Legal Fact from Legal Fictions

A Preface

When I sat down to finish this post this morning on the news about Michigan’s agreement with Enbridge to consider replacing an aging, dangerous Line 5 crude oil pipeline through the Great Lakes basin, I realized that what I should really be writing about is yesterday’s dire warning by the U.N.’s Intergovernmental Panel on Climate Change (www.ipcc.ch/) that if citizens, countries, communities, and businesses don’t act to reduce carbon dioxide levels by 45 percent before 2030, the world will tilt over the brink of massive destruction. We’ve been warned that the earth’s temperature must not increase more than 2 degrees C by 2050. Now scientists urge countries and citizens to mount an unprecedented historical shift in human actions to reduce that limit to 1.5 degrees C by 2030. If we do not engage in this historical shift, we but more so our children and grandchildren, will suffer untold loss. The narrative is clear: Future survival and prosperity are now dependent on enlightened water and energy policies; they are inseparable.

The IPCC report concludes that, “There is no documented historic precedent” for the scale of social and technical change that must occur for the world to survive. How ironic that our Governor and state agencies, with the advice of our Attorney General, signed a second agreement with Enbridge Energy last week to assure continued use of an aged, dangerous Line 5 in the Straits, and to propose a possible replacement tunnel in 7 to 10 years that would transport light and heavy tar sands crude for the next 99 years. Michigan should not be thinking about building a tunnel for Enbridge in the next decade, we should be taking immediate action to slash fossil fuel consumption by 45 percent.

The Michigan-Enbridge “Second Agreement”

Climate change aside, Michigan faces a serious risk of disaster from the aged, and failing original design of Line 5 in the Straits. To make sure we immediately address this risk, there are some critical realities beneath the rhetoric about the agreement that must be understood and avoided. If these realities are not avoided, Michigan citizens, communities, and businesses will face two disasters—(1) the intensity of catastrophic extreme weather from climate change and (2) an oil spill from Line 5 that would wreak massive irreparable damage and loss to Lake Huron and Lake Michigan, our drinking water, ecosystem, and economy.

1. This is not about meeting Michigan’s needs. Our leaders signed an agreement with recitals of fact claiming that “the continued operation of Line 5… serves important public needs by providing substantial volumes of propane to meet the needs of… citizens… and transporting essential hydrocarbon products, including oil to Michigan and regional refineries.” In fact, a number of modest adjustments would deliver propane via truck, train, or 4-inch-diameter pipeline to meet the needs of our rural residents. In fact, the existing pipeline network across southern Michigan and from Pennsylvania, Ohio, and the southern U.S. will meet the crude oil needs of Michigan and regional refineries. There are sensible, less costly alternatives within this existing pipeline network that render the need for Line 5 or a tunnel under the Straits imprudent and unnecessary. A number of independent studies, including FLOW’s, and the London Economics International (LEI) have come to this same conclusion: decommissioning Line 5 is not only economically feasible but is the best alternative because it would protect Michigan’s waters and natural resources, and it would have no noticeable impact on Michigan’s economy.
2. Enbridge’s pledge to operate consistent with its easement cannot be trusted. The agreement contains a recital that Enbridge “continues to operate and maintain such pipelines [dual 20-inch lines in the Straits] consistent with the terms of the [1953] Easement as part of Line 5.” In fact, the state and other organizations and reports have proven that Enbridge has violated its obligations in the Easement to prevent scouring of lakebed beneath the pipeline designed to lay on the bottom of the Straits, to exercise prudence in order to prevent harm to public and private property, and to provide financial assurances, among others. Unfortunately, it appears our State leaders would rather weaken the State’s ability to enforce the 1953 Easement.
3. Near-term safety measures don’t address Line 5’s failing design. The agreement contains a recital that “near-term measures to enhance the safety of Line 5, and the longer-term measure—the replacement of Dual Pipelines—can essentially eliminate the risk of adverse impacts that may result from a potential release from Line 5 in the Straits.” However, those “near-term” measures will not address the failing design of the 65-year-old oil pipelines in the Straits. The State has allowed Enbridge to install 150 anchors, with a request for 48 more, to elevate the dual lines above the lakebed as a “repair” or “maintenance” because the original, “as built” design failed to account for the scouring of lakebed under the lines. The installation of anchors elevating the lines above the lake bed constitutes a totally new or changed design of these dual lines. Worrisome currents and natural forces have pulled some of the anchors from the lakebed. Worse, the design has never been evaluated or authorized by state agencies, as required by the Great Lakes Submerged Lands Act (GLSLA) and Michigan Environmental Protection Act (MEPA). So an unauthorized, aged line will continue to operate while a longer-term tunnel will be proposed and discussed and built, if at all, in 7 to 10 years. Quite a deal for Enbridge. The company gets to run a pipeline with a failing design full-tilt in exchange for a promise to talk about the idea of a tunnel, if at all, sometime in the future. In effect, by allowing Line 5 to continue in the Straits, the agreement mostly ignores the high-risk of an oil spill causing an estimated $2 to $6 billion in damages to more than 400 miles of shoreline across upper Lake Huron and Lake Michigan.
4. The State cannot truthfully say the agreement protects public trust resources. The State agreed to a recital that “the terms of the Second Agreement will both protect the ecological and natural resources held in public trust…” Agreements to locate or allow occupancy of pipelines or other structures on, under, or through the bottomlands of the Great Lakes require authorization under the GLSLA. Until the Michigan Department of Environmental Quality determines that the location or occupancy of a tunnel will not promote primarily a private purpose or not impair the public trust in Lake Huron and Lake Michigan, the agreement cannot even be implemented. Why not just require Enbridge to decide for itself what it wants to do, and demand the company apply for the required determinations under the rule of law of the GLSLA? Unfortunately, State officials signed an agreement that circumvents this rule of law and deprives the public of notice, participation, and their legal right that the State enforce our laws to protect the public trust and welfare of our communities and citizens. If the law would be followed, the Second Agreement would not have ignored the independent studies; instead, the agreement appears to favor the self-serving studies commissioned by Enbridge.
5. The agreement commits the state to a new Line 5 segment under the St. Clair River without any environmental review. Paragraph B of the Agreement authorizes Enbridge to replace the segment of Line 5 under the St. Clair River with a new horizontal directional drilled (HDD) pipeline. In fact, the State agreed to allow Enbridge to make a substantial investment in this segment, tacitly confirming the continued existence of Line 5 for decades to come. How can our State officials commit to a new tunnel under the St. Clair River without considering and determining the risk sand alternatives to the entire length of Line 5, including the Straits? The law prohibits breaking up projects into little pieces to avoid full review of the risks, dangers, potential damages, and alternatives that would eliminate those risks. However, our State leaders allowed Enbridge to skirt the legal requirements that it must prove no more than minimal potential harm and no alternative to Line 5 (even though studies demonstrate that other alternatives exist and Line 5 is not necessary).
6. The State and Enbridge mistakenly claim the agreement provides for a “replacement” of the dual pipelines with an alternative Straits Tunnel in 7 to 10 years. In fact, there is no agreement or obligation for Enbridge to do anything: In paragraph I.F, state officials and Enbridge only agreed “to promptly pursue further agreements…” for “a replacement for the Dual Pipelines” in the Straits segment of Line 5. This means that Enbridge can decide not to agree to a replacement and continue operating the existing high-risk dual lines in the Straits indefinitely. It also means the State has ignored the legal requirement that Enbridge must first prove there are no alternatives to Line 5 in the Straits and Great Lakes under the GLSLA.
   • Paragraph I.G. of the agreement proposes a “Straits Tunnel” that is a corridor for a new Line 5 under the Straits for at least another 99 years. It is only a “proposal” and Enbridge and the State only agreed to “initiate discussions… to negotiate a public-private partnership agreement with the Mackinac Bridge Authority for locating the Straits Tunnel under the Straits of Mackinac. This means, Enbridge does not have to reach an agreement for a Straits Tunnel at all, but can continue operating the existing dual lines in the Straits indefinitely. It also means that a future “public-private partnership” (PPP) agreement will be negotiated with Enbridge and the Mackinac Bridge Authority. What exactly is a PPP?
   • There is no definition of what is meant by a “public-private partnership” agreement among the State, the Authority, and Enbridge. But PPPs are a flashing red warning light. PPPs substitute and favor private corporations with obligations to generate profits for shareholders for government or other publicly owned systems that by law are obligated to deliver services to the general public at cost. PPPs often involve property transfers, long term leases, and other agreements turning over public control of public lands and facilities to private interests. PPPs can be required to indemnify the government and public from liability for damages, but these agreements are often underfunded and do not supplant the liability of the state or a public body like the Mackinac Bridge Authority.
   • The Mackinac Bridge Authority was created by the legislature in 1952 for the sole purpose of constructing the Mackinac Bridge for the people of Michigan and the public to enjoy vehicular travel between the two peninsulas. The bridge was, and is, a public project for the traveling and motoring public. The bridge authority law does not authorize construction of a new tunnel for a privately owned pipeline company or privately owned electric utility, simply because a state utility board gives them a certificate of public convenience. These companies have an obligation to generate profits and dividends for their stockholders. The Bridge Authority has an obligation to preserve the fiscal and physical integrity of the Mackinac Bridge for the general public.
7. There is no requirement to shut down Line 5. In paragraph H.I there is a provision for the deactivation of the existing Line 5 in the Straits. However, it is not required unless Enbridge agrees to a tunnel, constructs one, and opens it for operation. Until that happens, there is no requirement for shutting down Line 5 in the Straits; the high risk of the aged, failing design will continue indefinitely into the future.
8. Enbridge’s financial assurance is at best vague and inadequate, at worst a sham. In paragraph I.J., Enbridge is supposed to provide a combination of assets and general liability insurance policies to cover a worst-case scenario risk assessment that estimates $1.878 billion in damages. In fact, another independent damage report puts the number at $6 billion, so the state accepted assurances at the low end of the range of estimated damages. Further, the estimated coverage is not adjusted for inflation over the next 10 years, and general liability policies often contain pollution exclusions that do not cover clean-up costs, restoration costs, and associated natural resource damages.
9. It appears the state has surrendered the water resources and pocketbook of the State and its taxpayers to Enbridge on flimsy financial assurance provisions. In paragraph I.J, the state also agreed that “Enbridge’s compliance with the requirements under this Paragraph I.J. satisfies its financial assurance obligations specified under Paragraph J of the [1953] Easement.” In short, the State has waived its leverage to enforce the financial assurance obligation in the current Easement.

Jim Olson, President and Legal Advisor

So, here we are in a world facing a “historically unprecedented” challenge to rapidly reduce greenhouse gases, and Michigan has signed a mostly non-binding agreement for the possibility of a tunnel in 2028, the same time-frame that the state and country must slash its fossil fuel consumption by 45 percent. From an eagle’s eye view, Michigan energy policy is to foster the expansion, of production and consumption of crude oil and increase in greenhouse gases at a time when the world is on the brink. From a fiscal point of view, the agreement commits the State to an investment in a tunnel and continued high risk of catastrophic damages or loss from the existing Line 5, at a time when most likely the world and national markets for fossil fuels will decrease, likely to the point that the pipe dream for a tunnel will never happen, or if it does, the State and its taxpayers will end up with an obsolete and unaffordable relic. One way or another, citizens will suffer harm, and taxpayers will suffer loss under an Agreement that favors Enbridge, not Michigan.