Each year 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 oil companies, landowners, the government and insurers.

For example, in September 2012, Calgary, Alberta-based Enbridge Energy paid a $3.7 million penalty for the 2010 rupture of a pipeline that polluted the Kalamazoo River in Michigan with thousands of gallons of crude oil. And in October, Montana landowners filed suit claiming ExxonMobil overlooked warnings before a pipeline break dumped roughly 1,500 barrels of crude oil into the Yellowstone River.

In addition to the severe adverse effects oil spills have on the environment, significant health consequences can also result; exposure to oil has been linked to various forms of cancer and genetic mutations that can lead to birth defects.

Because of the far-reaching implications of even one small oil spill, keeping these pipelines maintained is critical. It is important to understand the origin of these pipeline failures, which differ widely depending on such factors as the environment in which the pipe was located, the type of protective coatings used on the pipe, the materials being transported and human error related to lack of maintenance.

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, hydrogen ions may be produced—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 leaks. In this instance, what is at first supposed to be a protectant ends up being the cause of its deterioration.

Another advancement being applied to pipelines in an attempt to prevent ruptures is to apply a coat externally to the pipe by a process known as fusion-bonded epoxy (FBE), 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, no longer be a factor. Unfortunately, however, this isn't the case. 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.

But with more effective technology and better regulation in theory making pipelines safer, why do significant ruptures continue to occur? The problem may lie with the parties responsible for enforcing and/or complying with state and federal regulations.

The Pipelines and Hazardous Materials Safety Administration (PHMSA), an agency within the U.S. Department of Transportation, is frequently short of inspectors, leaving much regulatory inspection up to the pipeline operators—which can pose a conflict of interest. The agency has struggled with staffing for at least 17 years, averaging about 24 unfilled jobs a year since 2001.

Because of the resulting inadequate inspection by the PHMSA, there is a lack of answers as to why recent blowouts have occurred. Consequently, the agency's inspection capabilities can instill doubt as to the safety of pipelines. Without tougher inspections, the assessment of stiffer penalties and energy companies' resulting increased adherence to federal regulations, pipeline blowouts may never be truly eradicated.

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, manufactures, installers and operators.

This is where there is potential for subrogation, but time is always of the essence. Investigations into causation and proper cleanup often move quickly and involve highly technical issues. Retaining property experts and consultants early on can make a significant difference in an insured's recovery from pipeline failure.

Special Reports /

Preventing Claims Spillover: Understanding Oil Pipeline Failures

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