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Enbridge Development on Hold After Spill

Brian Hicks

Written By Brian Hicks

Posted August 6, 2012

The U.S. Pipeline and Hazardous Materials Safety Administration (PHMSA) on Thursday decided to increase the terms of its corrective action demands for Enbridge Inc (TSE: ENB).

Enbridge’s Line 14 pipeline spilled over 1,000 barrels on July 27 near Grand Marsh, Wisconsin, two years after a similar spill in Michigan.

Under the new terms, Enbridge needs to put forward an action plan for improved safety on its 1,900 mile pipeline before it can restart a crucial Midwest line.

Although Enbridge agreed to submit the required plan by end of that business day and claimed that several demands for safety action were already in progress, the company has faced serious criticism over several recent leaks.

Reuters reports:

“PHMSA has communicated its longstanding concerns about this pattern of failures with (Enbridge) over the past several years,” PHMSA wrote in the amendment to its order. “Given the nature, circumstances, and gravity of this pattern of accidents, additional corrective measures are warranted.”

The new demands will likely cause the pipeline to remain idle longer than anticipated, with more delays if regulators insist on reforms before allowing renewed operations.

Enbridge transports a majority of Canadian oil exports to the U.S., and the matter is being watched closely by many interested parties including environmental groups, energy investors, and U.S. and Canadian regulators.

For Enbridge, a successful resumption of pipeline operations could pave the way for a $3.2 billion expansion of the Canadian and Midwestern parts of its pipeline network.

Back in 2010, Enbridge’s Line 6B spilled 20,000 barrels of crude into the Kalamazoo River, shutting down the pipeline for two months. Line 14 also ruptured in 2007, spilling 1,500 barrels of oil.

Increased regulatory scrutiny over shoddy safety records contrasted with Enbridge executives’ claims that such attention is based more in concern over Canadian oil sands development and the controversial Northern Gateway pipeline, and it caused Enbridge shares to drop 1.5 percent on the Toronto Stock Exchange.

Enbridge has consistently brushed aside concerns about its safety precautions and principles, but their real-world record is at odds with the claims. This has earned them criticism on all sides and heightened scrutiny, which can affect their business.

Investors are going to follow future developments closely.

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