Overwhelmed with a recent trip to the North Dakota border to determine the Line 3 project status, I’m still processing through the hundreds of photos and videos we captured. What we observed was disturbing.
The good news is that they have not yet gone under the Red River. We can still prevent this project from ever transporting any tar sands from the horrific Athabasca (region where tar sands are mined). Note: When you click on the link from NASA, be sure to click on the eyeball logo that says “All” to view the slideshow of the region over time from 1984 to 2016.
The process of extracting oil from the sand is expensive. It takes two tons of sand to produce one barrel of crude oil. Great Canadian Oil Sands opened the first large-scale mine in 1967, but growth was slow until 2000 because the global cost of a barrel of oil was too low to make oil sands profitable.”
Here’s a brief shot of some of what we found in Kittson, Marshall, Pennington, Red Lake, & Clearwater counties.
I’ll be updating this blog as I finalize the details. We have quite a lot of video to process into something cohesive.
Until then, if you’d like to read something more while you wait, on how we got to this place where we have not yet been able to stop this pipeline, no matter HOW many people speak up… read this blog, a summary of recent MN350 report on Koch Industries capture of the MN Chamber of Commerce.
The ECO Act sought to reward residential energy customers who switched to more efficient heating systems that relied on electricity rather than propane. The Act, which was introduced by Republican Senator Jason Rarick, from Pine City, would have created jobs for local contractors, released utility companies from minimum spending requirements, prioritized benefits for low income home owners, and expanded consumer choice by rewarding them for switching to more efficient heating systems, according to MN350’s report. The Propane Association’s opposition to the legislation is easy to understand. They want people to use more propane. The reasoning behind the opposition of the Minnesota Chamber of Commerce is less transparent. However, MN350’s report makes a strong case for the claim that one Chamber member, the Pine Bend Refinery own by Koch Industries, has essentially captured the Chamber of Commerce when it comes to policy regarding bills such as the ECO Act, or other legislation regarding energy efficiency and the reduction of fossil fuel use. This is the case, the report argues, even though many of the other large members of the Chamber have expressly stated their support for increased energy efficiency, reduced petroleum use, and a greener economy. The report points out that Koch Industries lobbyist, Matthew Lemke, is on the Board of Directors for the Minnesota Chamber of (Commerce) and that time-and-again Chamber lobbyists statements have mirrored the Koch-Pine Bend position rather than that of companies such as 3M or Target.”
After a bit of working through the many photos and videos, this is our summary thus far.
Pipe staged along route from Red River east for 5.2 miles, then pushed dirt is consistent along the route throughout Kittson County. Marshall County dirt push was mainly at crossings of roads and waterways. Pipe staging along the corridor returned east of Trail, Minnesota and through to the Clearwater County line [another 6 miles of staged pipe]. We noted a bore machine off Hwy 75 in Marshall County and found 2-3 road crossings where they had prepared to bore under but no boring seemed to have been completed where we observed. [Quick video of the area on arrival – it was my first trip to this part of the state so I took in the Beet Field Vista.]
We observed many campers at the campgrounds north of the Petro Pumpers at Thief River Falls. Multiple trailers and trucks from states known for pipeline workers. These guys have their systems in place – with big propane tanks, foam board for skirting, and huge trucks… for driving through the snow. We counted trailers, campers, and trucks from 19 states: ND, OK, TX, MN, MO, FL, IL, MS, MT, OR, AR, PA, KS, IN, OH, SD, MI, WA, NV. [Hard to watch… HOW is THIS COVID-19 SAFE, Governor Walz?]
Clearbrook terminal showed piping staged from the east side of Hwy 92 to the Enbridge terminal there south of town. [You can still smell the gas leak or chemical smell at the plant when you drive past – SO GROSS. Makes me wonder about all those ramps on the houses in Clearbrook.]
The equipment storage yard north of Bagley on 242 again showed no apparent security presence.
Quick Summary of the Enbridge Corridor of Death from ND to Clearbrook
Hoping to have more video for release by the end of the week… There are a LOT of video files to consolidate… Sixty of them to be exact. Whew!
Paul Blackburn had to explain to them how the law works in a subsequent memo, later the same day. He beautifully explained to the PUC how Minnesota law actually works. I will walk you through it all here.
Will Seuffert, Executive Secretary of the PUC, appears to be in over his head – or is it Chair Katie Sieben directing the show erroneously? This comment period Notice is full of issues as Paul states in his response memo requesting clarity on the PUC posting. As a long-time follower and deep reader of the Line 3 documentation, I was immediately struck by what appears to be a request from the PUC to Enbridge asking them to explain THE PUC’s OWN JURISDICTION TO THEM. WTF??? [I mean, we all know the PUC has bent over backwards to accommodate Enbridge’s storyline but are they now allowing them to determine Minnesota law?]
In Paul’s response, it is made clear that the PUC is confusing the issue and violating the processes given by Minnesota statutes.
When and if the PUC finds it does have jurisdiction and files to secure a 20-day response from Enbridge on the complaint… (not the PUC’s jurisdiction), they also MUST provide a 30-day public comment period on which procedures should be followed – contested case hearing, informal proceeding, expedited proceeding, “as well as give notice of a 10-day reply public comment period for responses to the initial procedural comments. The 30-day public comment period allows commenters to see Enbridge’s answer before filing their initial comments. In such notice, the Commission should also provide public notice of the right to file a petition to intervene in the complaint proceeding.” In THAT situation, HTE is provided a chance to respond (also within 20 days), to Enbridge’s response on their Complaint.
Only after ALL THAT has been done can the PUC determine which procedure to use to resolve the complaint. Once they order said procedure, they also must rule on all petitions to intervene, if any.
There is no reason for the PUC to ask Enbridge if they have jurisdiction as Minn. R. 7829.1800, subp. 1 says the Commission shall determine jurisdiction and whether there are reasonable grounds to investigate the allegation. Minn. R. 7829.1800, subp. 2 says that IF the Commission finds the above to be true [and this MUST be done BEFORE they file to the respondent (Enbridge)], they THEN serve the complaint to the respondent… for an answer within 20 days.
Under the regulations, it is not appropriate for the Commission to seek comment on jurisdiction and whether reasonable grounds exist at the same time that it has apparently (albeit without a formal order) required an answer within 20 days from Enbridge.
Service of a complaint and order is not the same thing as issuing a notice for a “comment” period. The Notice, therefore, appears to conflate the reply period to the answer required by Minn. R. 7829.1800, subp. 3, with the reply period to initial comments period provided by Minn. R. 7829.1900, subp. 3.”
Indeed. The new Executive Secretary of the PUC appears to be unaware of the expected procedures given by the Minnesota Legislature in statute. In addition, Paul clarifies that “there is no right for other parties to reply” on the Complaint as that is reserved for the Complainant (Honor the Earth).
As is made clear in Minn. R. 7829.1900 COMMISSION ACTION ON FORMAL COMPLAINT; COMMENTS, the process requires the PUC to 1) determine the nature of the proceedings, 2) allow initial comments within 30 days of the commission order requiring answer to the complaint (complainant, respondent, Office of AG and any other known parties), 3) Allow reply comments for 10-days after that, and 4) allow for intervention by additional parties (said petition may be combined with the comments on the complaint).
Paul notes several possible outcomes the PUC may have been intending…
Establishing a public comment period? Oops. Didn’t include the word “public” and the Notice states the deadline for comment is limited to those “Enbridge” provides to answer HTE’s complaint. [However, Minn. R. 7829.1900 subps. 2 & 3 state that any “person” may comment on the procedures to be used.]
If intended as a public comment period, the PUC used the wrong LENGTH of comment period as statute requires “30 days”, not 20. [As Paul puts it, “Thus, if the Notice was a proper way to order an answer, which it is not, then the initial public comment deadline would be 30 days after November 5, or December 7 (given the weekend), and the reply comments would be due ten days after that, or December 17.”]
IF the intention was for a public comment period, Paul additionally notes, “the Notice incorrectly states that reply comments are limited to replies to just Enbridge’s answer; whereas Minn. R. 7829.1900, subp. 3, states that public reply comments “must be limited in scope to the issues raised in the initial comments” (emphasis added).”
Finally, if this is intending a public comment period, then it “fails to provide notice that any “person” may file a petition to intervene pursuant to Minn. R. 7829.1900, subp. 4. The lack of clarity in the notice and its failure to comply with the clear language of Minn. R. 7829.1800 and 1900, creates ambiguity about whether the notice initiates the intervention period or not.” [I sure love how Paul words things.]
Among the many problems with the PUC’s action are:
Creation of confusion as to the Commission’s intention, which also is unclear in its adherence to current Minnesota statutes.
Potentially provides too little time and prejudices commenters who would not have access to Enbridge’s answer before filing their complaints.
Improperly limits the scope of responses to the complaint.
Fails to provide a notice for rights to intervention.
Continues with the PUC’s failure to follow public participation requirements in the state of Minnesota (as found by the Office of Legilative Auditors earlier this year).
What should be done?
Honor the Earth requests that the PUC “withdraw the Notice and instead follow the process contained in the regulations.” I’d agree this is what we should expect from the PUC:
Make a preliminary jurisdictional and reasonable-grounds decision.
Issue an Order finding the Complaint within its jurisdiction and that the Complaint states reasonable grounds.
Serve this order and the Complaint on Enbridge and inform it of its right to file an answer within 20 days.
Provide a public notice of a 30-day initial public comment period and a 10-day public comment reply period on the appropriate procedures to be followed.
Provide a public notice of the intervention period.
Issue an order identifying the appropriate hearing procedure for the Complaint.
Paul’s closing paragraph ends with an appropriate notice to the PUC:
The public has a right to expect that the Commission will follow its own procedural rules and be clear about public participation rights.
Let’s start with an explanation a second-grader could understand on Line 3 happenings last week: Healing Minnesota Stories blog, The pipeline company that cried “Wolf!’. Their simple explanation tells how Enbridge has continued to plea that they NEED a NEW pipeline… all while ALREADY SHIPPING more crude than they hope to add with said new pipeline! In fact, Enbridge currently has an EXCESS of unused capacity equal to MORE than the NEW Line 3 would be able to ship for them! Yet the powers that be still fail to listen. [And Enbridge has plans to expand MORE… FFS.]
Surprise, Surprise! We DON’T have to build a new Line 3 AFTER ALL!
Honor the Earth‘s Paul Blackburn and Frank Bibeau have filed a Complaint and Petition for Investigation regarding Enbridge’s mainline system capacities. It seems Enbridge has been less than forthcoming with their true mainline system capacities!
The filing opens quickly to the heart of the concern:
In the first quarter of 2020, before the pandemic impacted oil demand, U.S. federal and Canadian crude oil shipment data shows that in the first quarter of 2020 Enbridge successfully operated its Mainline System at a flow rate of over 2.8 million barrels per day (“bpd”) on a sustained basis. This flow is approximately 400,000 bpd more crude oil than the maximum effective Mainline System capacity claimed by Enbridge during the L3RP evidentiary hearings of 2.4 million bpd. It is also more oil than the net increase in capacity that would be provided by the Line 3 Replacement Project (“L3RP”) of 370,000 bpd, should it be constructed.
The petition goes on… “The evidence presented herein shows that:
Enbridge started its effort to add capacity to the Mainline System in 2016, before the L3RP evidentiary hearing;
Enbridge was able to transport 2.6 million bpd in November 2017, at the time of the evidentiary hearing, approximately 200,000 bpd more oil than its experts claimed was possible;
Enbridge continued its capacity addition efforts during the remainder of the L3RP hearing process; and
Enbridge is continuing to this day to add capacity through upgrades and efficiency improvements.”
And notes also:
With regard to its ongoing capacity addition efforts, Enbridge seeks to further increase Mainline System capacity through its imminent capacity additions to Lines 4 and 67. In August 2020, the Wisconsin Department of Natural Resources issued a public notice of an air pollution permit application stating that Enbridge intends to increase the flow of crude oil through Lines 4 and 67 by a total of 178,400 bpd through efficiency-based measures. Once these capacity additions come online, the Mainline System would be able to transport approximately 600,000 bpd, a 25 percent capacity increase relative to the 2.4 million bpd cap claimed by Enbridge in the L3RP evidentiary hearing. Yet to Honor the Earth’s knowledge, Enbridge has not reported these completed and planned capacity increases to the Commission. Given that all of the quantitative need and apportionment data submitted by Enbridge in the L3RP docket (Docket No. PL9/CN-14-916) capped future Mainline System capacity at 2.4 million bpd through 2035, the fact that Enbridge now has the undeniable ability to ship more than 2.8 million bpd, and will shortly be able to ship approximately 3 million bpd, casts significant doubt on the efficacy of Enbridge’s forecasts. Since the Commission in Docket PL9/CN-14-916 did not consider the need for pipeline capacity beyond the 370,000 bpd of net capacity that would be provided by the L3RP, Enbridge through its efficiency-based capacity additions has apparently already met the commercial need for which the Commission approved the L3RP, and it will soon create additional capacity that will significantly exceed this need. The remarkable amount of additional capacity created by 3 Enbridge through efficiency improvements, optimization, and upgrades to existing pipelines has dramatically impacted the need for construction of a new pipeline.”
And just like that, we realize there is no longer a need for Line 3. Especially not when the still have another ~350K bpd in expansions they’re holding close to the vest… as this Attachment G figure from the Complaint and Petition for Investigation shows:
…the petition filed by Honor the Earth claims that capacity additions made by Enbridge between 2016 and 2019, including to lines 2, 4 and 65, have allowed the company to import an additional 400,000 barrels through Minnesota per day.
Honor the Earth also points to expansions to Lines 4 and 67 that would increase capacity by 178,400 barrels of crude oil per day.
Coupled with a decreased demand for Canadian crude oil due to COVID-19, the petition claims that the existing expansions outweigh the need for the Line 3 project, which it says would bring in 370,000 barrels per day.
“Together, these efficiency-based expansions create far more capacity than would be provided by the proposed Line 3 Pipeline’s net capacity increase of 370,000 bpd,” said Paul Blackburn, staff attorney for Honor the Earth, in a statement. “As a result, Enbridge has already met the need that formed the basis for the PUC’s approval of the Line 3 Replacement Project.”
Bottom line, Minnesota need not let Enbridge tear through Northern Minnesota Indian Country to put in a pipeline… especially not during a pandemic that is exploding up here in recent weeks.
If they move forward – ignoring the petition… it would seem that the Minnesota Public Utilities Commission could – without TRUE consideration of DEMAND – force Minnesotans to pay for the installation of this new pipeline! [We all do pay for it as the oil companies are guaranteed a profit, meaning gas prices will be going up to justify the cost of the build… if it happens. It always amazes me how Enbridge can convince people that putting in a new pipeline will help them keep gas flowing… but never explains that, in order to make tar sands gas affordable, we’ll all be paying MUCH higher prices at the pump.]
This chart makes it pretty easy to see that Enbridge was lying. And… Enbridge isn’t denying the charges!
Calgary-based Enbridge said it has been adding capacity to its “mainline” across Minnesota through various improvements.
“There have been several initiatives that Enbridge has implemented in recent years to optimize its pipeline network to better meet customer demands,” the company said in a statement. “We’ve talked about these optimizations and efficiency-led capacity increases in a variety of public forums.”
AP reports Enbridge does not deny these increases to capacity. 10/30/20
While Enbridge’s website says nothing of this latest monkey wrench, they have posted about the great benefits they just delivered to North Dakota: “About 400 construction workers recently packed up their tools and departed the northeastern corner of North Dakota. What did they leave behind? A state-of-the-art energy pipeline—and plenty of community prosperity.” What?!? No mention of the COVID spike now killing North Dakotans? Wonder if the grieving will still find Enbridge’s work “worth it” when they realize the expenses of caring for their sick and burying their dead. Will those few weeks of Enbridge workers buying things in your store or spending money on your rental cover the cost of a casket?
Since August, when Enbridge work started in North Dakota, we’ve seen COVID escalate rapidly in the state:
And this weekend Bismark Tribune reported: “Seven counties — Cavalier, Griggs, Pembina, Ramsey, Rolette, Ward and Wells — posted record single-day new cases.” Pembina houses the Line 3 project and Cavalier is just next door. Thus far, Pembina has not reported any Covid dead.
What we know: Enbridge lied.
What we don’t yet know: How many will die because of their lies?
This blog will focus on a report released 10-29-19 by the Michigan Attorney General’s office: An Analysis of The Enbridge Financial Assurances Offered to the State of Michigan On Matters Related To The Operation of The Enbridge Line 5 Pipeline At the Straits of Mackinac.
This is perhaps the best written coverage on the report’s release. And this covers the Enbridge response more recently.
Summary: This report concludes that Enbridge’s financial ability to pay for response costs and property and personal injury damages arising from a rupture of Enbridge Line 5 at the Straits of Mackinac may be inadequate. [I know. Shocker.] It also suggests what actions Enbridge can take to reassure Michiganders of their financial capability but concludes that – if not now, then in the future – Enbridge faces a likely inability to secure the needed environmental insurance due to the excessive risks associated with Line 5.
In 20 short
pages, the report clearly expresses the fallacy of Enbridge’s current business
model and questions their ability to financially support the full lifetime
requirements of their Line 5 pipeline, including removal after decommissioning.
So let’s begin. My goal is to highlight portions of the report (in italics; bold additions are my highlights) to give a condensed version with added explanation (from my perspective at least) of what it implies specifically for our Line 3 opposition here in Minnesota. [My definition of “condensed” may be debatable. Huge kudos to David Dybdahl for this fine work]
Hint: For a quicker read, skim the italics, reading the bold portions, and then read my commentary in plain text. This should give you the basics. [Dan says that you can also just read the stuff I wrote and get the gist of it all.] Update: Scott Russell covers this concern in regard to Enbridge’s proposed Line 3 project in this Healing Minnesota Stories blog.
Section I Executive Summary
To avoid unfunded response costs and property and personal injury
damages arising from a rupture of Enbridge Line 5 at the Straits of Mackinac (Straits), the State of Michigan, the Michigan Department of Attorney General,
the Michigan Department of Environment, Great Lakes, and Energy and the
Michigan Department of Natural Resources (the State) has commissioned this risk financing analysis to evaluate the ability
of Enbridge companies to pay for the costs and damages that a rupture of Line 5
This report presents an analysis of the current and future ability of
various Enbridge companies to pay up to $1.878 billion in U.S. dollars for
costs and damages arising from the potential release of petroleum products from the 66-year-old, Enbridge owned and
operated, dual pipelines running under the Straits of Mackinac (Line 5).
In 1953 the State of
Michigan granted an easement to a U.S. subsidiary company of Enbridge, Inc. to
build and operate two pipelines under the Straits of Mackinac. Enbridge, Inc.
is a Canadian company with global operations. Enbridge, Inc. is not a party to the Easement, only the company
that was granted the Easement (Grantee) and its successors are obligated by its
This is the same as in Minnesota. Enbridge, Inc. seems to be the lead for this project but Enbridge Energy, Limited Partnership is the entity that applied to the Minnesota Public Utilities Commission for a Certificate of Need. So Minnesota faces this same risk Michigan would face from Enbridge, Inc. using a subsidiary for the application of Line 3. UPDATE: After a review with PUC and their Orders for the Compliance Filing, Certificate of Need, and Route Permit Orders, there ARE provisions made for Enbridge, Inc. to be a signatory for Line 3 liabilities (though I’m not sure of the exact mechanisms for making this work…). However, I also learned this from a fellow activist:
Enbridge’s primary means of funding spill cleanup costs is by passing on the costs of cleanups to its customers, which it is allowed to do under federal tariff law. For example, it appears that little to no amount of the costs of cleaning up the Line 6b Kalamazoo spill came out of Enbridge’s bottom line. About $500 million was recovered through insurance, and most if not all of the rest of the spill cleanup costs were included as operating costs and reimbursed through its customers’ tariff payments. In a way, Enbridge’s insurance isn’t meant to protect Enbridge’s wealth, but rather to limit the impact of a spill on the tariff rates charged to Enbridge’s customers. Federal tariff law determines the fee that Enbridge may charge for its services, and this fee is set at its costs of operation plus a guaranteed profit (~10%). Enbridge’s reports to the Federal Energy Regulatory Commission (FERC) make clear that it included the costs of the Line 6b spill under the “Casualty and Loss” category of its operating expenses over the course of a number of years following the spill. Enbridge’s customers (the western Canadian oil industry and US oil industry that imports crude oil on the Mainline System) then pass the costs of transporting oil on the Mainline System to their customers – meaning consumers.
This does not mean there is no risk that a spill might not be cleaned up, because as the oil industry weakens it is possible that it will seek to avoid paying for major spill cleanup costs. Also, regardless of its ability to pass on oil spill cleanup costs, Enbridge Inc. should be held liable for any harm caused by its subsidiaries.
The cost of mitigating abandoned pipelines is an entirely separate matter, and no state or federal law requires that Enbridge set aside funds to pay for abandonment costs. Since most of Enbridge’s pipelines could be kept in operation until near their end-of-life, it is possible that Enbridge could under existing law avoid liability for most if not all abandonment costs.
The goal of Enbridge’s shareholders will be to strip Enbridge of its assets for their benefit before these assets can be dedicated to remediation of abandoned facilities.
So basically what this says is, insurance is only to protect Enbridge assets and to give some relief to consumers who truly are left paying the bills for cleanup, regardless. But the insurance stuff is interesting, nonetheless. [For geeks like me anyway.]
The 1953 Easement does not have a provision for using the assets of the Signatories, which is essentially self-insurance, to backup the indemnity requirements. To the contrary, the 1953 Easement makes specific reference to requiring the Grantee and its successors to maintain comprehensive general liability insurance, bonds or surety on the dual pipelines. In 1953 none of these specified financial instruments would have contained pollution exclusions. The effects of pollution exclusions are accounted for in our recommended insurance requirements.
The report include excellent insurance recommendations that Minnesota should consider for our approval for Line 3. We’ll get to the specifics on that later.
Upon analysis of the
financial resources of Enbridge, Inc. in August of 2019, we find that Enbridge,
Inc. currently has the capability to fund $1.878 billion for the potential
damages caused by a petroleum product release from Line 5. However, we do not recommend the acceptance of
Enbridge, Inc. assets as evidence of Financial Assurance unless Enbridge Inc.
becomes a signatory to The Agreements with the State.
And here’s why…
Due to the corporate structure of Enbridge, Inc., only the assets of
the Signatories are obligated by The Agreements. We have reached this conclusion based on the sworn November 9th, 2018
testimony of Mr. Chris Johnston. That
testimony was provided in an evidentiary hearing for the Minnesota Public
Utilities Commission (PUC). The PUC hearing pertained to the siting of a
new Enbridge Line 3 which is not
related to Line 5.
insights into the corporate structure of Enbridge that is directly related to
Line 5 can be gleaned from this testimony. Mr. Johnston is the Chief Financial
Officer of Enbridge Energy Partners, L.P. Enbridge Energy Partners L.P. is the
largest U. S. based operation of Enbridge, Inc. and is an actual Signatory to
the Agreements. Enbridge Energy Partners L.P. is also the successor company to
the Enbridge company that was granted the Easement in 1953. As the CFO of the U.S. operations of
Enbridge, Inc. and the lead Signatory to the Agreements, Mr. Johnston is a
credible expert on the company structure of Enbridge, Inc. and its U.S.
In the Minnesota PUC hearing, Mr. Johnston testified that Enbridge, Inc. is not contractually obligated to stand behind the indemnity agreements of a subsidiary.
The Signatories and
the flow of revenues and liability within the Enbridge corporate structure is
detailed in the schematic in Appendix A. What this schematic shows is that while revenues flow up to the parent
company of a subsidiary, liabilities stay at the subsidiary level. This is the
typical corporate structure of a parent company with operating subsidiaries and
is reflective of Enbridge, Inc. and its subsidiaries.
What all this is saying is that, since the agreement with the state of Michigan is with U.S. subsidiaries of Enbridge, Inc. (not Enbridge, Inc. itself), the only thing that would force Enbridge, Inc. to support any failure of Line 5 in Michigan would be the good will of the executives at Enbridge, Inc. deciding to support the cleanup and repair. (I believe the 2017 closure of the nursing home in Clearbrook, Enbridge’s Minnesota company town – just before Christmas no less, with absolutely no intervention by Enbridge, Inc. and their tremendous piles of money to save it, shows just how little they might care for the state of Minnesota as a whole.)
Based on the last historical publicly available financial information
on the Signatories, which is found
in the 2018 September 10-Q of Enbridge Energy Partners L.P., the Signatories did not have $1.878 billion
in liquid assets, credit facilities and insurance for the damages arising from
a rupture of Line 5.
Which means it is unlikely that Enbridge Energy, Limited
Partnership will have the financial capability to cover any damages posed by
Line 3 either, as they would require much more to cover liabilities for both
pipelines. And this leaves nothing for concerns
on any of the other pipelines currently under Enbridge management throughout
The liquid financial
resources of the Signatories based on September of 2018 10-Q information are
shown in Appendix C. We used September 2018 for this comparison of assets
between the Signatories and Enbridge Inc. because it is no longer possible to evaluate the financial resources of
Enbridge Energy Partners L.P. using publicly available information.
Partners, L.P. no longer produces its own financial statements for public
review. As described in the Enbridge, Inc. 2018 10-K, an unnamed wholly owned
subsidiary of Enbridge, Inc. purchased all of the stock of Enbridge Energy
Partners, L.P. at the end of 2018. At that point in time Enbridge Energy
Partners, L.P. became a wholly owned subsidiary of Enbridge, Inc. Because there
would be no further public trading in the stock of Enbridge Energy Partners,
L.P., the subsidiary no longer produces its own 10-K or 10-Q reports for the
U.S. Securities and Exchange Commission.
Since Michigan has no visibility to Enbridge Energy Partners, L.P. (EEPLP) financials, it will have to rely on another means to assure continued financial liability coverage for a spill on Line 5. Minnesota Pollution Control Agency (MPCA) indicates on its webpage for Line 3 that “Enbridge Energy, Limited Partnership” (EELP) has applied. Every search for this entity brings me back to EEPLP. I’ve got a call in to see if these are indeed one in the same but later in this report, it notes that all Signatories are U.S. based subsidiaries and both EELP and EEPLP are listed above.
We noted that in
October 2019, the assets of Enbridge,
Inc. were used in the Financial Assurance Verification Form supplied to the
State as required under the Second and Third Agreements. However, Enbridge, Inc. is not a party to the
1953 Easement or a Signatory to the subsequent Agreements. Based on the
testimony of Mr. Johnston, the
contribution of funds under an indemnity agreement made with a subsidiary would appear to be to be a purely voluntary
endeavor for Enbridge, Inc.And THERE IT IS! It would be VOLUNTARY for
Enbridge, Inc. to cover costs of a spill, but not legally required.
We did not evaluate
the cost recovery provisions in the environmental laws of the United States in
the light of foreign corporation status of Enbridge, Inc. for this report. [This
may be a future endeavor but would have likely make this document much longer
and exponentially more complex.]
Based on our research
for this report, we recommend
enhancing the indemnity obligations for the operators of Line 5 at the Straits.
To accomplish this goal, in summary we recommend:
1. Obtaining an indemnity obligation from
Enbridge, Inc., the Canadian based holding company of the Signatories to
the Second and Third Agreements.
2. Being more specific on the source of the information to be provided on the Financial
Assurance Verification Form, which was agreed to in the Second and Third
3. Requiring more specific types and amounts of
liability insurance on the dual pipelines, with the State named as an
Additional Insured on those policies. 5
4. Develop a pre-agreed upon process to
eliminate the loss exposure arising from Line 5 operation if the available prescribed assets of the Signatories dip below $1.878 billion U. S.
dollars at any point in the future.
5. Based on more
recent third-party projected cost studies, further
evaluate the adequacy of the $1.878 billion minimum level of financial
What this is proposing is to make Enbridge, Inc. legally liable for a Line 5 spill into the Straits of Mackinac, to assure that proper financial verification can be made of the protections offered by those liable to Michigan, and to assure liability coverage even if their assets lose value in the future. The level of need for cleanup is uncertain as estimates were (on the low end, from Enbridge) $300K to as high as $45B (yes, billion, from a Michigan State University study) – quite a range! More details to follow but we’re through the Summary!!! 🙂
Section II Our Scope of Work
ARMR.Net has been
directed to evaluate if Enbridge entities have the resources to pay up to
$1.878 billion for the costs and damages caused by a release of petroleum
products from the dual pipelines at the Straits of Mackinac.
To this end this
1. Evaluate the risk bearing capacity and
financial resources available to respond to, remediate, and pay
compensation for all damages that could result from a worst-case release of
petroleum products from Line 5 at the Straits of Mackinac and to satisfy the indemnification obligations
under the 1953 Easement and subsequent Agreements.
2. Evaluate the adequacy and reliability of
the Financial Assurance Verification Form provided by Enbridge business
entities to the State of Michigan in 2019 and, to make recommendations to
create a reliable and resilient Financial Assurance Verification Form,
including detailed insurance specifications.
3. Provide perspective on the scope, adequacy,
and dependability of the indemnity obligations assumed by the Grantee of the
4. Provide perspective on the projected
ability of Enbridge business entities to satisfy the indemnity agreement to the
State of Michigan over the next 7 to 10 years.
Basically, this will be a review of all the numbers. The work will show that Michigan currently lacks an agreement that will financially support a spill and the report will explain exactly how this can be remedied. I love item 3, which will question whether the original agreement was sufficient to cover a loss. But my favorite is item 4, where the report shines the light on Enbridge’s business untenable model.
Section III Findings
Our findings are:
1. Estimates on the
potential costs arising from a release of petroleum products from Line 5 at the
Straits range from an Enbridge supplied estimate of $300 million, to a $1.878
billion estimate from the Independent Risk Analysis for the Straits Pipeline
analysis, to a $45 billion estimate from a Michigan State University study on
the projected costs.
Our report does not
analyze the accuracy or reliability of the various potential cost estimates of
a petroleum product release from Line 5. However, the range of possible damage
costs arising from a release of petroleum products from Line 5 strikes us as
extremely broad, and $1.878 billion is on the low end of the possible range.
The higher range cost studies appear to have been prepared after the $1.878
billion financial assurance threshold amount was agreed to in the Second
Agreement. In light of the wide range of
possible damage costs in the various studies, we question the reliability of
the $1.878 billion risk funding target used for this study. But we offer no
opinion on the $1.878 billion being the right amount.
2. If Line 5 ruptured today, Enbridge, Inc. has the financial capacity to voluntarily pay up to $1.878 billion to fund an environmental clean-up and to compensate victims. However, based on the historical financial records, the U.S. based Signatories would not have enough resources to fund a loss event of this magnitude; without a voluntary financial bailout from the Canadian parent company.
3. With 275 operating
subsidiaries listed in the Enbridge, Inc.’s 2018 10-K report, the Enbridge corporate structure enables the
Canadian holding company Enbridge, Inc. to avoid liability for the U.S. based
subsidiary’s liabilities. The original Grantee of the 1953 Easement was
required to indemnify the State. All of
the Signatories to the 1953 Easement and the First, Second and Third
Agreements are U.S. companies.The State of Michigan is not contractually
indemnified by the Canadian company Enbridge, Inc.
In the absence of a
contractual indemnity from Enbridge, Inc. only
the assets of the obligated parties (The Signatories) should be used for the
completion of the Financial Assurance Verification Form.
The financial resources of the U.S. based Signatories are impossible to
verify using publicly available information because after 2018 these companies no longer file 10-K or 10-Q
financial statements. The Signatory
companies are 100% controlled subsidiaries of Enbridge, Inc. today.
Therefore, receiving an indemnity
obligation from Enbridge, Inc. is essential to facilitate objective
verification of the $1.878 billion of financial resources based on publicly
available financial reports.
4. The Financial
Assurance parameters agreed to in the Second and Third Agreements lack the
specificity to be accurate, reliable and easily verifiable by a third party.
Therefore, we recommend modifications to the metrics used in the 2018 Financial
Assurance Verification Form as shown in Appendix C.
5. The Enbridge business model is facing new
challenges that could affect the ability of the firm overtime to pay for
clean-up costs and other damages caused by a release of petroleum products
from Line 5 at the Straits.
Even among its peers
in the oil and gas business, Enbridge,
Inc. and its Subsidiaries face unique risks and challenges in their business
model which have the potential to adversely impact the risk bearing ability
of the firm over time.
These risks and challenges include:
To earn its profits, Enbridge transports
crude oil that is primarily extracted from tar sands in northern Alberta.
Crude oil extracted from tar sands (bitumen) has a unique set of environmental
issues not associated with other sources of crude oil. The extracted synthetic
crude oil is transported through thousands of miles of high-pressure pipelines,
some of those lines, like Line 5, are at the end of their useful life cycle and
need to be decommissioned or removed and replaced. Although Line 5 does not
transport tar sands derived crude oil, the overall business of Enbridge, Inc.
is heavily weighted to transporting tar sands derived products. The general financial well-being of
Enbridge, Inc. and therefore its ability to pay for the costs and damages
caused by petroleum releases through self-insurance is heavily dependent on the
market viability of tar sands oil.
To reach consumer markets, the Enbridge
lines run across land in the United States that is subject to American Indian
treaty rights. Resistance to the use of tar sands oil by nongovernment organizations
including Native Americans, is making maintaining and replacing old lines or
creating new routes for existing lines across lands subject to treaty rights
increasingly difficult for the company.
The U.S. demand for tar sands derived
crude oil is expected to decrease over time. Most of the historical sales
of tar sands derived oil has been to consumers in the United States. However, new forms of extracting oil, including
fracking, has created an excess supply of crude oil and natural gas in the
United States. Tar sands derived oil competes in a global market for crude oil.
Many producers of crude oil have lower production costs, have lower
transportation costs to bring crude oil to the market of end users and have a
smaller total carbon footprint per barrel than tar sands derived oil.
With the U.S. market saturated with local supply, the Enbridge, Inc. 2018 10-K references
future plans to supply crude oil to India and China. These countries are a
long distance from the tar sands of Alberta. The distance to these consumer
markets add transportation costs and
carbon footprint loading to tar sands derived crude oil that the competitors of Enbridge entities
do not have.
These risks and
challenges entwined within the Enbridge business model cannot be eliminated
through good management of its core business. We expect that over time these operational challenges in
the Enbridge business model will have an even greater impact on the financial
results of Enbridge entities in a carbon constrained world, which in our
opinion is likely. Although Enbridge, Inc. could self-insure a $1.878 billion
petroleum product clean-up in the Straits this year that does not mean the
company will be able to do so in the foreseeable future. Therefore, it will be necessary for the State of
Michigan to monitor the financial condition of the relevant Enbridge business
entities annually over the operational life of Line 5 through the Straits.
What all this says is that, while the costs of a spill are not clear, the ability of Enbridge, Inc. to cover these costs, now and over time, is questionable. In light of the fact that only the subsidiaries are currently legally liable, and their financials are no longer publicly available, revision of the financial reporting must be aligned to capture the proper data. This can be enhanced with insurance underwriting which will be discussed in more detail below.
But the most relevant portion of this to Stopping Line 3 in
Minnesota is bullet 5 which questions the viability of Enbridge’s business
model in light of our changing socio-economic and environmental situation here
on planet Earth.
1) Enbridge’s overwhelming reliance on Tar Sands shipments will hinder its financial well-being. This is due to multiple factors including: a) science dictates that Tar Sands must remain in the ground to assure future human habitation on planet Earth, b) the cost structure for this dirtiest of crudes makes it less attractive as oil prices drop, c) the social uprising against fossil fuels in general and Tar Sands in particular are pushing the end for extraction, especially in Alberta’s Tar Sands region. It should be noted that Line 5 is not restricted from carrying synthetics derived from Tar Sands, which carry their own inherent dangers and are allowed to transport on the line.
2) Enbridge’s current pipelines cross Treaty Territories in the U.S. bringing resistance and opposition from NGOs and Tribes as a) environmental dangers increase (The Line 5 lawsuit by the Bad River Band of Lake Superior Chippewa is a very example and a good read with lots of photos and explanation of the environmental risks of pipelines at river crossings), b) easements expire (Bad River Bad also is a reference for this as their easement expired in 2013, a fact that Enbridge has continued to ignore…), and c) Tribes invoke their sovereignty (Winona LaDuke speaks to a recent White Earth’s cease and desist to Enbridge regarding Line 3 work).
3) U.S. demand is decreasing while global demand still
rises. However, the insanity of trying
to compete against crude with Tar Sands crude is not cost-justified or
carbon-justified. And the prospect of
moving oil from Alberta, Canada east to China/India through the U.S. Midwest is
just plain nonsensical when the trip to the west is so much shorter.
“No amount of compensation is worth risking Wenji-Bimaadiziyaang – an Ojibwe word that literally means ‘From where we get life.’ It’s time to end the imminent threat the company is presenting to our people, our rivers, and Gichi-Gami [Lake Superior]”, Chairman Mike Wiggins said. Bad River turned down a $24 million offer from Enbridge in October. It appears that if a tribe takes money, (ie: says yes in consultation), Enbridge will bestow gifts. If “consultation” means “no”, Enbridge will sue the tribe. That seems fair, right? At some point No should actually mean No. Consultation is not the same as consent, and the human rights standard internationally is “free, prior and informed consent”. Simply stated, No means No, if you are a woman, or if you are a First Nation. Consent is the standard of this millennium.
Powerful statement regarding the value of money versus the value of water and the importance of consent.
Section IV Background Information on Enbridge Operations and The
Obligations To The State of Michigan
Enbridge, Inc. is one
of the largest firms in Canada. It has a complex corporate structure listing
275 operating subsidiaries in its 2018 10-K report to the U.S. Securities and
Enbridge, Inc. is a
profitable company, earning approximately $2.475 billion U.S. in profits and
generating $7.877 billion U.S. in cash in 2018. We will be using Canadian
dollars to U.S. dollars at a conversion rate of .75 for simplicity in this
The core business of
Enbridge is highly dependent on the market demand for tar sands derived oil. We
did note in conducting the research for this report that the future business forecasts for Enbridge
tend to focus on the future supply of tar sands derived oil with little or no
mention of the future demand for this source of fossil fuel.If demand for tar sands derived oil
decreases over time, the ability of Enbridge to self-insure for damages
resulting from a rupture of Line 5 would also decrease, potentially relatively
The History Of The
Indemnity Obligation In The 1953 Easement and, The First Agreement, Second
Agreement and Third Agreement (You can read this section in the report in
full but much of it is non-related to Line 3 in Minnesota. I’ve retained the
portions that felt most applicable or relevant.)
On April 23, 1953 the
State of Michigan and Lakehead Pipeline Company, Inc. (Lakehead) a subsidiary
of Enbridge, Inc. in Canada entered into an Easement that allowed Lakehead to
construct, lay and maintain pipelines over, through, under and upon certain
lake bottom lands for the purpose of transporting petroleum and other products.
Per the 1953 Easement,
in paragraph J., Lakehead agrees to indemnify and hold harmless the State of
Michigan “from all damage or losses caused to property (including property
belonging to or held in trust by the State of Michigan), or persons due to or
arising out of the operations or actions of Lakehead, its employees, servants
Within Paragraph J. of
the 1953 Easement, Lakehead agrees to the following relative items for this
1. Maintaining a
comprehensive bodily injury and property liability policy, bond or surety in
the amount of at $1,000,000, and
2. A surety bond in
the sum of $100,000 that is in force for the life of the agreement.
Both of these items
must be in place for as long as Lakehead and its successor companies operate
the pipelines and until the abandonment of the Dual Pipes installed across the
Straits is completed.
There have been multiple name changes, consolidations and mergers in
the Enbridge business operations over the years. Appendix A provides a Corporate Organizational Chart showing current
and historical Signatories to the Easement and subsequent Agreements. The
schematic also shows how profits and liabilities flow through the Enbridge
organizational structure. Typical of
corporate structures involving a parent company and subsidiaries, profits flow
upstream to the parent company and liabilities stay planted at the subsidiary
The Second Agreement
included a provision addressing Paragraph J. … To address the indemnity
requirements in the 1953 Easement the Enbridge Signatories agreed to provide
assurances that it had and would maintain $1.878 billion of liquid financial
assets to pay for an oil spill from Line 5.
It should be noted
that under the 1953 Easement there is no mention of using company
self-insurance, in lieu of liability insurance, a bond or surety to back up the
indemnity obligations in the lease. The $1.878 billion U.S. dollar threshold
amount was the estimated quantifiable damages from a most likely worst-case
scenario found by the Independent Risk Analysis for the Straits Pipelines.
Enbridge agreed to provide evidence of the minimum of $1.878 billion in liquid
assets to the State on a Financial Assurance Verification Form. See Section VI
of this report for a discussion on this form.
In the first Financial Assurance Verification Form supplied by Enbridge
representatives, the assets of Enbridge, Inc. were used to show that the
Signatories to the Agreement had liquid assets to meet the $1.878 billion threshold amount of financial resources as
set forth in the Second Agreement. As previously noted, Enbridge, Inc. is not obligated by contract to the State of Michigan to
contribute any money to an oil spill in the Straits of Mackinac.
The history of Line 5 in Michigan should be a warning to Minnesota. The bottom line is that U.S. Subsidiaries of Enbridge, Inc. are largely responsible for the liabilities of the pipelines in the state while all the profits go to the parent company, Enbridge, Inc., which remains legally free-and-clear based on the agreements with the state. Minnesota would do well to consider some of the recommendations in the remainder of this report, should Line 3 continue to proceed toward approval. The recommendations from Michigan should be considered as a part of the approval process for Line 3, not an afterthought to be dealt with once construction has started.
Section V Recommendations
1. The State of Michigan needs to obtain an
indemnity agreement from Enbridge, Inc. in Canada to pay for all costs and
damages associated with a potential rupture of Line 5. It is not
insignificant that Enbridge, Inc. is a foreign corporation based in Canada.
Money held in Canada may not be as accessible as assets held by a company in
the U.S. would be. We have not investigated or evaluated the complications that
Enbridge, Inc. being a foreign corporation may create in an indemnity agreement
with the State of Michigan.
2. The Financial Assurances Verification Form
with our recommended metrics should be evaluated by the State at least
annually, and should the Signatories fail to provide the required amount of
Financial Assurances at any point in time, a clear path to the elimination of
the hazard associated with operating Line 5 should be predetermined and agreed
upon. A recommended revised Financial Assurance Verification Form is
discussed in Section VI in this report and the evaluation metrics for
completing the Form are provided in Appendix C.
3. The recommended amounts and types of Liability Insurance including modern and verifiable insurance requirements are Shown in Section VII.
4. In light of the
more recent studies on the projected damages costs resulting from a rupture of
Line 5 at the Straits, the $1.878
billion financial assurance threshold requirement should be reevaluated.
In our opinion, $1.878
billion as the threshold amount for financial assurance appears based on the
available studies to be on the low end of the range of potential damage costs
resulting from a rupture of Line 5 under the Straits. There are economic impact
studies from 2018 concluding that the damages incurred from a rupture of Line 5
at the Straits could cost $45 billion including cleanup costs, natural
resources damages and economic damages. In
sharp contrast, Enbridge representatives estimated the clean-up cost of a Line
5 rupture at only $300 million, which represents a deviation in projected costs
of over 1300-fold at the $45 billion cost projection. We have not been
tasked with evaluating the reasonableness of the potential damage cost
estimates for a breach of Line 5 at the Straits of Mackinac, nor are we
qualified to do so. However, a 1300-fold differential between the high and low
cost estimates is too much of a range for a reliable risk financing planning
report. We have assumed $1.878 billion was the right number for our report but
have little confidence that is the right projected cost number given the wide
range of projected costs and where $1.878 billion falls within the range.
Again, all of these recommendations should be considered in
Minnesota as part of the Line 3 approval process. If necessary, Minnesota Attorney General
Keith Ellison can press for this same financial analysis and insurance review
prior to Line 3 approval.
Section VI Financial Assurance Verification Form
Paragraph J. in the 1953 Easement requires that the Enbridge
Signatories indemnify the State of Michigan and that the Signatories maintain
comprehensive general liability insurance, a bond or surety to back that
The 1953 Easement does
not mention the use of self-insurance to back up the indemnity obligation to
the State. The use of self-insurance was
agreed upon by the parties to the Second Agreement. In that Agreement, the
Signatories agreed to file with the State the Financial Assurance Verification
Form on an annual basis.
There is detail to the Enbridge financials provided – and to
be provided moving forward – in the appendices and detailed verbiage of the
report. What is to be kept in mind for Line 3 is a) what level of insurance
Minnesota will need (which should become more clear once the Supplemental
Environmental Impact Statement is released December 9, 2019 noting the impacts
to the Lake Superior watershed) and b) what legal indemnification Minnesota can
secure from Enbridge, Inc. for a potential spill.
Financial Assurance Verification Form Each Year
The financial assurances of the Signatories should be verified annually
from the information contained in audited financial statements. If Enbridge,
Inc. was a Signatory, the company’s 10-K report should be used to evaluate
compliance with the financial assurance requirements.
The evaluated criteria
in the Financial Assurance Verification Form are found in these areas of the
Enbridge, Inc. 10-K today:
1. Cash or equivalent
– Part 1, Section 1, Financial Statements: Consolidated Statement of Financial
2. Credit Facilities
(Available credit for the next 12 months) – Part 1, Section 1, Financial
Statements: Debt, Credit Facility
3. Accounts receivable
and other – Part 1, Section 1, Financial Statements: Consolidated Statement of
Financial Positions (accounts receivable and other)
4. Specified Insurance
– Specified insurance will be verified by referencing the Certificate of
Insurance that must be provided as shown in the recommended insurance
requirements in Appendix E.
If the Signatories are
not publicly traded in the U.S., an audited Statement of Financial Position for
the Signatory Enbridge company or companies could be used to prepare the
Financial Assurance Verification form.
The Property Plant and
Equipment Assets Are Not Useful Measures for Financial Assurance
Enbridge, Inc. does have assets owned by subsidiary companies in the
U.S. in the form of property, plant and equipment. These assets could
potentially be attached to satisfy a judgement against the firm. However, for
the reasons stated below, we have made no accounting of these fixed assets in
our evaluation of the ability of the Signatories to fund $1.878 billion in
losses as a result of a rupture of Line 5.
In our evaluation of
the financial resources available to the Enbridge Signatories to pay for oil
spills, we noted that generally accepted
accounting principles tend to overvalue pipeline assets and to undervalue the
environmental legacy liabilities of firms in the oil pipeline business. This
is especially true when a pipeline is not transporting oil to produce profits.
Pipeline assets like
other forms of fixed assets have a book value based on what was paid for the
pipeline, minus depreciation. In
contrast to most types of fixed assets, a pipeline permanently not pumping oil
has no value to anyone. In fact, the cash value of an idle pipeline can be less
than zero, if the costs to decommission or remove the idle pipes are taken into
account. Those kinds environmental
legacy costs for its U.S. subsidiaries are not being accounted for in
the Enbridge financial statements. This creates a situation where the book
value of a pipeline company’s assets is not reflective of their actual cash
market value. Cash and insurance proceeds are what is needed to pay for an oil
spill cleanup and other damages.
The future costs of removing idle pipelines from the ground are not immaterial and may be unavoidable new costs in the Enbridge business model in the near future. For example, in the negotiations over the replacement of Line 3 in Minnesota, the Public Utility Commission made the removal of the old Line 3 at the discretion of the landowners, a condition of the permit for the new Line 3. This is thanks, in part, to all us Water Protectors!!!
In another example of
pipeline removal costs, in a lawsuit filed by the Bad River Band of Chippewa in
Wisconsin, which is discussed further in Appendix J, the Band seeks the complete
removal of the existing Line 5 on their reservation.
The removal of pipes from the ground is expensive. Enbridge testimony in Minnesota on the
replacement of Enbridge Line 3 was that it costs on average $855 per foot to
remove pipelines from the ground14. At
$855 per foot it would cost approximately $23 billion to remove all the
Enbridge companies buried pipes in the U.S. alone. The $23 billion in potential
environmental legacy costs is not shown as a liability in the firm’s books, nor
is the firm required to do so by generally accepted accounting rules, or by the
U.S. regulations in effect on pipelines.
For these reasons, the value of property, plant and equipment,
as shown in the Consolidated Statements of Financial Position, 15 is not an accurate picture in time of the
firm’s ability to pay for environmental damages that it may cause as a
result of a rupture in Line 5. Therefore,
we have left the fixed assets of Enbridge businesses out of the Financial
Assurance Verification form.
Basically, your pipeline assets can’t be used to pay for a
pipeline spill. Additionally, they are
more of a liability than an asset as we move to a future that doesn’t include
Section VII Recommended Insurance
Insurance is an efficient financial mechanism to pay for otherwise
unaffordable loss events. One of the benefits of insurance from the State’s
perspective is liability insurance coverage survives the bankruptcy of the
named insured. In addition, the insurance underwriting process itself produces
a benefit for all the stakeholder’s in Line 5 by engaging global knowledge
sharing on the risks of pipelines through the international reinsurance
Pretty much speaks for itself. There is further clarification later on the
importance of the insurance underwriting process as a way to estimate risk.
Insurance Required In The 1953 Easement to Modern Insurance Coverage
liability insurance is a key component in the Financial Assurance Verification
Form. Ideally, 100% of the worst-case
loss exposure of Line 5 could be insured. However, there is likely not enough
liability insurance in the world to fund a $1.878 billion pollution loss
resulting from a rupture of Line 5.
Previous sworn testimony provided by Enbridge in Wisconsin and
Minnesota is that the firm purchases as much comprehensive general liability
insurance as it can in the world insurance marketplace. In the 2018 10-K report, that was $940,000,000 in general liability insurance.
We find this Enbridge testimony credible. Therefore, liability insurance with coverage for pollution releases from Line
5 can only supplement the other sources
of funds available to Enbridge entities to meet the agreed upon $1.878 billion financial assurance amount.
The scope of the recommended liability insurances and the annual
verification process of that insurance by the State during the operation of
Line 5 is addressed within the insurance recommendations in Appendix E. The recommended insurance requirements in
Appendix E take into account the 1953 Easement language requiring comprehensive
general liability insurance, and the general liability insurance that Enbridge
has testified in recent court proceedings that it carries today.
insurance requirements also encompass modern methods to verify the types and
amounts of liability insurance that Enbridge carries.
Enbridge has provided testimony in Wisconsin and Minnesota that the
information contained within the company’s insurance policies is a trade
secret. We respect that Enbridge would want to keep its trade secrets out of
the public eye and have accommodated Enbridge on this point in the insurance
recommendations. In place of an annual review of its actual insurance policies,
we recommend that the prescribed Certificate of Insurance as shown in Appendix
E be used to evidence the liability insurance carried by Enbridge, Inc. Providing a Certificate of Insurance to
interested parties is the customary way that evidence of insurance is provided
by businesses. The prescribed
Certificate of Insurance is designed to make the compliance with the insurance
requirements easy for the State to verify.
The Requirement for
Comprehensive General Liability Insurance In The 1953 Easement
The 1953 Easement
makes a specific (reference) to comprehensive general liability insurance. In
1953 “comprehensive” general liability insurance in the U. S. and Canada was
not referring to a specific insurance industry standard policy form. Also in
1953 there was no reference to coverage for pollution as a cause of loss in the
common general liability insurance policies sold to businesses in that time
frame. Pollution exclusions and exceptions to pollution exclusions in general
liability insurance policies developed decades later in the insurance business.
The title of “comprehensive” general liability insurance and having
coverage for pollution liability took on a specific meaning in 1973. In that year the Insurance Services Offices
(ISO), the largest standard policy form setting organization in the U.S.,
created the ISO Comprehensive General Liability insurance policy form as the
new industry standard general liability insurance policy.
In addition to a new
official name for the policy, there were a number of changes in coverage that
were incorporated into Comprehensive General Liability policy form. One the most significant changes to the
industry standard Comprehensive General Liability policy was a new exclusion
for losses arising from the release or escape of pollutants was added to
the policy. The pollution exclusion in the policy had an exception built into
it, the exclusion would not apply if the
release or escape of pollutants was sudden and accidental.
In 1973 for the first
time in history, Comprehensive General Liability insurance with coverage for
sudden and accidental pollution liability took on specific meaning in the
The scope of Enbridge, Inc.’s general liability insurance coverage for
sudden and accidental pollution liability was the subject of legal proceedings
in multiple Wisconsin courts for over three years. A core issue in these legal proceedings was does Enbridge carry
general liability insurance that meets Wisconsin Statute 59.70 (25). This
statute prohibits a county in Wisconsin from requiring additional insurance on
an interstate pipeline if the pipeline company carries the requisite insurance
as specified in the statute.
The Wisconsin statute
LIQUID PIPELINES. A county may not require an operator of an interstate
hazardous liquid pipeline to obtain insurance if the pipeline operating company
carries comprehensive general liability insurance coverage that includes
coverage for sudden and accidental pollution liability.” (emphasis added)
The underlined part of
this statute is an exact match to the ISO Comprehensive General Liability
insurance policy in both name and scope of coverage for sudden and accidental
pollution liability. This is the only industry standard general liability
insurance policy that provides an exact match to the Wisconsin statute.
After more than three years in multiple Wisconsin courts, on June 27, 2019, based on the sworn
testimony of Enbridge representatives that the company carries liability
insurance that meets the requirements of this statute, the Wisconsin Supreme Court ruled that Enbridge carries the insurance
specified in Wisconsin Statute 59.70 (25).
To avoid years of potential litigation in Michigan courts over the
scope of Enbridge’s trade secret comprehensive general liability insurance
coverage, the recommended insurance requirements for Line 5 as shown in
Appendix E specifically mirror the scope of insurance coverage required in
Wisconsin Statute 59.70 (25).
The remainder of this section gives further insight to Comprehensive
General Liability insurance and its coverage.
While I retained the detail in the top portion of this section, you can
refer to the report for those additional details. I felt the reference to “trade secret”
insurance, which has been a concern regarding Line 3, was critical. Though I have not researched the MN
requirements, there is likely more to be learned from Wisconsin as we proceed
with a review of the Line 3 application.
It is common practice
for large companies like Enbridge to purchase insurance policies that cover all
of the company’s operations. This practice introduces the possibility that a loss in Canada for example could exhaust
the available insurance coverage for a subsequent loss at Line 5. The
recommended insurance requirements anticipate this contingency.
We recommend that Enbridge, Inc. must at all times maintain a minimum
of $300,000,000 of recoverable insurance limits including coverage for sudden
and accidental pollution releases arising from Line 5 at the Straits. Within
that $300,000,000 of liability insurance at least $25,000,000 must be in the
form of Environmental Impairment Liability insurance. Enbridge, Inc. may use a combination of ISO
Comprehensive General Liability with sudden and accidental pollution liability
and Environmental Impairment Liability insurance coverage to meet the insurance
requirements set forth in Appendix F. The $300,000,000 of recoverable insurance
limits can be specific to Line 5 at the Straights.
Ideally, we would require $1.878 billion in Environmental Impairment
Liability insurance to cover a
rupture in Line 5 and not be dependent upon a General Liability insurance
policy that excludes pollution unless the pollution event is sudden and
accidental, or relying on self-insurance in any way to back up an indemnity
obligation to the State. However, the
global insurance marketplace for genuine environmental insurance does not have
$1.878 billion in capacity. Our recent survey of the insurance marketplace
for genuine Environmental Impairment Liability insurance showed market capacity
was just over $400,000,000 in potential limits of liability. Not all of that
environmental liability insurance would be available for purchase on a crude
oil pipeline. The recommended insurance
requirements reflect the practical constraints in the global insurance business
and are designed to be achievable.
So what this says is that there is NO WAY for Enbridge to buy liability insurance for the total cost of a spill that would exceed the $400M limit of available liability insurance worldwide. Thus, the recommendations request a level of insurance that is achievable, not what is truly needed. 😦
Impairment Liability Insurance Is Required in Addition to Comprehensive General
Impairment Liability insurance fills the coverage gaps created by pollution
exclusions in general liability insurance policies.
[Again, this verbiage is a bit of extra but it is highly
informative of the history of this kind of insurance. And, it is key to understanding how Minnesota
will need to work to protect itself from being left holding the bag for an
The general liability
insurance policies sold in 1953 did not contain pollution exclusions.
Therefore, any general liability insurance policy that has a pollution
exclusion of any type would not fulfill the minimum insurance requirements in
the 1953 Easement calling for “comprehensive general liability”.
Since the early 1970’s, virtually all general liability insurance
policies in North America, including Canada, have contained pollution
exclusions.Therefore, to meet an insurance specification written in 1953 for
general liability insurance on a pipeline which would have been silent on
pollution as a cause of loss, it is necessary to purchase Environmental
Impairment Liability (EIL) insurance to fill the coverage gap created by the
pollution exclusion in all general liability insurance policies sold today.
Even the ISO Comprehensive General Liability insurance policy has a pollution
exclusion as previously discussed.
insurance requirements shown in Appendix E. include a specification for
$25,000,000 of Environmental Impairment Liability (EIL) insurance on Line 5.
According to the Consumer Price Index, the present value of $1,000,000 in 1953
is $23,000,000 today. We recommended $25,000,000 Environmental Impairment
Liability to match the insurance industry custom of increasing insurance limits
in $5,000,000 increments.
Since the Comprehensive General Liability insurance that Enbridge
carries today has a pollution exclusion, technically the EIL coverage limits
should match the general liability policy limits if the exact terms of the 1953
Easement were followed. We have not recommended this approach in the insurance
requirements because such a requirement would be impossible to comply with.
It should be noted that the $1,000,000 limit of liability in the 1953 Easement insurance requirement was intended to set the minimum amount of required insurance. The idea behind requiring Comprehensive General Liability insurance in the Easement was to back the indemnity obligations of the Signatories.The stakeholders in the Second Agreement have acknowledged that the loss exposure from Line 5 is much greater than $25,000,000.
Again, this seems highly concerning to me that Enbridge will
be unable to secure enough insurance to guarantee that Minnesota taxpayers will
not be left with a bill for cleanup should a spill arise on Line 3.
The Advantages Of
The requirement for actual insurance which is not self-insurance in the 1953 Easement should not be overlooked. A requirement for some amount of purchased insurance versus self-insurance insurance, which is allowed for in the Second Agreement, will enable the State to receive real time feed-back on if the global insurance market thinks Line 5 is insurable or not. The insurability of the line will serve as “the canary in the coal mine” risk indicator for the State. [THIS IS CRITICAL.]
The Environmental Impairment Liability insurance requirement acts as a
form of expert independent third party risk evaluation. If Line 5 is low risk,
Enbridge should have ready access to environmental insurance that is relatively
low cost from a insurance market place with over $400 million in limits of
liability capacity. If Enbridge is unable to purchase this relatively low
amounts of Environmental Impairment Liability insurance, that situation would
provide an early warning sign to the State of Michigan that professional risk
evaluators (insurance underwriters) feel that Line 5 at the Straits is too
risky to insure.
Another early warning is provided by requiring the State to receive 60
days’ Notice of Cancellation or Non-Renewal on the Comprehensive General Liability and Environmental Impairment
Liability policies. If an insurance policy is cancelled or nonrenewed in the
future, the State will get an early warning that the underwriters have changed
their minds about the insurability of Line 5 at the Straits.
By requiring that the State
of Michigan be an Additional Insured under the liability insurances on Line 5,
the State of Michigan gains the additional benefit of having direct access to
very broad and reliable insurance coverage for pollution damages arising from
Minnesota would do well to also incorporate similar
requirements for Enbridge regarding Line 3, which will pose significantly higher
risks than Line 5 in that it would transport Tar Sands (more corrosive to the
pipe as evidenced by failure after failure of newer Tar Sands pipelines in the
U.S. with Keystone already failing 4 times in less than a decade) through
wetlands (the most dangerous place for a Tar Sands pipeline, especially with
regard to cleanup).
Section VIII The Long Term View On The Operation of Line 5
This could be my favorite part of the
report… J And it pretty much speaks for itself.
This section of the report discusses some of the business challenges
that Enbridge business entities will face during the foreseeable future of Line 5 at the Straits. These challenges
in what could be a relatively short period of time have the potential to
undermine the ability of Enbridge to pay through self-insurance the costs
associated with a release of petroleum products from Line 5.
Changes in social norms and a heightened awareness of the human impact
on the planet is affecting the Enbridge business model in profound ways that
the company has not had to deal with in the past. For example, in two permit
applications that would have been routine for Enbridge 10 to 20 years ago;
one was a building permit to add a pumping station to an existing pipeline, and
one was a permit to replace an existing line; Enbridge had to fight local resistance to the Enbridge development
plans all the way to the State Supreme Courts in Wisconsin and Minnesota.When routine business maintenance matters
require the State Supreme Court to resolve disputes with neighbors, the
writing is on the wall that there are
fundamental challenges to the old business model of Enbridge company’s
The Coal industry’s experience with challenges to its core business value proposition illustrates what the impact of changing
environmental awareness and concerns in the general population can do across an
entire segment of the energy economy. Coal as a source of fossil fuel is
relatively dirty compared to natural gas. Natural gas is in over supply in the
U.S., it costs little to produce, and it is relatively cheap to transport and
use. Coal does not compete well against natural gas over pollution concerns,
its carbon footprint or on cost. After
over a 100 years of robust business, furnishing most of the energy needs in the
US, “Approximately 44% of U.S. coal now comes from companies that have declared
bankruptcy sometime in the last four years.”All fossil fuel-based companies will be subject to the same economic
pressures over time as society moves to reduce the greenhouse footprint of
energy sources and gravitate to use relatively clean sources of energy.
In the spectrum of
potential crude oil supplies, tar sands
derived crude oil displays some common traits with coal. The profits of
Enbridge are closely tied to the consumption of tar sands derived crude oil
which has unusually high environmental impacts relative to other sources of fossil
fuels. Therefore, the robust business
results of Enbridge in the past and therefore the firm’s ability to self-insure
environmental risks may not endure indefinitely into the future.
The Enbridge Business Model Incorporates Systemic Risks Which Cannot Be
Some of the challenges
to the Enbridge business model are detailed below:
1. The risk of a rupture of Line 5 at the
Straits is in an extremely high consequence location for an inland oil
pipeline with potential damage costs well in excess of all available funding
sources for Enbridge entities.
2. The relatively high carbon loading
associated with tar sands derived crude oil and the corresponding work of
environmentalists to completely eliminate the use of tar sands derived oil as a
fossil fuel source is already having impacts on the operations of Enbridge,
Inc. As a source of fossil fuel, tar sands derived oil is relatively
inefficient on a total carbon footprint basis. This is because it takes a
relatively high amount of fossil fuel derived energy to heat the water, to
produce the steam needed, to produce a gallon of tar sands derived crude oil,
to put into the pipeline. For this reason, people
concerned about the greenhouse effect of carbon dioxide are mobilizing in
increasing numbers to completely eliminate tar sands oil consumption.
Appendix H illustrates an activist group chartering buses to protest
the Enbridge pipeline terminal in Duluth, Minnesota. Michigan is mentioned in the announcement. These activities by forward thinking environmentalist
will make it more difficult for Enbridge to earn money trading in and
transporting tar sands oil in the future.
3. The relative distance to end users of the
petroleum products that Enbridge transports is not competitive on a cost basis
to other sources of crude oil closer to the end users. The Enbridge, Inc.
2018 10-K mentions that demand from India and China will lead to future demand
for the services of Enbridge. We have no expertise in oil markets, but shipping relatively expensive tar sands
derived crude oil on ships to India and China does not make sense to us.Both countries are heavily focused on
renewable energy sources, they are both a great distance from northern Alberta,
and there are ample supplies of crude oil that cost much less to get out of the
ground closer to India and China.
The shortest route to China from Alberta is through British Columbia.
However, Enbridge lines do not run west, nor is it likely that Enbridge will
ever be able to build a new line to the west of Alberta to ship product for the
The existing Trans
Mountain Pipeline which does run west from the tar sands was built in 1953,
extending 715 miles from Alberta across the Rocky Mountains to Vancouver,
British Columbia. It carries 300,000 barrels per day.
The proposed expansion plan for the existing Trans Mountain Pipeline to
ship tar sands derived oil to the west was opposed by 59 Canadian tribes and
First Nations, and 22 local governments in British Columbia. The First Nations
undertook several lawsuits in opposition to the expansion. At the same time the
collapse in global oil prices in 2014 made it unlikely that earlier projections
of tar sands oil production would any longer come to fruition. Kinder Morgan,
the lead investor, confirmed the project may be “untenable”. In 2018, in efforts to overcome the financial
and legal challenges to the expansion, the Canadian government had to step in
to finance the expansion project.
Considering the difficulties encountered in expanding an existing pipeline
to carry tar sands oil to the west, it does not appear as if Enbridge could
build a new pipeline of its own. Without an Enbridge pipeline to the west, the
only way Enbridge will be transporting oil for the China market is through U.S.
ports to the South and East.
Looking at a globe, moving oil to the south and east of Alberta is not the most
direct way to move product to China. Transporting
oil thousands of additional miles to reach end users adds hard dollar and
potential carbon footprint costs to the tar sands oil that the competitors of
Enbridge oil supplies would not have. Therefore, the viability of the business
expansion plans to ship tar sands derived oil to China are questionable in our
India as a consumer of tar sands oil from Alberta also does not make a lot of sense to us. Oil from the middle east requires about half the production cost of tar sands oil, and middle east oil has the potential to be in over supply when the producing countries want it to be. Middle east oil is also much closer to the end users in India than the northern Alberta tar sands.
4. Other sources of crude oil have a lower
cost of production. Using steam to extract the oil from sand adds costs to
produce a barrel of tar sands derived crude oil. As shown in Appendix I, tar
sands oil has a relatively high cost of production when compared to alternative
sources of crude oil. If the market
price of crude oil dips below $44 a barrel for an extended period of time, the
supply of tar sands derived oil would be expected to decrease, adversely
affecting Enbridge’s revenues and profits.
5. The extractive process for tar sands oil in
Alberta is basically surface mining, which has extreme and long lived local
environmental impacts on the land. This is another reason that
environmentalists thousands of miles away seek to totally eliminate the use of
tar sands derived oil products.
6. Indian Treaty Rights including eviction actions for Line 5 at the Bad
River Indian Reservation in Wisconsin, as discussed in Appendix J of this
report, illustrates how quickly contemporary treaty rights can alter a business
plan for Enbridge.
The major feeder pipelines from Canada cross into the United States
into lands that are subject to treaties formed in the 1800’s. These treaties
give Native Americans certain rights to the lands. In more contemporary times,
various Native American Bands in the United States have perfected those rights
in court. As a result of the precedent and evolving case law on Treaty Rights,
Enbridge faces legal challenges in the U. S. as the firm attempts to replace
pipelines that were installed more than 50 years ago across land that is
subject to treaties with Native Americans.
The right of ways and
easements used by Enbridge to access U.S. markets and international shipping
ports are being challenged by Native Americans in yet untested legal theories
regarding treaty rights. Treaty rights
established in courts over the past 20 years have the potential to severely
restrict the ability of Enbridge to move product and therefore earn revenues in
a relatively short period of time.
Of particular importance for this report, if Line 5 is shut down at the
Bad River Reservation in Wisconsin as further discussed below, unless and until
Enbridge is able to re-route Line 5 around the reservation there will be no
throughput of oil in Line 5 in Michigan including at the Straits of Mackinac.
In our opinion, the
10-K financial reports of Enbridge, Inc.
tend to downplay the potential effects of Treaty Rights on its business model.
For example, Enbridge comments on its replacement for Line 3 on page 73 of the
“United States Line 3
The MNPUC approved the
Certificate and Route Permit and denied petitions to reconsider the decisions.
All related Certificate conditions have been finalized and are being addressed.
In addition, agreement was reached with the Fond du Lac Band of Lake Superior
Chippewa granting a new 20 year easement for the entire Mainline including the
Line 3 Replacement Project through their Reservation. The remaining permit
applications have been submitted to the various federal and state agencies,
including the United States Army Corps of Engineers (Army Corps), the Minnesota
Department of Natural Resources, the Minnesota Pollution Control Agency and
other local government agencies in Minnesota.
We anticipate that the agencies will process all of these applications
in the coming months, and with timely approvals continue to expect an
in-service date for the project before the end of 2019.”
From this project update, which was not untrue when it was written just
ten months ago, a reader of the 2018 10-K would conclude the replacement of
Line 3 would be coming on-line shortly. [BUT IT IS NOT!!! We have successfully stopped Enbridge’s New
Line 3 from becoming a reality in 2019!!!
However, the reality is the permit for the replacement Line 3 was
appealed at the Minnesota Supreme Court. There were also two other actions
opposing Line 3 filed at the Minnesota court of appeals, one of the appeals had
been made by the Minnesota Department of Commerce. The emergence of three
appeals after the PUC approval paints a different picture of the Line 3
replacement permitting process than what is expressed in the 10-K from just 10
In another example of a disclosed risk in the 2018 10-K that does not
fully reflect the developing reality 10 months later, the 2018 10-K discusses a
dispute between the Bad River Band of Chippewa.
“On January 4, 2017,
the Tribal Council of the Bad River Band of Lake Superior Tribe of Chippewa
Indians (the Band) issued a press release indicating that the Band had passed a
resolution not to renew its interest in certain Line 5 easements through the
Bad River Reservation. Line 5 is included within our mainline system. The
Band’s resolution calls for decommissioning and removal of the pipeline from
all Bad River tribal lands and watershed and could impact our ability to
operate the pipeline on the Reservation. Since the Band passed the resolution,
the parties have agreed to ongoing discussions with the objective of
understanding and resolving the Band’s concerns on a long-term basis.”
In their lawsuit, The
Bad River Indian Band in Wisconsin alleges that Enbridge Line 5 since 2013 has been trespassing on its reservation
property. If the lawsuit is successful, not only would Enbridge forgo the
revenues derived by shipping petroleum products in Line 5, the cost to remove just 10 miles of existing Line 5 pipe within the
reservations could cost $855 per foot or $45,000,000.
The 10-month-old Enbridge, Inc. 10-K report does not reflect the
potential removal costs or the gravity of the eviction lawsuit at the Bad River
In its report to shareholders Enbridge says it may need to reroute Line
5 around the reservation. It does not mention how difficult that can be. Based
on the Enbridge experience in permitting a new Line 3 through Indian treaty
rights-controlled territories in Minnesota, getting a replacement route for
Line 5 will not be as easy as it was 50 years ago.
In general, in case you’re only reading the non-italicized
portions… Enbridge operates under a business model that 1) fails to account for
the tremendous costs of spills, 2) dismisses the carbon budget of the planet
that will allow continued human habitation and the ensuing societal uprising
that speaks to this concern, 3) insanely thinks their almost-all-the-way-around-the-world
shipment of oil to India and China is going to be more attractive that more
local, less energy intensive, and cheaper fossil fuels available, 4) fails to
see the high production costs of their product as a liability, 5) ignores the environmental
degradation of the Tar Sands which are quick becoming globally recognized, and
6) fails to address the Treaty Rights of Native Peoples and the potential for
these rights to shut down their pipelines.
Along with over-valuing their assets (which are pretty much worthless for anything other than shipping oil) and their ability to secure insurance for spills (especially as the new Tar Sands pipelines are showing new materials, specifications, and technologies DO NOT eliminate them…), Enbridge is facing a recipe for disaster and possible quick bankruptcy in the right circumstances. And these circumstances seem to become more real every day.
Indigenous fights for Treaty Rights are on the rise. Societal uprisings in civil disobedience fighting pipelines and fossil fuels in general are in the news on a daily. As the government and corporations seem unable to heed the warnings of science, we see more and more calls for a rapid redress of the climate catastrophe. All this, along with a movement for a clean, green energy future, spells out that Enbridge is in a dying industry. It’s just a matter of time… and it’s more imminent each day.
Section IX Qualifications of the Author
This for sure gets left in as I am AMAZED by the work David has done in this report. 🙂
This report has been authored by David J. Dybdahl, CIC, CPCU, ARM, MBA with the help of researchers.
Mr. Dybdahl has
extensive experience in environmental risk management and insurance. He holds a
bachelor’s and a master’s degree in risk management and insurance from the
University of Wisconsin Madison, where he has been a guest lecturer on
environmental risk management and insurance topics for over 35 consecutive
He has authored the
chapters on environment insurance and risk management in over 30 insurance text
books including the chapter on Environmental Insurance in the Chartered
Property and Casualty Underwriter (CPCU) 4, Commercial Liability, Risk Management
and Insurance textbook, and authored and edited the chapters
“Environmental Loss Control” in the Associate in Risk Management
(ARM) textbook and the chapter on environmental claims in the Associate in
Claims textbook. His Curriculum Vitae is attached in Appendix D.
Mr. Dybdahl’s past
consulting work includes advising and providing technical information on
environmental insurance to the U.S. Department of Defense, the U.S.
Environmental Protection Agency, the U.S. Department of Justice and the U.S.
Department of Energy. Directly related to this work for The State of Michigan,
he was the author of An Insurance and Risk Management Report on the Proposed
Enbridge Pumping Station which was prepared for The Dane County Zoning and Land
Regulation Committee and submitted for review on April 8, 2015 and he prepared
in 2018 the Risk Financing and Insurance report on the replacement of Enbridge
Line 3 for the Department of Commerce in the State of Minnesota. Many of the
risk and insurance topics associated with Enbridge Line 61 in Dane County and
Line 3 in Minnesota parallel the risks and insurance topics associated with
Line 5 in Michigan.
Mr. Dybdahl has served
as an expert witness in both state and federal courts on over two billion
dollars in litigated and arbitrated insurance coverage cases involving mostly
environmental damage losses. In his
profession as an insurance broker, he has placed thousands of environmental
insurance policies into the global insurance marketplace. These environmental
insurance policies insured risks ranging from mold in a single-family home, to
the clean-up operations of the Chernobyl nuclear disaster in the Ukraine for
the World Bank in London. He has worked with environmental insurance
products on a day to day basis for over 35 years.
Thank you, David!!! And your find team of researchers as well. 🙂 You have given me added hope that we will yet DEFEAT LINE 3!!!
Note: Updates 11-13-19 include Line 3 requirements for Enbridge, Inc. in the PUC Orders, why insurance is less about protecting us and more about protecting Enbridge (since they can pass on costs to customers), and clarification about what Line 5 can transport (which includes tar sands derivatives).