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Petrol prices spike after pipeline break

August 3, 2012
By Journal and AP Staff ( , The Mining Journal

MARQUETTE - Gas prices in the Upper Peninsula jumped dramatically this week, with pipeline breaks and refinery malfunctions in the Great Lakes area being blamed.

"We're seeing these spikes happen all around the Great Lakes, in Indiana, Ohio, Illinois, Wisconsin," said Patrick DeHaan, a senior petroleum analyst for, which posts gas prices from stations nationwide every day.

DeHaan said the biggest issue facing the U.P. is an Enbridge pipeline break in Wisconsin that has spewed 1,200 barrels of oil onto the ground.

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Federal regulators recently toughened the requirements that Canadian pipeline operator Enbridge must meet before the company can reopen the line.

The U.S. Transportation Department's Pipeline and Hazardous Materials Safety Administration has ordered Enbridge to certify that its entire 1,900-mile Lakehead oil delivery system is safe to operate. That order, issued Wednesday, adds to the list of requirements that PHMSA released on Tuesday.

The new directive requires Enbridge to do a comprehensive safety review of the Lakehead System and hire an independent observer to evaluate the findings. The Lakehead System transports oil from Neche, N.D., to Chicago, and to Buffalo, N.Y., via an extension. The system includes 10 pipelines plus numerous pumping and maintenance facilities.

According to DeHaan, that pipeline break could cause high gas prices for U.P. residents to stick around for a few weeks, as the break comes at a time when three refineries that produce gasoline for much of the Great Lakes area are also experiencing malfunctions that are causing lower production than usual.

"There's a lot more buyers than there are sellers," DeHaan said of the demand for gas in the Great Lakes region.

"(The price of gas) may go up. I'd like to say that the worst is here already. $4.09 would be an amount that would likely take in the entire increase we've already seen. Will it get worse from here? It's really difficult to tell. These refineries should be back up and running, if they aren't already. The thing I'm worried about is the pipeline issue and how long that will last and if there will be a bigger issue that develops."

Krist Oil President Stan Atansoff did not return a call for comment by press time this morning. Krist Oil is a major gasoline distributor in the Upper Peninsula.

Enbridge officials also did not return calls for comment.

PHMSA, which regulates the nation's pipelines, initially ordered Enbridge to address safety issues related only to the pipeline that failed in Wisconsin.

But after considering the spotty safety record of Enbridge's entire Lakehead system, which includes the pipeline that burst in 2010 and sent 1 million gallons of oil gushing into Michigan's Kalamazoo River, the agency decided a broader review was essential, PHMSA spokesman Damon Hill said.

"Given the nature, circumstances, and gravity of this pattern of accidents, additional corrective measures are warranted," said the amended order signed by Jeffrey D. Wiese, PHMSA's associate administrator for pipeline safety.

"A lot of it, really, will hinge on whether or not the government is satisfied with Enbridge's plan to check the pipeline," DeHaan. said.

Enbridge is facing a record $3.7 million fine so far for the Michigan catastrophe.

It was primarily that spill that prompted PHMSA officials to re-evaluate their initial corrective action order for the Wisconsin spill. That order required Enbridge to meet a number of stringent requirements, including testing the section of ruptured pipe for mechanical and metallurgical weakness before it could reopen the Wisconsin pipeline.

"(T)he July 2010 failure on Line 6B in Marshall, Michigan, and additional failures throughout all parts of the Lakehead System indicate that Respondent's (Enbridge's) integrity management program may be inadequate," Wiese said in the order. "PHMSA has communicated its longstanding concerns about this pattern of failures with Respondent over the past several years. Given the nature, circumstances, and gravity of this pattern of accidents, additional corrective measures are warranted."

Enbridge must now develop a comprehensive written plan for the Lakehead System, including setting timelines for specific actions to improve its safety record.

Federal regulators also ordered Enbridge to hire an independent third party pipeline expert to review and assess the written plan, concurrently.

The independent consultant will then oversee the creation, execution and implementation of the actions identified in the plan, according to the amended order.

"(Enbridge) must commit to address any deficiencies or risks identified in the third party's assessment, including repair and replacement of high-risk infrastructure," the order said.

PHMSA said the plan must address 11 specific issues, including response plans, priorities for pipe replacement, leak detection systems and management.

The timeline for that overall assessment must be approved before Enbridge will be allowed to reopen the Wisconsin pipeline.

"We want to be sure the operator is addressing everything they can for the entire system so it operates safely," Hill said.

The estimated 12,000 tons of soil contaminated in the Wisconsin spill is being trucked to a landfill 45 miles away for disposal, said Ed Culhane, a spokesman for the Wisconsin Department of Natural Resources.

Early reports say two nearby residential water wells have not been contaminated, though testing will continue on additional wells in the area along with groundwater monitoring.

For now, area residents will have to sit tight and wait for Enbridge to prove its pipelines are safe before gas prices can change.

Jackie Stark can be reached at 906-228-2500, ext. 242.



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