The Trans Canada Keystone Pipeline System, seen here in Swanton, Neb., transports synthetic crude oil and diluted bitumen from the Athabasca oil sands region in northeastern Alberta, Canada to multiple destinations in the United States. There are millions of miles of pipelines globally that transport crude and refined petroleum; fuels such as oil, natural gas and biofuels; and other fluids including sewage, slurry, water, beer, hot water or steam. (Photo credit: shannonpatric17/Wikipedia Commons)
Lisa Harris is an executive vice president and co-head of Oil & Gas within the Natural Resources Practice at CAC Specialty. For more than two decades, Harris has managed energy-industry clients worldwide, which involves negotiating complex insurance and risk management programs for an array of “midstream” energy companies.
It follows that the most recent Keystone Pipeline spill snagged Harris’ attention. The pipeline system spanning the U.S. and Canada shut down in early April after a rupture was discovered in North Dakota, “halting the flow of thousands of gallons of crude oil,” according to news reports. Environmentalists say this was just the latest in roughly two-dozen Keystone spills since the pipeline was commissioned in 2010.
PropertyCasualty360.com recently caught up with Harris to hear more about pipelines and insurance.
PC360: Please describe your job and your background in insurance.
Harris: I am an upstream/midstream energy insurance broker [and] have been for over 20 years now, mostly in Houston, Texas. I also spent a bit of time in the Lloyds market in 2005, working for about a year. I've always focused on energy companies; basically anything they need, they call.
PC360: How often does your job involve pipelines?
Harris: I don't specifically have history with the Keystone pipeline. I only know what most of us in this space have read in the media. I do work on some midstream clients right now as well as pipeline-maintenance clients.
PC360: What about the recent news regarding the Keystone Pipeline got your attention?
Harris: I think it was the fact that the Pipeline and Hazardous Materials Safety Administration is requesting a full, 10-year history on the pipeline. They're trying to determine whether there was anything in inspections that [indicated] a systemic issue. That is not common with most spills.
PC360: When a pipeline spill occurs, what are the risk and insurance concerns, both short- and long-term?
Harris: Generally speaking, you would expect a midstream company to have adequate site environmental liability coverage and pollution coverage with anywhere from $20 million to $50 million in limits. And then, excess liability coverage would wrap around that for sudden and accidental spills, such as this one. A client could have $50 million to $250 million [in excess liability coverage], if not higher.
Long-term, the concern is the gradual. With this event specifically, someone reportedly heard the rupture, and they were immediately able to stop it. The reason for pollution coverage is to address any slow seepage, when people can't determine specifically when the leak or spill started.
With this one, it appear it was the more sudden and accidental type-of failure. The lesson is, make sure the pipeline is scheduled on the environmental policy and that all of the relevant information has been provided to underwriters. That way, they're not surprised [in the event of a loss].
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