Seven years ago this week, the Pegasus Pipeline ruptured, sending 210,000 gallons of heavy crude oil flowing through a Mayflower subdivision into Lake Conway. Twenty-two homes were evacuated, and it took months to clean up the mess.
Now, seven years later, we still don't know if all the crude oil was removed from Lake Conway, or what the long-term environmental impact it will have on the local environment.
According to ExxonMobil, the owner and operator of the Pegasus Pipeline at the time, the pipeline had been tested in 2006 and inspected in 2010, with no areas of concern or abnormalities found. Later, however, the Pipeline and Hazardous Materials Safety Administration (PHMSA)--the federal agency tasked with assuring the proper operation of crude-oil transportation pipelines in the U.S.--announced ExxonMobil failed to spot obvious warnings that the Pegasus Pipeline had structural defects. In other words, ExxonMobil knew (and still knows) that much, if not all, of the pipe used to construct the pipeline was improperly manufactured and is subject to a greater-than-usual risk of failure.
ExxonMobil's claims of testing were hogwash. Testing consisted of pressurizing segments of the pipeline to the point where it broke. After establishing a pattern of breaking at a certain pressure--a pressure substantially below the manufacturer's stated maximum pressure for the pipe--ExxonMobil merely attempted to operate the pipeline at a lower pressure. That is the equivalent of saying, "The car starts to shimmy at 60 mph, so I just won't drive it above 55."
Just as driving at a slower speed doesn't fix the problem with the car, operating at a lower pressure doesn't fix the problem with the pipeline. By choosing not to solve those problems, ExxonMobil allowed them to grow and spread until eventually the pipeline ruptured--full of crude oil.
Since the pipeline has been non-operational, crude oil has been transported from the north to refineries along the Gulf of Mexico by other means. To put it bluntly, the decrepit Pegasus Pipeline hasn't been needed, so the risk of restarting it has not outweighed the potential reward to the oil and gas behemoth. Now, unfortunately, a new round of the old shell game has emerged.
Round One--ExxonMobil utilizes a series of transactions to transfer ownership of the pipeline to Energy Transfer (ET). The sole unstated purpose of ET is to insulate the major oil and gas production companies like ExxonMobil from bad publicity when breaks occur. In exchange for this service, their investors receive large returns from their pipeline operation. ExxonMobil transferred its asset to ET in exchange for a very small share of the ownership and a long-term crude oil shipping agreement that fixes costs for ExxonMobil and moves the risk of future pipeline breaks to ET. While ET claims to have a robust pipeline integrity management plan, one of its pipelines ruptured in March 2019 due to a stress corrosion crack, causing $1.14 million in property damage. In January 2020, a subsidiary of ET agreed to pay a fine in excess of $30 million due to "lack of oversight" and ET's failure to comply with Pennsylvania Department of Environmental Protection orders.
The very next month, ET reported record 2019 profits of $3.6 billion, more than three times its previous record of $1.1 billion, on virtually flat revenue.
Round Two--"Pegasus Pipeline" has a bad reputation, so let's rename it. In a series of correspondence over the past several months, the Pegasus Pipeline has been referred to as the Permian Express Pipeline, the Patoka Pipeline or Red Horse. ET's game is to call it something else so the public thinks we are talking about something else. They want it known as anything but the Pegasus Pipeline, which has a history and reputation for failure.
Round Three--The current company line from ET is, "We don't know if we are going to use it, we only want to know what condition it is in." The problem is that ET and PHMSA will be the only ones who know what condition it's in. The reason is that ET will not share the results of its test with anyone except PHMSA, which by law cannot share the information with anyone else.
At some point, ET will file a restart plan with PHMSA for administrative review. Unfortunately, PHMSA's ability to dictate what steps ET must take before operating the pipeline are limited. Local regulators have no say in the restart plan or pipeline operation procedures.
Why does all this matter? The Pegasus Pipeline runs along the north shore of Lake Maumelle. The rupture in Mayflower was just 8.5 miles from the lake's watershed. The same rupture in a slightly different location would have impacted the state's largest drinking water reservoir, negatively affecting more than 450,000 people in central Arkansas. Not to mention, the Pegasus Pipeline runs from the northeast part of the state to the southwest border, crossing 21 watersheds along the way. It's not just central Arkansas at risk.
The Pegasus Pipeline is not needed. Recent ET operations, and its record profits, have proven that. Given the pipeline's known propensity to break and ET's inability to assure the safe operations of its pipelines, the Pegasus Pipeline should never restart under its current name or any other name.
That's because a dangerous, defective pipeline--by any other name--remains a dangerous, defective pipeline.
Tad Bohannon is CEO of Central Arkansas Water.
Editorial on 04/03/2020