Suddenly, it’s all about aging infrastructure – pipelines

3 Apr 2013

Oil spills and subsurface utilities are in the news.  Sunday, there were reports of a significant oil spill in Lansing into the Grand River.   Then we heard about the 80 year-old pipeline rupture in Arkansas which was a topic of discussion on a national news show (All in with Chris Hayes) Monday night. Before that, there was a rail spill in Minnesota.   Of course, we all know about the Kalamzoo River oil spill from 2010. That one is still going on, in 2012, EPA proposed an order and just last month, EPA issued an order to Enbridge requiring further containment, sediment dredging, monitoring and further inspections.

A recent federal study regarding leak detection programs noted that an average pipeline leak results in a spill of over 29,000 gallons.  Aging pipelines are clearly a concern and, when they leak, they can cause massive problems.  That recent federal study called into question the industry’s current leak detection programs, noting that the public was as at least as likely to detect a pipeline leak as was the industry.

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 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.

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, 49 CFR 195.573 and 192.723, – 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 reported 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 acquisition cost but when you hear about the impacts on the properties in Calhoun County, Lansing, Arkansas, and elsewhere, this is where an ounce of prevention may truly be worth many thousands of dollars of cure.

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