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Alberta energy regulator decides against fine for worst pipeline leak in province for 30 years

06 March 2013

Alberta’s energy regulator issued a scathing report in February into the 4.5-million-litre Rainbow pipeline spill northeast of Peace River, Alberta, in April 2011. About half a million litres of light sour crude spilled into the Red Deer River with some of it washing into the Gleniffer reservoir, which provides thousands of Albertans with drinking water.

The Alberta Energy Resources Conservation Board said pipeline operator Plains Midstream appeared to place a higher priority on keeping the pipeline running than on any concerns about the leak.

But investigators with the decided not to refer the case for prosecution and potential imposition of a fine of up to $10,000 after finding the spill northeast of Peace River was much larger than it should have been. "Fines aren’t part of our current regulatory framework," board spokesman Darin Barter said.

The ERCB discovered an operator at the company’s control centre had ignored repeated alarms and restarted the pumps on the pipeline during the April 2011 spill.

Public filings by Plains publicly traded parent show the company suffered a loss of $21 million in revenue while the pipeline was shut down for 122 days following the incident.

While cleanup and remediation at the site cost $70 million, the company expected $41 million of that cost would be covered by insurance.

Some environmental groups say Alberta needs stiffer fines because those cleanup costs and loss of business are just a drop in the bucket for a company like Plains that had profits last year of $1.1 billion.

"Alberta’s current maximum of $10,000 is a joke," said Nathan Lemphers, a policy analyst with the Pembina Institute, quoted in the 

"We need fines that will get rid of the perverse incentive for companies to postpone maintenance and run the risk of having a spill."

The ERCB report found the 45-year-old pipeline — which Plains purchased from Imperial Oil Ltd. four years ago for $544 million — began leaking when a sleeve used for corrosion repair failed.

The company had not properly inspected the weld on the sleeve when it excavated the line a year before the spill. It had also failed to properly backfill and compact soil around the pipe, resulting in additional stress that contributed to the weld’s failure.

Lemphers told the Calgary Herald that pipeline companies south of the border face large civil penalties as well as cleanup costs.

For example, the U.S. Pipeline and Hazardous Materials Safety Administration hit Enbridge Energy with a record $3.7 million fine after one of its Michigan pipelines ruptured in 2010, spilling millions of litres of bitumen crude into the Kalamazoo River.

That same year, Plains was hit with $3.2 million in civil penalties in connection with a series of leaks on it pipeline network that polluted water bodies in several southern states.

"It needs to hurt and we need to make an example of these firms," Lemphers said.

Under the Responsible Energy Development Act that comes into force later this year, officials with Alberta Energy said pipeline companies in the province could face fines of up to $500,000 a day when a spill happens.

"We will have one single regulator in the very near future," Premier Alison Redford told reporters.

Officials with Alberta Environment said the department will conclude an investigation into the 2011 spill by the end of April that could still see Plains prosecuted under current legislation that allows for fines of up to $1 million. The company also made headlines in 2012 for an oil spill near Sundre, Alberta.

Plains said in a prepared statement that it has increased aerial patrols of its Rainbow pipeline to look for spills and has reinforced procedures that call for an immediate shutdown if a leak is detected. "Plains will continue to cooperate with the ERCB and is committed to fulfilling the directives outline in the (board’s) report," the statement said.

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