U.S. orders major Enbridge oil pipeline review after leak

Thu Aug 2, 2012 7:57pm EDT
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By Jeffrey Jones and Ayesha Rascoe

CALGARY/WASHINGTON (Reuters) - The U.S. pipeline regulator raised pressure on Enbridge Inc on Thursday over the latest spill on its U.S. oil pipeline network, demanding that it submit a plan to improve the safety of the entire 1,900 mile system before restarting a key Midwest line.

The U.S. Pipeline and Hazardous Materials Safety Administration said it added new conditions to this week's corrective action order for the restart of Line 14 to address failures on that pipeline as well as a string of others in recent years on its U.S. system, part of the world's longest network for transporting oil and petroleum products.

Enbridge responded immediately, saying it would submit the new plan by day's end and that many of the improvements sought on the U.S. system were already under way. But regulators who have made no secret of their dismay and anger over a series of recent leaks on Enbridge lines must still approve the plan.

"PHMSA has communicated its longstanding concerns about this pattern of failures with (Enbridge) over the past several years," PHMSA wrote in the amendment to its order. "Given the nature, circumstances, and gravity of this pattern of accidents, additional corrective measures are warranted."

The move came as Enbridge's top executives defended the company's safety record amid growing public pressure. They said quick action to stop the flow of crude from the 318,000 barrel per day pipeline in rural Wisconsin showed it had bolstered safety procedures after a devastating 2010 Michigan oil spill.

The added demands are almost certain to mean the pipeline remains idle for even longer, potentially months if regulators also require it to implement reforms, according to experts. That could tighten supply of light, sweet crude for Chicago-area refineries at the height of the U.S. driving season.

Benchmark gasoline jumped over 1 percent on Thursday as Midwest premiums spiked this week to a near record high. Canadian crude oil producers are also worried that a lengthy outage could also back up crude supplies in Alberta, weighing on prices or even forcing them to shut in production.

The situation is being watched closely by the energy industry, environmentalists, Canadian regulators and Enbridge's investors. The company, which transports most of Canada's oil exports to the United States, is struggling to win approval to restart the pipeline and proceed with a C$3.2 billion ($3.2 billion) expansion of the Canadian and U.S. Midwest parts of its network to eliminate bottlenecks.   Continued...

Greenpeace protestors begin the cleanup of a simulated oil spill outside the Enbridge oil pipeline offices in Vancouver, British Columbia June 13, 2012. REUTERS/Andy Clark