Michigan scraps Straits of Mackinac oil pipeline safety study after conflict discovered

The State of Michigan today terminated a contract with a company preparing a risk analysis report on the Line 5 oil pipeline below the Straits of Mackinac, after discovering a conflict of interest between an employee working on the report and the worker's ties to the pipe's owner, Canadian oil transport giant Enbridge.

Det Norske Veritas, Inc., or DNV GL, was preparing a risk analysis of the 64-year-old, twin, 20-inch pipes under the Straits, which move 23 million gallons of crude oil and natural gas liquids through the Upper and Lower Peninsulas daily. The report was to look at financial and worst-case-scenario impacts from a spill in the Straits.

State officials learned within the past month than an employee for Det Norske Veritas who worked on the Line 5 risk analysis subsequently worked on another project for Enbridge. That violates conflict of interest prohibitions contained in the company's contract with the state.

“The evaluations of Line 5 were supposed to be independent, not tainted by outside opinions or information, but that’s not what happened," Michigan Attorney General Bill Schuette said in a statement.

"Instead, our trust was violated, and we now find ourselves without a key piece needed to fully evaluate the financial risks associated with the pipeline that runs through our Great Lakes. This is unacceptable."

State officials decided to terminate the contract "based on our commitment to the complete integrity and transparency of this report," DEQ Director C. Heidi Grether said.

►Related: New Senate bill introduced is aimed at shutting down Line 5

"Ultimately, the state will have to decide how to proceed with Line 5, and we can’t do that if there is any doubt regarding the nature of the information," she said.

The state Pipeline Safety Advisory Board, appointed by Gov. Rick Snyder to look into risks associated with Line 5's continued operation in the Straits of Mackinac, in a competitive bidding process last year chose DNV GL to conduct a risk analysis, and Dynamic Risk Assessment Systems Inc. to conduct an analysis of potential alternatives to Line 5. DNV GL's contract was for $756,000.

Enbridge agreed to pay $3.58 million into an escrow account to fund the studies.

"The money actually came from Enbridge, and the state was holding it and paying (DNV GL) upon completion of the report," DEQ spokeswoman Melody Kindraka said.

DNV GL, following its contractual obligations, informed the state that one of its employees who worked on the risk analysis was potentially in conflict because of the employee's subsequent work for Enbridge.

"We did work with them to try to find a solution, but ultimately, we did not find a solution that we felt was satisfactory. So we decided to terminate the contract," Kindraka said.

Andrea Bitely, a spokeswoman for Schuette's office, said the DNV GL employee worked in "hydro-dynamic modeling."

"That would give us an estimate of the rates at which oil and natural gas could potentially leak out of the pipelines in various scenarios," she said, adding the employee's role in the Line 5 risk assessment was "definitely significant."

State officials, who signed the contract with DNV GL, will be "working out the details" with the company over what compensation, if any, it gets for the months of work it had already conducted.

"There are specific provisions and procedures that we now have to follow," Bitely said. "But they were terminated for cause — it's not like we woke up and decided, 'We don't like you.' They violated the terms of the contract."

The state did the right thing terminating DNV GL's contract and the risk analysis report, said Mike Shriberg, executive director of the nonprofit National Wildlife Federation's Great Lakes Regional Center. But Shriberg, who's also a member of the state Pipeline Safety Advisory Board that commissioned the Line 5 study, said the board should not now "go back to square one."

"We’re well aware that this pipeline has very high risks for the Great Lakes, the most important water body in the world," he said. "We know there’s a very high consequence if the pipeline breaks."

More important in the short-term, Shriberg said, is the second report contacted by the state, reviewing alternatives to moving the oil and natural gas liquids that would not involve piping it underwater through the Straits.That report is expected to the state in draft form by the end of this month, after which a public comment period will take place.

"What we've never really had is a really clear-eyed discussion of alternatives," he said. "We’re going to have that piece in hand.

"We know the risks are extreme. The alternatives analysis will give us the path forward to decommissioning Line 5."

Whether to proceed with decision-making on Line 5's future with or without the risk assessment report will be reassessed by the DEQ, Attorney General's Office, Michigan Department of Natural Resources and Michigan Agency for Energy, Kindraka said. The alternatives analysis report, and public discussions that arise from it, "will help inform our decisions."

DNV GL officials did not respond to messages seeking comment Wednesday.

Enbridge spokesman Ryan Duffy, in an email, said company officials were "disappointed to learn of these developments with one of the State’s independent contractors."

"It is important this process is independent and without conflict," he said. "We support the State’s actions. We, too, are investigating what may have happened in the contracting process."

Enbridge last weekend completed hydrostatic tests of the twin underwater pipes in the Straits, filling them with water at much higher pressure than at which they typically operate, and finding no cracks, leaks or other anomalies.

Andrea Bitely, a spokeswoman for Schuette's office, said the DNV GL employee worked in "hydro-dynamic modeling."

"That would give us an estimate of the rates at which oil and natural gas could potentially leak out of the pipelines in various scenarios," she said, adding the employee's role in the Line 5 risk assessment was "definitely significant."

State officials, who signed the contract with DNV GL, will be "working out the details" with the company over what compensation, if any, it gets for the months of work it had already conducted.

"There are specific provisions and procedures that we now have to follow," Bitely said. "But they were terminated for cause — it's not like we woke up and decided, 'We don't like you.' They violated the terms of the contract."

The state did the right thing terminating DNV GL's contract and the risk analysis report, said Mike Shriberg, executive director of the nonprofit National Wildlife Federation's Great Lakes Regional Center. But Shriberg, who's also a member of the state Pipeline Safety Advisory Board that commissioned the Line 5 study, said the board should not now "go back to square one."

"We’re well aware that this pipeline has very high risks for the Great Lakes, the most important water body in the world," he said. "We know there’s a very high consequence if the pipeline breaks."

More important in the short-term, Shriberg said, is the second report contacted by the state, reviewing alternatives to moving the oil and natural gas liquids that would not involve piping it underwater through the Straits.That report is expected to the state in draft form by the end of this month, after which a public comment period will take place.

"What we've never really had is a really clear-eyed discussion of alternatives," he said. "We’re going to have that piece in hand. 

"We know the risks are extreme. The alternatives analysis will give us the path forward to decommissioning Line 5."

Whether to proceed with decision-making on Line 5's future with or without the risk assessment report will be reassessed by the DEQ, Attorney General's Office, Michigan Department of Natural Resources and Michigan Agency for Energy, Kindraka said. The alternatives analysis report, and public discussions that arise from it, "will help inform our decisions."

DNV GL officials did not respond to messages seeking comment Wednesday.

Enbridge spokesman Ryan Duffy, in an email, said company officials were "disappointed to learn of these developments with one of the State’s independent contractors."

"It is important this process is independent and without conflict," he said. "We support the State’s actions. We, too, are investigating what may have happened in the contracting process."

Enbridge last weekend completed hydrostatic tests of the twin underwater pipes in the Straits, filling them with water at much higher pressure than at which they typically operate, and finding no cracks, leaks or other anomalies.

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© 2017 Detroit Free Press


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