Michigan scraps Straits of Mackinac oil pipeline safety study after conflict discovered Employee for contractor working on risk analysis then took job working for Enbridge, owner of the Line 5 pipe in the Straits, in violation of company's state contract

Keith Matheny | Detroit Free Press

Show Caption Hide Caption Did improper mooring damage Straits oil pipeline? Sixteen sections of underwater oil and gas pipelines in the Straits of Mackinac were found unsupported on the Great Lakes bottom during 2003 inspections — spans of 140 feet or longer, well beyond state requirements for mooring the pipe.

The State of Michigan today scrapped an almost-complete risk analysis on the Line 5 oil pipeline below the Straits of Mackinac after discovering an analyst who worked on the study later did work for the pipeline's owner.

Det Norske Veritas, or DNV GL, was preparing the safety analysis of Enbridge's 64-year-old, twin, 20-inch pipes under the Straits where Lakes Michigan and Huron meet. The report was to look at financial liabilities from a worst-case-scenario spill in the Straits from the pipelines, which move 23 million gallons of crude oil and natural gas liquids through the Upper and Lower Peninsulas daily.

State officials learned within the past month that an employee for DNV who had a "significant" role in the Line 5 risk analysis subsequently worked on another project for Enbridge. That violates conflict-of-interest prohibitions in the company's contract with the state.

“The evaluations of Line 5 were supposed to be independent, not tainted by outside opinions or information, but that’s not what happened," Michigan Attorney General Bill Schuette said in a statement.

"Instead, our trust was violated, and we now find ourselves without a key piece needed to fully evaluate the financial risks associated with the pipeline that runs through our Great Lakes. This is unacceptable."

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State officials decided to terminate the contract "based on our commitment to the complete integrity and transparency of this report," Department of Environmental Quality Director C. Heidi Grether said.

"Ultimately, the state will have to decide how to proceed with Line 5, and we can’t do that if there is any doubt regarding the nature of the information," she said.

The state Pipeline Safety Advisory Board, appointed by Gov. Rick Snyder to look into risks associated with Line 5's continued operation in the Straits of Mackinac, in a competitive bidding process last year chose DNV to conduct a risk analysis at a cost of $756,000. It also hired Dynamic Risk Assessment Systems to conduct an analysis of potential alternatives to Line 5.

Enbridge agreed to pay $3.58 million into an escrow account to fund the studies.

"The money actually came from Enbridge, and the state was holding it and paying (DNV) upon completion of the report," DEQ spokeswoman Melody Kindraka said.

DNV, following its contractual obligations, informed the state that one of its employees who worked on the risk analysis was potentially in conflict because of the employee's subsequent work for Enbridge.

"We did work with them to try to find a solution, but ultimately, we did not find a solution that we felt was satisfactory. So we decided to terminate the contract," Kindraka said.

Andrea Bitely, a spokeswoman for Schuette's office, said the DNV employee worked in "hydro-dynamic modeling."

"That would give us an estimate of the rates at which oil and natural gas could potentially leak out of the pipelines in various scenarios," she said, adding the employee's role in the Line 5 risk assessment was "definitely significant."

State officials, who signed the contract with DNV GL, will be "working out the details" with the company over what compensation, if any, it gets for the months of work it had already conducted.

"There are specific provisions and procedures that we now have to follow," Bitely said. "But they were terminated for cause — it's not like we woke up and decided, 'We don't like you.' They violated the terms of the contract."

The state did the right thing terminating DNV GL's contract and the risk analysis report, said Mike Shriberg, executive director of the nonprofit National Wildlife Federation's Great Lakes Regional Center. But Shriberg, who's also a member of the state Pipeline Safety Advisory Board that commissioned the Line 5 study, said the board should not now "go back to square one."

"We’re well aware that this pipeline has very high risks for the Great Lakes, the most important water body in the world," he said. "We know there’s a very high consequence if the pipeline breaks."

More important in the short-term, Shriberg said, is the second report contacted by the state, reviewing alternatives to moving the oil and natural gas liquids that would not involve piping it underwater through the Straits. That report is expected to the state in draft form by the end of this month, after which a public comment period will take place.

"What we've never really had is a really clear-eyed discussion of alternatives," he said. "We’re going to have that piece in hand.

"We know the risks are extreme. The alternatives analysis will give us the path forward to decommissioning Line 5."

Whether to proceed with decision-making on Line 5's future with or without the risk assessment report will be reassessed by the DEQ, the Attorney General's Office, Michigan Department of Natural Resources and Michigan Agency for Energy, Kindraka said. The alternatives analysis report, and public discussions that arise from it, "will help inform our decisions."

DNV officials did not respond to messages seeking comment Wednesday.

Enbridge spokesman Ryan Duffy, in an e-mail, said company officials were "disappointed to learn of these developments with one of the state’s independent contractors."

"It is important this process is independent and without conflict," he said. "We support the state’s actions. We, too, are investigating what may have happened in the contracting process."

Enbridge last weekend completed hydrostatic tests of the twin underwater pipes in the Straits, filling them with water at much higher pressure than at which they typically operate, and finding no cracks, leaks or other anomalies.

Contact Keith Matheny: 313-222-5021 or kmatheny@freepress.com. Follow on Twitter @keithmatheny.