Enbridge Faces Maximum Fine of $86 Million for Kalamazoo Spill

The company told regulators in a filing it expects to pay at least $22 million. The EPA, which will assess the fine, is mum.

Sign barring people from using the Kalamazoo River after Enbridge's pipeline rupture and spill in 2010. Credit: Jason W. Lacey

12:30 PM ET on 8/28/204: This story has been updated with information from the EPA.

Pipeline giant Enbridge, Inc. has almost finished cleaning up its 2010 spill that sent hundreds of thousands of gallons of heavy crude oil into Michigan's Kalamazoo River.

Now the U.S. Environmental Protection Agency must decide how much it will fine Enbridge for causing one of the biggest inland oil spills in U.S. history.

Enbridge spokesman Larry Springer declined to speculate on the amount of the fine. But according to the company's filing with the Securities and Exchange Commission last year, Enbridge expects it will be at least $22 million.

"Discussions are ongoing with the relevant government agencies, and it is premature to discuss negotiations at this time," Springer said.

A spokesman for the EPA said the agency would not comment on the fine.

Under provisions of the Clean Water Act, Enbridge could be fined as much as $4,300 for each barrel of oil it spilled into the river. At one point, EPA estimates indicated that 1,148,229 gallons—or about 27,000 barrels—of oil had been spilled. The agency's website now says approximately 843,000 gallons were spilled, putting the maximum fine at about $86 million.

In 2011, in what the agency called the largest per-barrel penalty for an oil spill ever imposed at the time, the EPA fined BP Exploration Alaska, Inc. $25 million for spilling 5,000 barrels of crude. (A barrel contains 42 gallons.) In that case, two accidents on BP pipelines fouled wetlands on the North Slope of Alaska.

"This penalty should serve as a wake-up call to all pipeline operators that they will be held accountable for the safety of their operations and their compliance with the Clean Water Act, the Clean Air Act and the pipeline safety laws," a U.S. Justice Department lawyer said at the time.

Earlier this week, the EPA fined ExxonMobil Pipeline Company $1.7 million for a 2012 pipeline spill that sent 117,000 gallons of oil into an unnamed tributary connected to Bayou Cholpe near Baton Rouge, La.

The EPA typically tries to reach an agreement with an offending company before a fine is announced.

Andy Levine, a Philadelphia attorney and former senior assistant regional counsel for the EPA, said the Enbridge case could end up in court if no agreement is reached or the company balks at the final amount.

The Enbridge accident closed almost 40 miles of the Kalamazoo River near Marshall, Mich., after Enbridge pipeline 6B ruptured on July 25, 2010. Environmental authorities began opening large segments of the river in 2012 but demanded more cleanup in areas where oil had pooled on the bottom.

The spill presented a unique cleanup challenge, because 6B was carrying bitumen, a thick crude oil mined from Canada's tar sands region that is thinned with a cocktail of liquid chemicals to form diluted bitumen, or dilbit. As the chemicals evaporated, the bitumen sank to the river bottom in sticky, marble-sized globs. That meant that conventional cleanup measures designed to clean up oil floating on the surface of the water no longer worked. Enbridge has already spent $1.2 billion on the cleanup.

Earlier this year, the EPA relinquished its role as the lead agency in the cleanup to Michigan's Department of Environmental Quality (MDEQ). All that remains of the EPA-ordered cleanup is for Enbridge to finish dredging a section of the Kalamazoo that flows though Morrow Lake, about 36 miles from the spill site. That job is expected to be completed in October.

The EPA uses a complex set of guidelines in determining whether to impose sanctions and the amount of the fine. Levine said a clue to the agency's thinking in the Enbridge case might be found in the National Transportation Safety Board's harsh criticism of the company.

The NTSB blasted Enbridge in 2011 for a "complete breakdown of safety" in the Kalamazoo spill. It criticized the company for failing to repair Line 6B despite knowing of defects five years before the rupture, including flaws along the section of pipe that burst open.

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

"In some cases there can be an environmental disaster where everything was in order and it just happened," Levine said. "It was an accident that happened not because you violated regulations."

But cases where the accident was a result of a company's negligence in not following regulations can trigger stiff penalties, Levine said.

"The question EPA will be asking is 'How badly did you blow it based on the regulations?' If, in the course of a disaster, it is determined that a company was not following regulations that can be a major consideration."

Another factor the EPA is likely to consider is the severity of the damage—and how responsive Enbridge has been to the EPA's cleanup requirements.

"The conduct of Enbridge could be a material driver for or against any enforcement actions," Levine said. "Did Enbridge do everything it was asked or did Enbridge resist? Those will be major factors in determining enforcement action.

"You'll see the highest penalties in cases where there is the largest deviation from regulations and maximum harm to the environment."

Monitoring Will Continue for Years

While punitive measures are being considered, Steve Hamilton, a professor of ecosystem ecology at the Kellogg Biological Station at Michigan State University who served on an EPA advisory committee for the cleanup, said the river has mostly returned to its former state. Aquatic life is teaming and vegetation along the river banks and flood plain is thriving.

"My sense is the cleanup is as successful as it could have been," Hamilton said. "Most people wouldn't realize anything had happened if they paddled the river now."

Still, Hamilton said it's not possible to say the river is 100 percent healthy, because some oil remains on the river bottom and will likely be there for years.

"We don't know whether there will be any residual toxic effects from the oil because we can't get it all out," he said. "So you could see the remnants of this for some time."

That means years of study and testing will be need before the final verdict is reached on any long-term effects of the spill.

Even though the EPA is ending its role in the cleanup, Enbridge must continue to meet Michigan's remediation requirements. Nicole Zacharda, an enforcement specialist with the MDEQ's Water Resources Division, said that while the river "looks good," work on wetlands and parts of the river channel could continue for years.

"They will do this work under our direction and we will review the results," Zacharda said.

The MDEQ also is negotiating with Enbridge over what Zacharda described as a "broad compensation package." She declined to elaborate, saying "there is nothing else I can speak to you about."

Enbridge spokesman Springer said the company is working with the MDEA on the final draft of a consent judgment that will outline what remains to be done.

"We will have a long-term presence in the area and will continue to work in the best interests of the affected communities and river environment," he said.

Since the accident, Enbridge has replaced and enlarged Line 6B from Indiana to Ontario, Canada at a cost of $1.3 billion. The project faced resistance by landowners angry with Enbridge over its condemnation of their land and some of its construction methods, which the homeowners said were unnecessarily destructive.

Enbridge points to the replacement project as evidence of its commitment to improving its operations. In 2011 and 2012 the company spent nearly a billion dollars to assess the safety of its entire 15,000-mile pipeline network in the United States and Canada.

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