Pegasus-parallel oil line planned, ditched by 2008

In 2007 and 2008, Exxon Mobil and Enbridge Inc. were planning to build a new, high-capacity crude-oil pipeline running parallel to the aging Pegasus line, records show. But the project fell through, the Arkansas Democrat-Gazette learned, and Exxon Mobil increased the capacity of the Pegasus by 50 percent in 2009.

The Pegasus, built in 1947-48, was made of a type of pipe long known to be susceptible to seam cracks, which were ultimately blamed for the March 29, 2013, rupture that spilled an estimated 210,000 gallons of heavy crude into a Mayflower neighborhood.

Exxon Mobil spokesman Christian Flathman said the companies' abandoned proposal to build the Texas Access Pipeline "did not include replacing or shutting down Pegasus -- nor did it have any connection to Pegasus conditions."

But it was unclear how, if at all, the Pegasus would have been used if the Texas Access Pipeline had been built.

Asked if it was correct to say that Exxon planned to operate both pipelines "side by side carrying oil from the same region to the same region," Flathman replied that the statement was "not accurate," but would not say what was correct. Rather, he said, "We removed the project from consideration several years ago, and it did not move forward."

When pressed, he repeatedly said, "We are not going to comment further on a project that was removed from consideration some time ago and that did not move forward."

An attorney for plaintiffs in a federal class-action lawsuit resulting from the Mayflower spill contend that Exxon Mobil had intended to replace the Pegasus until the oil giant concluded that it wasn't cost-effective to do so.

"Exxon ended up choosing the cheaper route by abandoning the Texas Access Pipeline, and the people of Mayflower paid the price," attorney Marcus Bozeman said in an email.

"I believe that inference is strong, and that's something the plaintiffs plan to prove at trial," Bozeman said in an earlier interview. The new line "was going to cost them a whole lot of money to build. They decided not to spend that money."

Exxon Mobil also is resisting the release of information regarding the abandoned proposal to attorneys in that lawsuit.

In a Dec. 5 filing, the plaintiffs said the oil company defendants were "'standing on their objections' as to any further production of documents relating to Enbridge or the Texas Access Pipeline."

Like the Pegasus, the proposed Texas Access Pipeline would have carried Canadian crude from southern Illinois to the Texas Gulf Coast and, under the companies' original plan, would have begun service in 2011.

The approximately $3 billion project would have had two segments -- a 768-mile, 30-inch mainline from Patoka, Ill., to Nederland, Texas, and an 88-mile, 24-inch lateral line from Nederland to Houston, according to an August 2008 Federal Energy Regulatory Commission document.

The much-longer stretch of the new line would have had an estimated capacity of about 445,000 barrels of crude per day, the document said. That compares with the 66,000 barrels per day the Pegasus was transporting in 2008 and about 96,000 barrels per day in 2009.

Flathman said that before the Mayflower rupture, "Pegasus had not experienced a failure and met or exceeded all requirements."

Previous Pegasus accidents Exxon Mobil listed in a court filing were not seam-related failures, he said.

The condition and the maintenance of the Pegasus have been at issue since the Mayflower accident, which prompted a federal regulatory agency to propose that Exxon Mobil pay more than $2.6 million in fines for nine "probable" safety violations. Exxon Mobil has appealed those findings.

In that proposal, the Pipeline and Hazardous Materials Safety Administration noted that the Pegasus had experienced "multiple hydrostatic test failures ... as a result of [electric resistance welded] long seam failures in 1991 hydrotesting and subsequent 2005-2006 hydrotesting."

Exxon Mobil restarted the long-idle line in 2006 after reversing the direction of its flow. Exxon Mobil shut down the line after the spill, and all but a small segment in Texas remains down.

In an April 29, 2008, quarterly report filed with the federal Securities and Exchange Commission, Enbridge Energy Management LLC said that in June 2007 there had been "strong shipper support for the construction of a new heavy crude oil pipeline system" from Patoka to the Gulf Coast and said Enbridge Inc. and Exxon Mobil were jointly pursuing the plan.

Enbridge projected that the proposed Texas Access Pipeline would be in service in mid-2011 and said it would be built "in the same corridor with existing pipelines owned by" Exxon Mobil, Enbridge said.

By mid-2008, prospects were changing.

Dow Jones reported on July 16, 2008, that an Enbridge executive said the proposed line could still begin service in 2012 despite not yet having enough support from oil-sands producers.

Dow Jones quoted the executive as saying a delay until 2014 "need not be the case" and adding, "It really depends on the response from the industry ... clearly if the industry commitments are there, we can be in place by 2012."

Another SEC report filed by Enbridge Energy Management on July 28, 2008, explained that an effort "to solicit binding 15-year shipper commitments" for the proposed pipeline between December 2007 and March 14, 2008, did not obtain "the required level of commitment."

As a result, Enbridge said, it continued "to work with potential shippers to review alternatives to provide access for Western Canadian crude oil" to the U.S. Gulf Coast.

Enbridge did not return an email request seeking comment.

Central Arkansas Water spokesman John Tynan said he had been unaware of the Texas Access Pipeline proposal and that talks with Exxon Mobil about the Pegasus have hit a standstill.

"It's certainly something we're going to look into and learn the history about," Tynan said, referring to the abandoned project.

Under a confidentiality agreement reached in September 2013, Exxon Mobil had agreed to provide the utility access to Pegasus-related documents.

But Tynan said utility officials "haven't been able to have conversations regarding our lingering concerns and the path forward" since the middle of this year. "And that is something that gives us concern," he said.

A 13.5-mile segment of the Pegasus runs through the Lake Maumelle watershed, which provides drinking water to more than 400,000 central Arkansans. The utility and some public officials have urged Exxon Mobil to move the line if it is restarted.

Exxon Mobil signed the agreement after Central Arkansas Water threatened to sue the company.

"All of our conversations have been polite, and some have been productive," Tynan said. But since the oil company filed its remedial work plan for the northern section Pegasus pipeline on March 28, "we've actually had some trouble getting in contact with them."

The northern section includes the Arkansas portion.

"We do hope to continue to have an open dialogue," Tynan said. "All of our options are on the table," he said, and those still include a lawsuit. He said that in 2015, utility officials will determine how to proceed.

A section on 12/25/2014