What are the broader industry impacts of the National Transportation Safety Board's recent assessment of the 2010 Enbridge Energy Partners oil spill in Michigan? During today's OnPoint, Andy Black, president of the Association of Oil Pipe Lines, talks about the NTSB's analysis and its impact on future pipeline projects. He discusses how Enbridge's organizational failures contributed to the incident and weighs in on the latest challenges to TransCanada's proposed Keystone XL pipeline project.
Monica Trauzzi: Hello and welcome to OnPoint. I'm Monica Trauzzi. Joining me today is Andy Black, president of the Association of Oil Pipe Lines. Andy, thanks for coming on the show.
Andy Black: Thank you, Monica.
Monica Trauzzi: Andy, the NTSB recently released its assessment of last year's Enbridge Michigan oil spill. It found that the company had pervasive organizational failures. NTSB said that Enbridge knew there were cracks in the pipeline, but they didn't go ahead and fix the problem. Do you agree with NTSB's characterization of the culture that existed at Enbridge at the time of the spill?
Andy Black: The NTSB found that the accident was caused by stress corrosion cracking, which is an unusual phenomenon in pipelines that is not the cause of very many accidents. Stress corrosion cracking is difficult to detect. The NTSB acknowledged the limitations of inspection technology using smart pigs right now, and encouraged the industry to improve on the ability to detect these cracks. That was very difficult to find.
Monica Trauzzi: But they did say that Enbridge knew about these cracks before the time of the spill and did not go ahead and fix them. How many companies are out there sort of operating in this same way in the United States?
Andy Black: Operators inspect the pipelines looking for cracks. Cracks were found, as you said and as the NTSB found, but Enbridge did not recognize that these cracks were ultimately going to become stress corrosion cracking. The industry is putting money, $2.8 million already and another million going forward, into improving the ability to use inspection technology and understand what types of cracks are found.
Monica Trauzzi: So, do you believe that Enbridge was at fault then or did they follow standard operating procedure in this case?
Andy Black: In integrity management Enbridge was doing its best, was following the recommended practices about doing inspections and about understanding this. Even today the crack detection technology is better than it was in 2010. In fact, in 2010 when that accident happened, Enbridge had a smart pig in the lime right then looking for more cracks. They knew to be looking for stress corrosion cracking, but we're all at the frontier of technology in identifying it.
Monica Trauzzi: So, the NTSB also faulted federal regulators saying that PHMSA was lax in their approval of spill response plans and because regulators got blasted in this report, I'm curious if you sort of assume or fear that they may be harsher moving forward when we do see other spills like this one.
Andy Black: I think the NTSB properly recognize that regulators and industry both can spend more time working on oil spill response plans. They pointed out the number of PHMSA staff that was looking at this and that probably can be higher, and they encouraged operators to do drills, which they have been doing, and to have enough equipment available to deal with any oil spills, as rare as they are.
Monica Trauzzi: What do you want other companies to learn from the fallout of the spill and Enbridge's response to it?
Andy Black: The oil pipeline industry has a long tradition of sharing lessons, of improving recommended practices. We were actually glad for the NTSB to have that meeting, because it meant now we can listen to Enbridge, we can listen to NTSB. We hadn't been able to talk about that accident before. So, many pipeline engineers and integrity managers now know to work more on integrity management. We knew that mistakes were made in the control room. Enbridge's own procedures weren't followed. Control room teams now have an example of something to discuss to make sure that that doesn't happen. And in emergency response, similarly, all operators don't want to have that happen to them.
Monica Trauzzi: So, what does this report and sort of the things that it outlines and lays out for the future, what does it mean for the Keystone XL pipeline? What are the broader ramifications of it?
Andy Black: I don't think it has much to do with Keystone XL. The NTSB made a specific finding that internal corrosion was not the cause of the accident. And the allegations are that oil sands crude is more corrosive than other crude oils and that's just not the case. When you look at Department of Transportation pipeline accident records going back to 2002, when the accident records improved, not one oil pipeline carrying crude oil from the Canadian oil sands has had an internal corrosion caused failure. Bitumen is produced in the Canadian oil sands and, yes, it comes out sandy. But it's processed up there in Alberta. It's separated from the sands, the other sediment, the water. It's diluted by being mixed with natural gas condensate and then the diluted bitumen that's ready for pipeline transportation is just like any heavy crude. In fact, it has to pass the product quality specifications that are a standard part of FERC tariffs and those specifications deal with corrosive elements like sediment and water. We get this charge a lot, that oil sands crude is more expensive and it's just not logical. Pipelines are very expensive to build and the operators expect them to have long lives. Refineries are expensive to build and retrofit and are expected to have long lives. It's just not logical that a pipeline operator or a refinery would put into it an asset like crude oil that is too corrosive for it to handle.
Monica Trauzzi: The because the initial process is different than what we've seen before, how do you guarantee that it's not going to be, over the long term, more corrosive?
Andy Black: Well, it's tested. It's tested when it's ready to go into a pipeline. Any shipper can do product quality specification tests and an oil pipeline operator does too. An oil pipeline doesn't want a corrosive product to enter its pipeline and ruin the pipeline. Absolutely, the production is different. It's either mined or it's developed in situ and bitumen is connected with sands, but the sands are left up in Fort McMurray. What moves through a pipeline is like any other heavy crude, say from Mexico, Venezuela, the Bakersfield area of California. Those have been moved safely for decades.
Monica Trauzzi: So, there are specific questions now relating to the chemicals the Keystone pipeline will carry, including the diluting agents that will sort of help the crude flow. From a standard practice perspective, is there anything out of the ordinary or different in the chemical makeup that TransCanada will be using or would be using in the Keystone XL pipeline? Or is it business as usual?
Andy Black: Generally, the bitumen is mixed with a natural gas condensate. That's a byproduct of natural gas production. It's one of those items that is separated when the natural gas is processed. The National Academy of Sciences is going to look into this. Congress required a study of whether the oil sands crude is more corrosive than other crude oils. That study starts next week and if that study is done fairly, it's going to show what the market knows, what refiners and shippers know, that it's not any more corrosive than other crude oils.
Monica Trauzzi: So on Keystone, as the process moves forward for the southern leg of the pipeline, do you have any reason to believe that there won't be full-scale approval of Keystone XL?
Andy Black: We've heard the larger Keystone XL is set for a decision by the State Department in the first quarter of 2013. I hope it's approved. I would have lost money long ago thinking that it would have been approved while back. I think the benefits to consumers and workers are so strong and pipelines are the safest way to move fuel. So right now, from the Canadian oil sands and from the Bakken, if you don't have sufficient pipeline capacity, it's moving by rail, it's moving by truck. Those are several times riskier than pipelines, which are the safest way to move these fuels.
Monica Trauzzi: How would you qualify the relationship between the Obama administration and the oil industry as it pertains to the construction and regulation of pipelines?
Andy Black: In March, earlier this year, the president, on an extraordinary day, was in Cushing, Oklahoma, pipeline crossroads and great crude oil storage hub. He said all the right things about the importance of gaining oil pipeline infrastructure to areas that he mentioned, the Bakken, the Eagle Ford in Texas, Colorado even. He issued a presidential memorandum that day about streamlining oil pipeline reviews. Those are great. As long as the oil pipeline operators can get those small, but crucial things like environmental permits for construction and presidential permits where necessary, this will be great and consumers will be connected with the lower priced crude oil that they need.
Monica Trauzzi: All right, we'll end it right there on that note. Thank you for coming on the show.
Andy Black: Thank you.
Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.
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