In May of 2008, construction on the Minnesota Pipeline Company's (MPL) MinnCan pipeline will start. In 2009, the first oil from the Athabascan Tar Sands may begin running through the line, connecting the Enbridge Energy Partner's (EEP – $50.70) pipeline and oil-tank farm at Clearbrook, Minnesota to refineries in Rosemount.
Another line, from Chicago to Alberta running through Wisconsin, Minnesota and North Dakota, will transport diluents, or thinners needed to make the heavy crude flow. Common diluents are pentane, and include such toxic compounds as toluene, benzene, xylene or hydrogen sulfide.
MPL's ownership is spread across a large and intricate web of companies; Flint Hills Resources, Marathon Pipe Line LLC, and TROF, Inc. (which Koch's Todd McKimmey identifies only as an "equity owner"). MPL says Koch Pipeline is merely the operator. According to the Minnesota Public Interest Research Group, or MPIRG, MPL is wholly owned by Koch Industries.
Koch Industries, a privately owned company, includes the Koch Pipeline Company, Koch Oil, Flint Hills Resources, Georgia-Pacific Corp., Koch Nitrogen Company, Reiss Remediation Co and The C. Reiss Coal Company. Koch operates in Minnesota, Wisconsin, Iowa, Kansas, Oklahoma and Texas, as well as Canada, Asia and Europe, and delivers over $80 million of product annually.
Enbridge Energy Partners currently owns and operates the Canadian-American conduit of pipelines known as the Lakehead System, one of which feeds into Clearbrook. Enbridge acknowledges that planned pipelines are connection actions. These planned connections include: Southern Access (2009), which connects Alberta, Saskatchewan and Manitoba to new pipelines in Wisconsin and Illinois; the Alberta Clipper (2010), a new crude oil pipeline from Alberta to Superior, Wisconsin; Southern Lights (reversing the existing line), which will transport diluents from Chicago through Wisconsin, Minnesota and N. Dakota to the tar sands; and the LSr Project, which will carry Canadian petroleum to Clearbrook). The Alberta Clipper, Southern Lights, and LSr will run within existing Enbridge rights-of-way. Only the Alberta Clipper is waiting on regulatory approval.
MinnCan is a $300 million dollar, 300-mile long trek through Minnesota from Clearbrook to Rosemount. For the first 100 miles, it matches an existing pipeline. In the last 200 miles, it runs through virgin countryside, completely ignoring an existing route and instead traversing 183 streams and rivers, 14 watersheds, and preempting the property of 1,300 landowners in 14 counties under eminent domain – 23 of them organic farmers. MPL and Koch call this their "Greenfield" route. The project also includes three new pumping stations, the most vulnerable aspect of any pipeline, subject to mismanagement, leaks and sabotage.
Neither company has a promising environmental record, but this is perhaps to be expected. Oil and gas pipelines are typically hazardous working environments and frequently endanger both humans and wildlife. As one writer pointed out, oil spills are a matter of when, not if.
Enbridge stocks are likely to soar, and Koch profits multiply, as these two companies develop the means to transport tar sands to the refineries in the Upper Midwest, or further downstream to Gulf refineries in Texas.
The tar sands themselves, while environmentally deplorable, do represent the biggest resource on the N. American continent (1700 billion barrels), and may free the U.S. from its dependence on Mideast oil, since Canadians themselves consume only about 60% of their oil.
Unfortunately, processing these 174 billion barrels of oil, only 20% of which are recoverable by mining, uses tremendous amounts of both natural and nonrenewable resources like water and natural gas.
Water, used for soaking and steaming the bitumen, or tar, will devastate Canadian wetlands and the Peace River. Professor Kjell Aleklett of Uppsala University, an expert on tar-sands recovery, estimates that – given today's dependence on natural gas – N. American reserves are inadequate to support future Canadian oil sands recovery.
In Minnesota alone, two of the largest generating plants (High Bridge and Riverside) have, or are, converting to gas. Nationally, in 2006, U.S. power plants burned 30 billion cubic feet of gas, up 17 percent from 2005.
According to the American Society of Civil Engineers, or ASCE, gas-fired generation is projected to increase from 16 percent in 1999 to 36 percent in 2020. As a result, by 2004, natural gas is expected to overtake nuclear power as the nation's second-largest source of electricity. Industry alone uses 50 percent of available natural gas.
If Professor Aleklett is correct, we will be spending what we can't afford to recover what we can't use without costly conversions in our energy and industrial sectors. To this writer, it sounds like a case of snatching defeat from the jaws of victory.
Enbridge and Koch Reliability Statistics:
On Nov. 14, 2007, a pinhole leak was discovered in Enbridge Line 3 in Clearbrook. Pumping was suspended for 18 hours while workers repaired the leak with a temporary sleeve. On November 23, the line went down again, releasing 325 barrels of oil. Workers again tried to fix it. Six days later, a fire and explosion killed two of the repair crew, and the line remained down until December 3, causing oil prices to skyrocket worldwide.
Another Enbridge leak, on January 24, 2003, released at least 100,000 gallons of oil into the Nemadji River, a tributary of Lake Superior. In February of 2007, workers ruptured a Wisconsin pipeline, releasing 80,000 gallons of oil. It was the second spill that year from Enbridge Line 14. The first, On Jan. 1, released 500 barrels of oil. A study by the Canadian Carrier Sekani Tribal Council shows that Enbridge has experienced eight Canadian pipeline failures on its regulated lines since 1992, averaging a reported 478,000 gallons (some spill quantities were never reported). In 2004, Canada's Supreme Court ruled that late-payment penalties imposed by Enbridge Gas Distribution Inc. for over a decade constituted criminal misconduct. In 2001, Amnesty International linked Enbridge, as owner-operator of Oleoducto Central South America (OCENSA) to death squads in Columbia.
In June of 2006, Koch's pipeline sprang a leak south of Little Falls, Minn., ultimately releasing more than 134 thousand gallons of oil in than 10 acres of combined wetland-upland. Walt Haas, Minnesota Pollution Control Agency project manager, said restoration is expected to be a years-long process.
In 2003, Koch Petroleum Canada was charged with unauthorized use of public lands. The incident, reported by the Alberta Sustainable Resource Development, resulted in a $4,000 fine. In 2000, Koch was charged with covering up evidence in a Corpus Christi, Texas, spill of 91 metric tons of benzene.
Originally, the government filed 97 counts of misrepresentation and asked for $350 million. That same year, Koch contributed $800,000 to Republican candidates, including Bush. When the case finally came to trial, the counts had been reduced to seven, and Koch was allowed to settle for $10 million in fines and $10 million in environmental projects.
Koch's 2008 Republican was $705,642. In 2000, Koch also received the largest federal environmental fine ever recorded in Minnesota for its March 9, 2000 spill which released aviation fuel into a wetland and waterway. That fine was $8 million; subsequent restoration destroyed a portion of the habitat, possibly forever.
Overall, in 2000, Koch was fined $35 million for more than 310 spills into lakes, streams and waterways from its pipelines and oil facilities in six states. In 1999, a jury found Koch Industries guilty of negligence in the deaths of two teenagers killed in a fire caused by a corroded pipeline.
Other violations in Minnesota include the 1996-97 dumping of a million gallons of ammonia-contaminated wastewater directly into the Mississippi River. This dumping took place on weekends, when Koch was not required to monitor discharges. Even though Koch was aware of the problem, it didn't develop a comprehensive plan to recover the waste or prevent future discharges until late in 1997.
During the MPL pipeline hearings, oversight was transferred from the Minnesota Environmental Quality Board to the Minnesota Public Utilities Commission, which allowed MPL (read Koch) to create its own environmental assessment report, which the PUC then signed off on. The Minnesota Pollution Control Agency also waived section 401 of the Clean Water Act to allow the new portion of the MinnCan pipeline to cross rivers and wetlands. This kind of rubber-stamping has led Minnesotans to question the ethics not only of Koch but of the agencies charged with representing their interests.
Disclosure: I don't own Enbridge stock.