Tag: administration

The Future of Line 5 in the Straits of Mackinac





Now that Michigan’s governor and attorney general have sunk the oil tunnel scheme hatched by the last administration, I’m asked nearly every day: What can citizens and state leaders do to shut down the propped-up, banged-up Line 5 oil pipelines in the Straits of Mackinac for good?

Here’s my answer, as succinctly as I can distill it, accompanied by a summary of the law and political history in play.

So what should Governor Whitmer and Attorney General Nessel do?

Governor Gretchen Whitmer and Attorney General Dana Nessel must take swift and comprehensive actions to review and reverse the improper failure of the former Snyder administration to bring Line 5-owner Enbridge under the rule of law. Enbridge has had its way with Michigan’s prior elected officials, and it is time to call a halt to this nonsense. Here are the steps to getting Enbridge out of the Great Lakes for good:

Proposed Oil Tunnel:

  1. Send a Letter: Tunnel Deal Is Dead– Governor Whitmer and Attorney General Nessel should send a formal letter to Enbridge advising the company that its agreements calling for a transfer or occupancy of the Straits of Mackinac public trust bottomlands, the new state-granted easement, and 99-year lease for the proposed oil tunnel that would house a new Line 5 are unenforceable unless Enbridge has obtained authorization under state law – the Great Lakes Submerged Lands Act (GLSLA).

Line 5 in the Straits:

  1. Send another Letter: No Life Support for Line 5 – Governor Whitmer and the Michigan Department of Environmental Quality (DEQ), along with Attorney General Nessel, should send a letter to Enbridge advising it that the agreements purporting to grant Enbridge occupancy and use of waters and bottomlands the existing Line 5 for 10 years or more are unenforceable, because the former administration and Enbridge failed to obtain the required authorization under the GLSLA.
  1. Apply the Law to the Redesign of the Ailing Pipelines – Governor Whitmer and the DEQ, along with Attorney General Nessel, should investigate and correct the lack of review and showings required by the GLSLA and public trust law for the substantial change in design implemented for the 3 miles of pipeline elevated above the lakebed under the guise of “repair.” Enbridge should be instructed that it must show the risks and magnitude of harm are minimal and that there exist no other alternative than the existing line in the Straits or Great Lakes.

How Did We Get Here on Line 5? Tracing the Law and the Politics

The plotting of former Governor Snyder’s administration and Enbridge to hand over the public trust soils and bedrock under the Straits of Mackinac for the company to build and operate a new crude oil pipeline in a tunnel for 99 years has been put on hold.

On her first full day in office, Governor Gretchen Whitmer asked Attorney General Dana Nessel for a formal opinion on whether the Snyder-Enbridge agreement and legislature’s stamp of approval through a lame-duck law known as “Act 359” to hand over the Straits for Enbridge’s tunnel  to Enbridge was constitutional.  In late March, Attorney General Nessel found it was not constitutional because the legislature tried to graft a private tunnel-pipeline project onto a public infrastructure law that governs a public icon—the Mackinac Bridge.

Read more about the history and law surrounding Line 5 here!

  1. Revoke the Easement – Attorney General Nessel along with the Department of Natural Resources (DNR), along with the above actions, revoke the 1953 easement because under the current circumstances the existing Line 5 is no longer in compliance with the common law standards of the paramount interests of the Great Lakes protected by public trust law; if Enbridge desires to continue using the existing line in the Straits, the company must submit an application for authorization of such use and occupancy along with the authorizations identified in this list.
  1. Increase Insurance Requirement and Verify It – Governor Whitmer, the DEQ, and the DNR, with the Attorney General, should require Enbridge to submit financial assurances that cover the worst case economic and natural resources damages of at least $6 billion (significantly more than the current cap of $1.8 billion), retain qualified experts to determine the adequacy of those assurances, and require Enbridge to name the State of Michigan as an “additional insured” and/or “named insured” on its insurance coverage for Line 5. Inadequate insurance is another cause for revoking the easement.

Once the Governor and Attorney General do these things, they will have taken action consistent with their pledge in being elected to lead the State and protect the Great Lakes, by nullifying the improper actions and agreements of their predecessors and bringing Enbridge, finally, under the rule of law. Regardless of the outcome, the interested parties, communities, and persons in this controversy and the government will be required to make determinations concerning the fate of Line 5 in an open forum based on facts, science, and law.  We are ruled by law, not by self-serving agreements that were plotted to avoid it.

Given President Trump’s executive orders this week to water-down or smooth over federal laws and regulations affecting water, the Great Lakes, and pipelines, it is more critical than ever that Governor Whitmer and Attorney General Nessel exercise the full jurisdiction and authority they and the State of Michigan under its exclusive power over use of the waters and bottomlands of the Great Lakes, its lakes and streams, public lands, and the public trust in the Great Lakes and navigable waters and public common property of Michigan. This trust imposes a duty on our leaders to protect the interests of citizens, the legal beneficiaries of this trust. Not the President, not Congress, not federal agencies, or state government can repeal, limit, or narrow the state’s duties and citizens’ individual and common rights under this public trust.

What Should Citizens Do?

It is quite simple: Citizens should do what they always do best. Continue to stay involved, increase communications to Governor Whitmer, Attorney General Nessel, and the Director of the DEQ, and the DNR.  These communications should do the following:

  • Thank our state leaders for taking action on the unconstitutional Act 359 and the misguided oil tunnel agreement;
  • Urge our state leaders to take immediate steps to implement the actions outlined above to formally scrap the oil tunnel and shut down Line 5.

Are Michigan’s Residents, Communities, and Businesses Insured if Line 5 Fails in the Straits?

Line 5 Pipeline

If the 66-year-old Enbridge Line 5 pipelines fail in the Straits of Mackinac, who will pay for the oil spill clean-up costs and damages to residents, coastal communities, businesses, and our public waters?

Michigan citizens may believe they are protected, at least at some level, by the insurance Enbridge should be required to have in place to pay the costs of cleaning up an oil spill disaster in the Straits, where Lake Michigan meets Lake Huron.

Unfortunately, that may not be the case.

A FLOW investigation has revealed potential holes in Michigan’s financial protections against a Line 5 pipeline rupture into the Great Lakes. The potential shortcomings could prove ruinous to communities, residents, and businesses that suffer losses at the hands of a Line 5 oil spill in the Straits.

The problems can be traced to last year when environmental regulators were largely sidelined by the Snyder administration, which negotiated four Line 5 agreements directly with Line 5-owner Enbridge from the executive offices of the governor.

Now FLOW’s findings come as Governor Gretchen Whitmer has issued an executive order and new directives aimed at strengthening the state’s regulatory and administrative oversight capabilities for the Great Lakes, although Republican legislators are seeking to overturn the governor’s order in favor of delegating oversight in part to the businesses being regulated by the state.

A Rush to Cut a Deal

The Snyder Administration’s inexplicable, rushed effort to sign agreements with Enbridge to replace Line 5, the dual 20-inch pipelines transporting crude oil and natural gas liquids through the Straits of Mackinac, has left the State of Michigan with potential catastrophic and unfunded financial liabilities.

The recent agreements between Governor Snyder and Enbridge allow the continued operation of the existing Line 5 pipeline for a period of 7 – 10 years, the estimated construction time required to design and build a tunnel to house a proposed new oil pipeline across the Straits of Mackinac.

Under the “Second Agreement,” the potential damages resulting from a disastrous pipeline break are supposed to be addressed by liability insurance Enbridge carries that would, if an oil spill occurred, pay for economic harm, clean-up and restoration costs, and natural resource damages.

The Snyder Administration Failed to Conduct a Risk Management Review

In its haste to sign agreements with Enbridge, the state failed to conduct a study that would evaluate the financial capacity of Enbridge to address a worst-case scenario for damages and claims that may result from an existing Line 5 failure. The purpose of a detailed quantitative and qualitative assessment of Enbridge’s capacity to perform in the event of a pipeline failure is make sure that Enbridge has the ready financial capacity to:

  • Immediately address and remediate environmental damages over the next seven to ten years;
  • Pay for economic damages that citizens, businesses, and affected coastal communities may incur as a result of a spill; and
  • Ensure that the State of Michigan is protected from future liabilities and expenses that third parties may bring against the state.

An appropriate examination of measures necessary to manage the risks and exposure state and local governments may face from pipeline failures is an essential precaution necessary to evaluate the risks posed by pipeline failures.

Minnesota and Wisconsin Expert Reviews Found Enbridge’s Insurance Coverage Deficient

Recently, the State of Minnesota and Dade County, Wisconsin, retained insurance experts to determine the adequacy of the financial assurances Enbridge has in place for pipeline related projects in their states.

Both expert analyses determined that the insurance Enbridge carried was deficient. The General Counsel to Minnesota’s Department of Commerce stated that they “found no meaningful coverage for damages caused by oil spills.” The Wisconsin analysis revealed Enbridge did not carry Environmental Impairment Liability (EIL) insurance, explaining:

An EIL policy designed specifically to cover claims arising from pollutants provides broader coverage for environmental losses than a GL [General Liability] policy does. A good quality EIL insurance specifically insures Cleanup Costs, Emergency Response Costs, Restoration Costs and Natural Resources Damages within the insuring obligations of the policy. GL policies do not reference these important elements of coverage which will always come into play as a source of damages in a pipeline spill.

Unlike our sister states dealing with Enbridge, there is no evidence that the State of Michigan conducted a risk management and insurance review of any kind, nor does it appear that the State sought any assistance from qualified experts to determine whether the financial assurances Enbridge has proffered would, in fact, protect the State of Michigan and its natural resources as well as coastal communities, citizens, property owners, and businesses.

FLOW’s communications with the experts who conducted the Minnesota and Wisconsin reviews has raised the concern that the Line 5 pipeline may never have been adequately insured.  Even worse, Line 5 may be potentially uninsurable.  Given its age and known condition — anchor strikes, coating loss, abrasion, dents, cracks, bending, and deformities — Environmental Impairment Liability insurance may be unavailable in the international insurance market.

Inadequacies of Enbridge’s Financial Assurances to the State of Michigan

A preliminary review raises many questions regarding the adequacy of Enbridge’s financial assurances that are supposed to mitigate the economic harm if Line 5 fails:

  • Enbridge’s General Liability insurance may not cover clean-up costs, restoration costs, natural resource damages, or claims by third-parties who have been injured by a spill.
  • Enbridge does not carry “environmental impairment liability” insurance that would cover clean-up costs, natural resources damages and claims by injured third-parties.
  • Enbridge’s financial assurances are capped at $1.878 billion dollars, far less that the $6.3 billion estimate of worst-case damages determined by a study by Michigan State University, and a potential $45 billion loss to the nation’s Gross Domestic Product in after just 15 days from disrupting Great Lakes commercial shipping and steel production.
  • Enbridge Inc., the parent company, is not a signatory to the agreement relating to financial assurances; instead three Enbridge subsidiaries signed the agreement. It is unknown whether these subsidiaries are insured.
  • The State of Michigan may not be named as an “additional insured” on the insurance policies. If not, then the State of Michigan would have no direct right of recovery against an insurer, but instead would only have a derivative right to a recovery through Enbridge or one of its subsidiaries, assuming the subsidiary was an insured party.

An expert risk management review would have analyzed, quantitatively and qualitatively, the adequacy of Enbridge’s financial assurances and determined whether they afforded real economic protections to Michigan’s coastal communities, property owners and businesses.  It is imperative that an expert review be conducted immediately.

FLOW’s Recommendations for the State of Michigan

Based upon the preliminary review of the financial assurances intended to mitigate the present economic risks posed by a Line 5 failure and the ensuing questions and issues that have been identified by FLOW and independent insurance experts, the State of Michigan should:

  • Retain qualified experts to determine the adequacy of Enbridge’s financial assurances and to make appropriate recommendations regarding mitigating the magnitude of the financial risks posed by Line 5;
  • Determine to what extent the State of Michigan is bound by the indefinite and inadequate terms and provisions of the “Second Agreement;”
  • Require Enbridge, Inc., to name the State of Michigan as an “additional insured” and/or “named insured” on its insurance coverage for Line 5; and
  • Seek the termination of operation of Line 5 until all financial assurance deficiencies are fully cured and satisfied.

The Snyder Administration appears to have placed the people of the State of Michigan at great risk by its failure to exercise due diligence and assess the financial assurances proffered by Enbridge.

The Whitmer Administration and Attorney General Nessel have the opportunity to correct this critical omission.