A pipeline and nobody warned you?

28 Jul 2011

A typical buyer’s Phase I Environmental Site Assessment should identify the presence of an oil pipeline on, under, or across the subject property but it won’t necessarily flag the oil pipeline as a “recognized environmental concern” unless the pipeline is known to have leaked.  This is a surprise to many landowners.  Michigan, like every state, is crisscrossed with natural gas and oil pipelines.  Michigan reportedly has the sixth most miles of pipelines in the Country (which was a surprise to me).   The Free Press published this map of oil pipelines and their leaks; the State has this map of petroleum product pipelines which does not include crude oil, natural gas or liquid petroleum gas (LPG) pipelines.

Last year, I blogged about the Kalamzoo River oil spill and, given that it happened about a year ago, I noticed that others have been revisiting the site and reporting on its current status.   

Michigan leaves the job of regulating oil pipelines to the federal government but the federal Pipeline and Hazardous Materials Safety Administration has only 113 inspectors for the whole Country.  Federal rules require companies to inspect oil pipelines every three years — but reportedly there are exceptions for pipelines in lightly populated or non-sensitive areas. That may mean some pipeline segments are rarely, if ever, inspected.  The National Wildlife Federation reports that from 2000 to 2010, Michigan had 61 pipeline “incidents” (9th most in the US).

So, what should you do?  If you’re doing a Phase I ESA and a pipeline is reported, you should do further due diligence regarding the pipeline – How old is it? Who owns it? What is their track record? What is its inspection record?  What are the terms of the easement allowing its presence?  Maybe you should consider insurance (which will require a lot of data).  Yes, this will drive up the cost of the acquisition but when you hear about the impacts on the properties in Calhoun County, and Yellowstone and two recent spills in Alaska, this is where an ounce of prevention may truly be worth many thousands of dollars of cure.

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