Coastal spill raises jitters about firm's Arkansas pipe bid

Workers monitor the site or a crude oil pipeline break near Refugio State Beach, about 20 miles north of Santa Barbara, Calif., on May 20. The spill on May 19, from a pipe owned by Plains All American Pipeline LP, blackened beaches and created a 10-square-mile slick in the Pacific Ocean.
Workers monitor the site or a crude oil pipeline break near Refugio State Beach, about 20 miles north of Santa Barbara, Calif., on May 20. The spill on May 19, from a pipe owned by Plains All American Pipeline LP, blackened beaches and created a 10-square-mile slick in the Pacific Ocean.

Plains All American Pipeline LP, the company behind a proposed crude-oil pipeline that would cross Arkansas from Oklahoma to Memphis, is working to clean up an oil spill on the California coast at the same time a federal agency is examining how the project could affect waterways on its intended path across the state.

photo

Arkansas Democrat-Gazette

A map showing the proposed Diamond pipeline.

Regulators and environmentalists say there are concerns about the $900 million pipeline project after one of Plains All American's pipelines burst on May 19, sending thousands of gallons of crude into the Pacific Ocean.

Adding to the concerns is the oil spill by an Exxon Mobil pipeline in a Mayflower neighborhood two years ago, they said.

"There has been some concern from the public," said Cynthia Blansett, the U.S. Army Corps of Engineers' project manager for the pipeline. "But no formal concerns about additional steps that we might take."

Before Plains All American can begin construction on its pipeline, the company will need permits from the Corps, which is assessing the route's implications on navigable waterways, including the Arkansas and Mississippi Rivers.

The project calls for the construction of 440-mile pipeline to move sweet crude from the company's terminal in Cushing, Okla., to Valero Energy Corp.'s refinery in Memphis.

The 20-inch line, called the Diamond Pipeline, will have a 200,000-barrel-per-day capacity and will take a route across north-central Arkansas. It will carry light sweet crude from U.S. shale formations, primarily the Bakken Shale in North Dakota.

Plains All American said on its website that the company plans to finalize permits and engineering plans, and begin construction later this year. The project is scheduled for completion in 2017.

The Houston-based pipeline company has come under increased scrutiny for both its safety record and its response to the recent California oil spill that fouled beaches near Santa Barbara.

U.S. Sens. Barbara Boxer and Dianne Feinstein of California have called for more information about why Plains All American's pipeline ruptured and referred to the company's response as "insufficient" in a letter to the Pipeline and Hazardous Materials Safety Administration.

In the letter, the senators questioned why the pipeline did not have an automatic shut-off valve and why it took the company about 90 minutes after the spill to notify the National Response Center.

"Based on this timeline, we are concerned that Plains Pipeline may not have detected this spill or reported it to federal officials as quickly as possible, and that these delays could have exacerbated the extent of the damage to the environment," the letter, dated Thursday, said. It was also signed by Sen. Edward J. Markey of Massachusetts.

Plains All American has defended its safety record since the oil spill and emphasized the reliability of the Diamond Pipeline.

Brad Leone, spokesman for Plains All American, said in an email statement that the company "is committed to designing, constructing, operating and maintaining the Diamond Pipeline in a safe and reliable manner."

He said the Diamond Pipeline will exceed U.S. Department of Transportation pipeline standards "and will include a number of safety elements, such as pipe manufactured to exceed industry specifications, burying the pipe at a greater depth to reduce the likelihood of third-party damage to the pipeline and an examination of all welds by x-ray to verify integrity."

Plains All American stock has taken a hit since the spill. The company's shares are down $2.46 since May 19. Plains All American shares closed Monday at $47.13 on the Nasdaq exchange.

Plains All American reached a $3.25 million settlement with the U.S. Environmental Protection Agency in 2010 for Clean Water Act violations for 10 oil spills in Texas, Louisiana, Oklahoma and Kansas.

At the time, Plains All American agreed to spend about $41 million to upgrade 10,420 miles of pipeline in the U.S., according to the agency's website.

Between 2010 and this year, Plains All American or its subsidiaries reported 121 crude oil spills involving a total of more than 6,500 barrels to the federal Pipeline and Hazardous Materials Safety Administration.

The oil spills resulted in an estimated $17.2 million in total damages -- the combination of private and company property damage, commodity loss, company emergency response and environmental remediation, according to data from the administration analyzed by the Arkansas Democrat-Gazette.

The data are based on reports made by the company to the federal government. Companies are required to submit reports within 30 days of an accident. The data do not include the May 19 California oil spill.

According to the federal data, more than $1.7 million of the damage attributed to reported spills was to private property. None of the accidents reported by the company resulted in injuries or fatalities.

All but 132 barrels of oil involved in the spills was recovered, the company reported. But 71 of the company's reported crude oil spills, or 59 percent, resulted in the closure of a pipeline or facility.

"The bottom line is that all pipelines leak," said Glen Hooks, chapter director of the Sierra Club of Arkansas, in an email. "The question is not if, but when will a new pipeline leak hazardous material into our communities."

He added, "Our concern for Arkansas is especially heightened given the recent California disaster caused by this company's pipeline. The proposed Diamond pipeline has the potential to devastate critical Arkansas waterways and communities. The last thing Arkansas needs is another, even larger, Mayflower disaster."

The proposed route for the pipeline crosses several waterways, including the Arkansas and Mississippi Rivers, James Fork River and Big Piney Creek, along with several smaller streams, said Blansett with the Army Engineers.

She said the agency received an application for a permit for the pipeline in December and will investigate each water crossing separately.

The Corps is working with U.S. Fish and Wildlife Service, which has to issue its own permits for the project, about concerns of endangered species living in areas the pipeline will cross.

It usually takes the Corps about 60 days to approve permits for projects. But because the Diamond Pipeline is requiring coordination between agencies, it could take up to a year for the project to be approved, Blansett said.

If Plains All American secures approval from the Corps, the company then has to go to the Arkansas Public Service Commission for additional permits.

There have been "preliminary conversations" with the Public Service Commission regarding the project, but company has not yet sought permits from the agency, said John Bethel, executive director of the general staff.

For Valero, whose refinery the pipeline will serve, the project means a more direct route for its crude.

Valero is moving Bakken crude to its terminal in Louisiana by rail or barge before sending it north to its Memphis refinery by pipeline. The facility, which serves eastern Arkansas and Memphis, can process 195,000 barrels per day.

While Valero will ship crude on the line, it is not involved in the construction process. When asked if there were concerns after the spill in California, Valero spokesman Bill Day said pipeline safety is always a concern.

"There are a lot of differences between this proposed pipeline, that is brand new, and pipelines from years past," he said.

A Section on 06/02/2015

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