EPA Postpones Enbridge’s Day of Reckoning for Kalamazoo Spill

The fine for calamitous pipeline rupture could exceed $100 million, but may take another year or more to decide.

The dilbit pipeline spill that fouled the Kalamazoo River in 2010 could draw Enbridge a record fine.

An extended deadline means Enbridge has still not paid a penalty for Clean Water Act violations in the 2010 dilbit spill into the Kalamazoo River. Credit: EPA

The U.S. Environmental Protection Agency and Enbridge, Inc. have agreed to extend the deadline for fines in connection with the massive 2010 spill that sent highly toxic oil into Michigan's Kalamazoo River. The penalty is expected to be one of the largest ever for an oil pipeline spill, perhaps exceeding $100 million. 

The original deadline fell on July 25, the fifth anniversary of the spill, but a new and undisclosed date has been set, according to documents Enbridge recently filed with the U.S. Securities and Exchange Commission.

The documents do not disclose the new date and Enbridge officials declined to reveal it. The EPA did not respond to requests for comment.

Enbridge also has disclosed that it may be required to pay for improved pipeline safety measures and public service projects, in addition to the fine for damages.

Former EPA attorney Andy Levine said the extentsion does not surprise him because of the complexity of the case.

He said the EPA and Enbridge likely have different reasons for extending the deadline even though both undoubtedly share the same goal of avoiding litigation.

The agency, Levine said, probably wants to make sure it has a comprehensive understanding of the damage done not only at the time of the spill but also more that might become apparent in the years ahead.

Enbridge will use the additional time to convince EPA officials that it has taken great care in cleaning up the spill and will address any lingering environmental issues, he said.

Levin, a Philadelphia lawyer now in private practice, said he expects the final settlement may not be reached for a year or more.

"Both sides have a lot at stake and want to get it right," he said.

Enbridge continues to say it expects a minimum fine of $40 million, but hedged the final amount in its quarterly report to the SEC, updates that are required so stockholders and potential investors can assess a company's financial status.

"Given the complexity of settlement negotiations, which we expect will continue, and the limited information available to assess the matter, we are unable to reasonably estimate the final penalty which might be incurred or to reasonably estimate a range of outcomes at this time," the disclosure read.

Enbridge also said the final settlement "is likely to include further measures directed toward enhancing spill prevention, leak detection, and emergency response to environmental events, and the cost of compliance with such measures."

That is in line with The EPA's "Next Generation Compliance" program that launched this year. The initiative compels pipeline operators to step up compliance with environmental regulations and employ advanced safety technology as part of environmental settlements.

The harshest penalties Enbridge faces fall under the Clean Water Act, which went into effect in 1972. It empowers the EPA to levy fines of as much as $1,100 for each barrel––42 gallons––of spilled oil. The maximum penalty rises to $4,300 a barrel if the agency concludes the spill resulted from negligence.

The rupture in Enbridge's line 6B spilled more than 1 million gallons of tar sands oil from Canada, into the Kalamazoo near Marshall, Mich.

Ultimately, the oil pushed nearly 40 miles downriver, triggering a massive cleanup effort that has cost the company $1.2 billion so far. Much of that expense––$547 million––has been covered by insurance but the company has been responsible for making up the difference. Enbridge also has filed a lawsuit against its insurance company seeking an additional $145 million that it believes was covered under its policy.

Earlier this year, Enbridge reached settlements totaling nearly $80 million with the Michigan Department of Environmental Quality and the U.S. Department of Justice's Environment and Natural Resources Division.

Both settlements were designed to address environmental damage; they do not reflect punitive measures for harm to the Kalamazoo.

Facebook Twitter Google Plus Email LinkedIn RSS RSS Instagram YouTube