Dane County should require Enbridge Energy to purchase $25 million in special pollution insurance to address concerns about a possible spill of tar sands crude and toxic chemicals as the company sharply increases the load carried by an underground pipeline, according to a new consultant’s report.
If the county’s zoning committee adopts the recommendation on Tuesday, the company would be required to provide more insurance than it had previously offered the county but the cost of the coverage would be relatively low — in the tens of thousands of dollars, said David J. Dybdahl Jr., a Middleton-based broker and expert on environmental insurance.
An Enbridge spokeswoman said Friday that the company was still reviewing the report.
But committee chairman Patrick Miles said company representatives told county planning staff members they weren’t happy with the recommendation and they want the committee to make a decision quickly on a permit for a new pipeline pumping station.
Miles said he hadn’t analyzed the consultant’s report in detail and he couldn’t predict what would happen Tuesday.
“I’m not sure where that leaves us,” Miles said. “I know they (Enbridge officials) are champing at the bit for the committee to take action.”
The committee has been holding up Enbridge’s planned pumping station in the county’s northeast corner amid concerns about a possible spill like the one that took four years and $1.2 billion to clean up after an Enbridge pipe burst in 2010 fouling miles of Michigan’s Kalamazoo River.
Enbridge has argued that it can’t be forced by any local government to purchase additional insurance, but in January it offered to add the county as an “additional insured” on $100 million of its overall $700 million general liability policy.
The zoning committee hired Dybdahl to evaluate the offer. His 30-page report pointed out that the general liability policy covers property damage but excludes coverage of pollution claims except in certain circumstances. Enbridge is fighting in court with an insurance provider that insists it isn’t obligated to pay $103 million in the Michigan spill.
“Whether pollution damage is covered as property damage or not has been litigated in the state courts for 30 years,” Dybdahl said. “Nobody knows.”
So Dybdahl is recommending the county seek $25 million in unambiguous “environmental impairment liability” coverage that specifies it would apply to pollution coverage cleanup.
The pollution coverage is exactly what is needed, said Peter Anderson of the Madison chapter of 350.org, which has been critical of the Enbridge project, but the county should require an annual increase in the coverage amount to reflect inflation.
And the county should be named on the policy so that county officials can bill the insurance company directly for costs, Anderson said.
Dybdahl said the inflationary increases were impractical and unnecessary. The purpose of the pollution policy isn’t as much to cover all possible cleanup costs, but to act like the proverbial coal miner’s canary that dies when the air becomes toxic.
As long as the company is able to purchase and annually renew the policy, the county will know that the insurance industry views the pipeline as a reasonably safe operation, but if it isn’t renewed the county could shut down the pumping station.
“The real benefit is the canary in the coal mine rather than actual risk transfer to an insurance company,” Dybdahl said.
Looking ahead decades
Dybdahl said his recommendations are aimed at protecting the county for 40 to 50 years.
Enbridge has said that government cleanup funds and its own cash reserves can cover any costs insurance doesn’t cover.
But Dybdahl warned that the federal and state funds aren’t guaranteed to be in place forever, and Enbridge may not always be as rich as it is now.
The oil industry may be subject to the same economic pressures that caused the U.S. coal industry to lose 70 percent of its value in five years, Dybdahl said.
Reduced profitability would limit the company’s ability to maintain robust safety levels and its ability to dig into its pockets for cleanups, Dybdahl said.
Enbridge is adding pumping horsepower at 13 spots along its Line 61 route, which carries Canadian tar sands crude across Wisconsin on its way to refineries.
The company plans to triple the 400,000-barrel-per-day flow Line 61 has averaged since it began operating in 2009. The first three new pumping stations began operating in August, increasing the rate to 560,000 barrels.
Dane County is the only local government that hasn’t yet issued a permit for installation of new pumps.
The addition of the county to Enbridge’s $700 million general liability policy would cost the company very little and mean that the insurance would cover county legal costs in the unlikely event it was sued for something Enbridge did, Dybdahl said. Enbridge also promised to cover any county government costs associated with a spill.
The county hired Dybdahl for $4,950. Enbridge is picking up the cost of the contract, Miles said.