Michigan terminates contract for Enbridge pipeline study, citing conflict of interest

Correction appended.

Nearly a year after advocates raised transparency concerns over the hiring of two companies to study Enbridge’s Line 5 pipeline in the Straits of Mackinac, the state has canceled its contract with one of the firms, citing a conflict of interest.

In a joint announcement Wednesday, multiple state officials say an employee with Det Norske Veritas — which was selected to analyze the financial risks associated with the Mackinac pipeline — “subsequently worked on another project for Enbridge … while the risk analysis was being completed.”

Officials say this violated terms of a contract approved last year.

“The evaluations of Line 5 were supposed to be independent, not tainted by outside opinions or information, but that’s not what happened,” 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. Terminating the contract is the only option we have to maintain the integrity of the risk analysis.”

The news comes just two weeks before the pair of studies looking at Line 5’s financial risks as well as potential alternatives were to be presented to the public. The highly anticipated reports are likely to decide whether top-level state officials will commence with actions to close Line 5 in the Straits. It is uncertain whether the financial risk analysis will be completed, according to state officials.

It is also not yet clear the exact nature of the work the Det Norske employee went on to do for Enbridge. State agency spokespeople deferred the question to other agencies or the companies. A Det Norske spokesperson could not immediately be reached for comment.

Enbridge spokesperson Ryan Duffy said in an email that the company is “disappointed to learn of these developments with one of the State’s independent contractors” and that the company is investigating what happened.

“It is important this process is independent and without conflict. We support the State’s actions,” Duffy added.

Concerns raised last year

Along with Det Norske, which is headquartered in Norway, the state reached an agreement last year with Calgary-based Dynamic Risk Assessment Systems to do the analysis on potential alternative routes for Line 5 that don’t cross the Straits of Mackinac.

A coalition of organizations pushing for the closing of Line 5 in the Straits raised concerns about the state’s agreement with Enbridge last year over the reports, as well as the hiring of the two contractors that had done work for Enbridge in the past. Det Norske had been an independent consultant on Enbridge’s Northern Gateway Project as well as on Enbridge’s 2010 oil spill in Marshall, Michigan. Dynamic also worked on the Northern Gateway Project, which sought to link Alberta’s tar sands with British Columbia

Liz Kirkwood, an environmental attorney and executive director of For Love of Water (FLOW), said today’s news is “a real blow to the public.”

She said independence and conflicts-of-interest are a broader issue when it comes to pipeline reviews given the relatively few independent experts in the field.

“Conflict of interest was a serious concern in this process and specifically with the pipeline industry because there are very, very few independent pipeline experts who don’t work for the industry,” Kirkwood said. “This particular issue magnifies a larger one: With advisory boards that operate outside of any legal proceeding, there’s no way to ensure that this conflict of interest is honored from the get-go.”

Andrea Bitely, a spokesperson for Attorney General Schuette, said the state was aware of the past work that both Det Norske and Dynamic Risk Assessment Systems had done for Enbridge when the companies were selected for the studies. But she echoed Kirkwood’s sentiment that there are relatively few independent pipeline experts to do this work.

“There’s a very limited number of qualified petroleum engineering firms that exist,” Bitely said. “It’s a pretty niche speciality for engineering firms, and Enbridge is an extremely large oil company. We did our due diligence to make sure the companies reported to us the work they had done in the past (for Enbridge).”

While it’s unclear what the next steps will be for the study that was being done by Det Norske, Dynamic Risk Assessment Systems’ alternatives report is expected to move forward as scheduled. The state is scheduled to present the findings on July 6 with a public comment period to follow until August 4.

The reports are the next phase in what has been a multi-year process of assembling task forces and advisory groups to study Line 5.

However, Kirkwood remains critical of the state for overseeing the process, which has been criticized as too slow, giving too much deference to the industry and not in the public’s interest.

Kirkwood also maintains that Enbridge continues to violate its easement agreement with the state for being allowed to run Line 5 through the Straits of Mackinac, and that the best path forward for determining the pipeline’s fate is through the legal system.

“The state has put all of its eggs in one basket by touting this advisory board process and these studies as a panacea of determining the state of aging oil infrastructure pipelines that don’t belong in the Great Lakes,” she said. “Fundamentally the law is just very, very clear: It requires the state of Michigan all of its agencies to be legal trustees of the Great Lakes.

“When there’s new information that indicates a private interest like an oil company and their operations are threatening to substantially harm and pollute a resource, it has to take action to protect the paramount interest of the public. This advisory board is not hitting the mark.”

Correction: An earlier version of this story incorrectly listed attorney Liz Kirkwood’s affiliation. She is executive director of For Love of Water.

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