Editor's Note: This article has been contributed by Bryan Campbell, a member of the subrogation and recovery department at Cozen O'Connor.

Yearly, many oil pipelines fail, spill crude oil, and cause significant health and environmental damage all across the continental United States, leading to hefty financial implications for the oil companies, landowners, government, and insurers.

Case in point: In September 2012, Enbridge Energy paid a $3.7 million penalty for a 2010 rupture of a pipeline that polluted the Kalamazoo River with thousands of gallons of crude oil. In October, Montana landowners filed suit claiming a major petroleum distributor overlooked warnings before a pipeline break dumped roughly 1,500 barrels of crude oil into the Yellowstone River.

Here, we will examine the risks of pipeline spills and their origins, technology and regulations to mitigate potential fallout, and recovery from failure.

The Fallout of a Spill
When oil spills occur, there can be significant health consequences as exposure to oil has been linked to various forms of cancer and genetic mutations in DNA that can lead to birth defects. It also goes without saying that oil spills have significant adverse effects on the environment.

Because of these tremendous risks, it is imperative that oil spills are controlled, contained, and cleaned up quickly to mitigate the health/environmental risks and exorbitant financial implications for landowners, government, and insurers. Cleanup and containment of oil spills—which often happen in remote, hard-to-access locations—call for specialists, extensive testing, and a process that often costs into the millions of dollars. For these reasons, much research and development has been dedicated to preventing oil spills from happening in the first place.

Curbing Pipeline Failures
Even one small oil spill can have various, far-reaching implications. Therefore, keeping these pipelines safe is critical. It is important to understand the origins of pipeline failures, which differ widely depending on several factors: the environment the pipe was in, coatings used on the pipe, materials being transported, and human error related to lack of maintenance.

In particular, corrosion plays a significant role. Most pipelines are manufactured from steel, which is highly corrosive when exposed to the soil on the outside. They are also subject to degradation on the inside through years of crude oil flowing through.

Several new techniques and technological developments have made the extraction of oil in hard-to-reach places easier, less costly, and more efficient—the result of which may be a contingency of new pipelines being built throughout the country, such as the highly controversial Keystone XL pipeline. While it is vital for us to employ practices and technologies that will minimize the risk of pipeline failures, it is equally critical to understand potential cracks in these methods.

Currently, in an effort to combat corrosion, most pipelines are “cathodically protected” (CP) on the outside of the pipe prior to being buried in the ground. CP is a technique that turns the steel pipe into the cathode of an electrochemical cell. On pipelines, CP is achieved by using a DC power source and pumping electricity into the system. The positive cable is attached to the anode that is backfilled into the surrounding sediment near the cathode. The pipe is connected to the negative cable, thus creating the cathode.

Although CP protection is designed to be impermeable, there are some weaknesses. Specifically, if the CP is improperly administered then the production of hydrogen ions may commence, which results in the ions being absorbed by the metal causing hydrogen embrittlement. Hydrogen embrittlement causes weakened welds and significantly compromises the piping itself, leading to cracks, fissures, and ultimately catastrophic oil leaks. Therefore, what is at first supposed to be a protectant ends up being the crux of its deterioration.

Another advancement being applied to pipelines in an attempt to prevent ruptures is the application of a fusion-bonded epoxy (FBE) coating, which is used because it is extremely durable and can withstand the punishment of installation, backfilling, and ground movement. With both CP and FBE, blowouts should, theoretically, be a risk of the past. Unfortunately, however, they are not. When faced with a leak on a newer pipeline, it is imperative to engage an expert who understands CP and FBE, including how they are administered and potential problems with their application.

In addition to new technologies making the pipelines physically safer, regulations are also becoming more prominent, although compliance and regulatory enforcement is lacking. Laws such as 49 CFR 192.112 have provided a framework for inducing safer modes of operation. This specific piece of regulation provides requirements for corrosion control and federal safety standards of natural and other gas pipelines.

There are also regulations determining what kind of loads the pipes can carry and the pressure at which certain materials are passed through the pipe, as well as mandatory maintenance, service, and inspection schedules.

The combination of technology and better regulation has resulted in the safer operation of pipelines. However, significant failures continue to occur, such as the Kalamazoo River spill. The problem may not simply be the lack of regulation, but also the parties responsible to enforce and/or comply with the regulations. The Pipelines and Hazardous Materials Safety Administration (PHMSA) is frequently short of inspectors, leaving the regulatory inspection up to the pipeline operators, which may pose a conflict of interest. Because of the inadequate inspection by the PHMSA, there is a lack of answers as to why recent blowouts have occurred.

Consequently, the derisory inspection capabilities provided by the PHMSA instill doubt to pipeline safety. Without tougher inspections, penalties, and increased adherence to the regulations, pipeline blowouts may never be truly eradicated.

Recovering from a Spill
Despite new technologies and regulations making pipeline operations safer, improper application of coatings, unplanned reaction of chemicals, and other factors can induce disastrous blowouts leading to environmental damage and property loss. Chances of breakdown also increase with imperfect execution of perfected procedures by third parties, i.e. workers, manufacturers, installers, and operators.

This is where there is potential for subrogation—but time is of the essence. Investigation into causation and proper cleanup move quickly and involve highly technical issues. Retaining property experts and consultants early on can make a significant difference in recovering from pipeline failure.

Special Reports /

Preventing Claims Spillover

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