DNR asks Enbridge to pledge full financial responsibility for Line 5

Agreement would hold company to minimum liability assurance of $900M in case of pipeline spill

Laina G. Stebbins

The Michigan Department of Natural Resources (DNR) wants to ensure that Canada-based multinational oil company Enbridge will pay up in the event of a catastrophic rupture of the dual Line 5 pipeline.

In an emailed letter to Enbridge Inc. Friday, DNR Director Dan Eichinger requests that the company enter into a written financial agreement with the state of Michigan that would ensure Enbridge’s financial liability for an oil spill under the Straits of Mackinac.

“As recent events have reminded us, we must get these pipelines that transport crude oil out of the Great Lakes as soon as possible,” Eichinger said in a statement Friday. “In the meantime, Enbridge must provide full financial assurance to the people of Michigan that the company will meet its obligations in the event there is a spill or some other disastrous damage to the Great Lakes.”

Eichinger cites a state-commissioned report from October that cast doubt on Enbridge’s promise to foot the bill for any oil spill cleanup costs.

Tests show west leg of Line 5 pipeline isn’t damaged

The proposed written agreement with the state would address this loophole, putting Enbridge on the line for at least $900 million in liability insurance and have the company directly pledge its own assets for the remainder of the financial requirements.

The letter comes in the midst of the DNR’s now year-long review of Enbridge’s compliance with the 1953 easement that allows the company to operate Line 5 beneath the Straits of Mackinac. Gov. Gretchen Whitmer ordered the review last June after her negotiations with Enbridge fell through, the company sued the state and Attorney General Dana Nessel launched her own lawsuit on behalf of Michigan to shut down the pipeline.

On Oct. 29, a state-commissioned report from the American Risk Management Resources Network shone light on the possibility that Enbridge could be able to avoid financial responsibility for a Line 5 rupture.

The report, which was commissioned by Nessel’s office, the DNR and the Michigan Department of Environment, Great Lakes and Energy (EGLE), alleged that Enbridge’s 2018 pledge to pay up to $1.878 billion for oil spill cleanup may not actually be legally enforceable.

This is because the set of agreements Enbridge made with the state in 1953 and 2018 were signed by subsidiaries of its global parent company, rather than Enbridge Inc. itself. The report concluded that Enbridge would not be contractually obligated to put up those oil cleanup costs; doing so would be on a purely voluntary basis.

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

Despite the report being based on Enbridge’s own testimony regarding a pipeline expansion in another state, the company denied the report’s findings at the time. Spokesperson Ryan Duffy told the Advance in November that the company “pledges to take full responsibility for the clean-up of any incident in Michigan or anywhere along our pipeline system.”

In an email Friday, Duffy reiterated this pledge and maintained that Enbridge “already [has] an agreement with the State of Michigan to provide these assurances.”

“As part of our existing agreements with the State of Michigan, Enbridge provided the State with detailed financial assurances that we have the ability to cover all costs in the unlikely event of an incident in the Straits. Enbridge provided an update on our financial assurances to the State in October 2019 per the second agreement,” Duffy said. 

He added that the company would be happy to sit down with the state and discuss its financial assurances, regardless.

Anti-Line 5 activists buoyed by national pipeline victories

The DNR’s proposed agreement asks that Enbridge Inc.:

  • Assumes the indemnity obligations of Enbridge Energy Company Inc., the successor to the original Enbridge company that was granted an easement with Michigan in 1953 for Line 5
  • Agrees to a minimum of $900 million in liability insurance
  • Directly pledges its own assets for the remainder of the financial assurance requirements (to meet or exceed $1.878 billion, annually adjusted for inflation)
  • Names the state of Michigan as an additional insured party on the above identified policies so that Michigan’s right of recovery is not derivative

Eichinger’s letter requests a confirmation from Enbridge on whether it will enter into the agreement by next Friday, July 24.

Lisa Wozniak, executive director of the Michigan League of Conservation Voters (LCV) that opposes Line 5, said the DNR’s attempt to secure financial assurances from Enbridge is a step in the right direction.

“We are pleased Gov. Whitmer and the Michigan Department of Natural Resources are taking steps to hold Enbridge accountable on their financial responsibility, especially after the recent damage to the pipeline,” Wozniak said in a statement Friday.

“These financial assurances are more important than ever, but given the company’s long track record of safety violations and deceit, the only way to truly protect our Great Lakes from an oil spill is to revoke Enbridge’s easement agreement and shut down Line 5 once and for all.”

Nessel got Line 5 shut down, for now. Enviros say Whitmer can shut it down for good.

Oil & Water Don’t Mix spokesperson David Holtz, however, said the anti-Line 5 coalition is less than enthused about the proposed agreement.

“The state’s ask of Enbridge falls well short of what Michigan needs,” Holtz said, noting that the October report cited by Eichinger identifies $1.878 billion as being “at the low end” of likely damages from a catastrophic Line 5 spill.

“Yet the DNR is only asking for liability insurance covering $800 million in damages with the rest covered by Enbridge’s assets. With some reports putting potential damages from a Line 5 failure up to $6 billion, the DNR’s request remains a roll of dice with the stakes too high,” Holtz said.

Earlier this month, the DNR publicly released 373 documents relating to Enbridge and Line 5. A spokesperson said the review remains ongoing and there is not yet a timeline for its completion.

Environmentalists have noted that if the DNR finds that Enbridge has violated the terms of its easement, the most consequential action Whitmer could take to shut down both dual Line 5 pipelines would be to revoke the easement entirely.

The east leg of Line 5 remains shut down Friday under court order, as a federal investigation by the Pipeline and Hazardous Materials Safety Administration (PHMSA) continues.