Just before 9:30 p.m. on July 25, 2010, emergency workers in Calhoun County, Michigan, received a 911 call from someone reporting a "bad" odour. It smelled, the caller suggested, like a natural gas leak.
For Canada's Enbridge Inc. , that call was the first hint that oil was pouring out of a two-metre gash in a key link of its massive crude oil pipeline network. It would soon become clear that this was the worst spill in the company's history, one that will cost an estimated $550-million (U.S.) to clean up. And that tally pales in comparison to the billions the rupture has cost Canada's oil producers, who saw prices plunge as domestic supplies built up after the pipeline outage.
Now, after months of cleanup work, most of the crude has been scoured from the river and its banks. A U.S. government-mandated repair program, which saw Enbridge use 65 crews to fix 400 locations over the span of several months, is nearly complete. And Enbridge chief executive officer Pat Daniel has in recent weeks promised that things are nearly back to normal.
But the spill has raised new questions about the age of the Enbridge pipeline network - the single most important link between Alberta's oil and buyers in the U.S. and Eastern Canada - and about the broader infrastructure of North America's massive system of oil transportation. Much of that system is decades old and built using protective coatings that have been shown to break down over time. Its future performance has important implications for both Canada's energy industry and the economy of the broader country, for which energy is now the single most important export.
In terms of pure oil lost, the Michigan spill was but a fraction of the BP spill - the leaking Gulf of Mexico well poured out 250 times more crude. But for Canada, the stakes of what happens with Enbridge are as high as they were for U.S. Gulf operators. In 2009, the Enbridge network carried 71 per cent of Canada's crude exports, supplying a substantial portion of U.S. imports. For Canada, then, concerns about pipelines pose not just a corporate conundrum - they are a serious national economic issue.
Pipelines have long been considered virtually invincible, a transportation corridor so certain that investors have come to expect extraordinary and predictable performance. Enbridge's 2009 annual report highlighted an average 13.5 per cent annual shareholder return over more than 55 years.
The problems that have dogged Enbridge for the past seven months have, however, provoked new concern over how the company will continue to operate half-century-old assets in coming years.
The Michigan spill "is a harbinger of things to come," said Glen Perry, a prominent Alberta pipeline builder who helped found the Alliance natural gas pipeline.
"What we're learning is some of that old pipeline doesn't have a 100-year life, even though maybe they hoped it did," he said. "I don't know what the life is. But for sure these old lines are going to have to eventually get replaced. And I think what Enbridge is seeing is just the front end of that."
The industry has long held that a well-maintained pipeline should last forever - and that, as a result, the construction date is largely irrelevant. Indeed, thanks in part to newly rigorous inspection rules, spills from crude pipelines have decreased by 35 per cent since the 1980s, and Enbridge itself has a spill rate that is roughly half the industry average.
Age doesn't present a risk for its pipelines, since the company closely monitors all aspects of its network to check for compromises or possible weak spots, Enbridge says. The company spends heavily each year on sensors, spot inspections and other measures to ensure its pipelines are running safely. When problems are detected, the company dispatches experts to identify the source and replace any needed sections.
"The age of the pipe shouldn't make any difference," Enbridge's Mr. Daniel said in an interview. He acknowledged that age brings deterioration in coatings, wear and tear and metal fatigue. But, he said, the company replaces sections of pipe when needed, and has the tools to find any issues before they turn into spills. Those tools, he said, are improving at such a rapid rate that the company can more than compensate for any age-related issues.
"To the extent we have deterioration in coating, we're going to be ahead of the game because of better detection technology," he said.
Enbridge has pointed out that the Michigan spill was its worst in 60 years, and the company stresses that safety is a chief concern. Mr. Daniel said what the company is learning from the mishap will only help create a more reliable pipeline network.Report Typo/Error