Each year many oil pipelines fail, spill crude oil andcause significant health and environmental damage all across thecontinental United States—leading to hefty financial implicationsfor oil companies, landowners, the government and insurers.

For example, in September 2012, Calgary, Alberta-based EnbridgeEnergy paid a $3.7 million penalty for the 2010 rupture of apipeline that polluted the Kalamazoo River in Michigan withthousands of gallons of crude oil. And in October, Montanalandowners filed suit claiming ExxonMobil overlooked warningsbefore a pipeline break dumped roughly 1,500 barrels of crude oilinto the Yellowstone River.

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

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

In an effort to combat corrosion, most pipelines are“cathodically protected” (CP) on the outside of the pipe prior tobeing buried in the ground. CP is a technique that turns thesteel pipe into the cathode of an electrochemical cell. Onpipelines, CP is achieved by using a DC power source and pumpingelectricity into the system. The positive cable is attached to theanode that is backfilled into the surrounding sediment near thecathode; the pipe is connected to the negative cable, thus creatingthe cathode.

Although CP protection is designed to be impermeable, there aresome weaknesses. Specifically, if the CP is improperlyadministered, hydrogen ions may be produced—which results in theions being absorbed by the metal, causing hydrogen embrittlement.Hydrogen embrittlement causes weakened welds and significantlycompromises the piping itself, leading to cracks, fissures andultimately leaks. In this instance, what is at first supposed to bea protectant ends up being the cause of itsdeterioration.

Another advancement being applied to pipelines in an attempt toprevent ruptures is to apply a coat externally to the pipe by aprocess known as fusion-bonded epoxy (FBE), which is used becauseit is extremely durable and can withstand the punishment ofinstallation, backfilling and ground movement.

With both CP and FBE, blowouts should, theoretically, no longerbe a factor. Unfortunately, however, this isn't the case. Whenfaced with a leak on a newer pipeline, it is imperative toengage an expert who understands CP and FBE,including how they are administered and potential problemswith their application.

But with more effective technology and better regulation intheory making pipelines safer, why do significant ruptures continueto occur? The problem may lie with the parties responsible forenforcing and/or complying with state and federalregulations.

The Pipelines and Hazardous Materials SafetyAdministration (PHMSA), an agency within the U.S. Department ofTransportation, is frequently short of inspectors, leaving muchregulatory inspection up to the pipeline operators—which can pose aconflict of interest. The agency has struggled with staffing for atleast 17 years, averaging about 24 unfilled jobs a year since2001.

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 instilldoubt as to the safety of pipelines. Without tougher inspections,the assessment of stiffer penalties and energy companies' resultingincreased adherence to federal regulations, pipeline blowouts maynever be truly eradicated.

Despite new technologies and regulations making pipelineoperations safer, improper application of coatings, unplannedreaction of chemicals and other factors can induce disastrousblowouts, leading to environmental damage and property loss.Chances of breakdown also increase with imperfect execution ofperfected procedures by third parties—i.e. workers, manufactures,installers and operators.

This is where there is potential for subrogation, but time isalways of the essence. Investigations into causation and propercleanup often move quickly and involve highly technical issues.Retaining property experts and consultants early on can make asignificant difference in an insured's recovery from pipelinefailure.