enbridge announces 81-foot gap beneath Line 5

In response to Nessel’s statement, Duffy said that “Enbridge made no misrepresentations to the State” and its financial assurances are “fully accurate.”

Duffy also pointed to a section of one of the 2018 agreements, which states that “financial assurances can be met by the parties to the agreement or their parent companies.” He further notes that “federal law imposes an obligation on any party responsible for such an incident to pay all costs for cleanup, restoration, and remediation.”

“If the State has any concerns about Enbridge’s financial assurances, Enbridge stands ready to discuss and address those concerns as soon as the State is ready to convene discussions,” Duffy said, adding that Enbridge has not been contacted by any state officials to discuss the report.

Laina G. Stebbins
Laina G. Stebbins covers the environment, civil rights, health care/safety net and criminal justice. She is a graduate of Michigan State University’s School of Journalism, where she served as Founding Editor of The Tab Michigan State and as a reporter for the Capital News Service. When Laina is not writing or listening to podcasts, she loves art and design, discovering new music, being out in nature and spending time with her two very special cats.