Friday, July 31, 2015

TransCanada Keystone XL Hits New Turbulence As South Dakota Permit Hearing Implodes Over Pipeline Corrosion, Market Demand

By Julie Dermansky • Thursday, July 30, 2015 - 14:11

Keystone corrosion TransCanada root cause report
Holes too big to fix were poked in TransCanada’s narrative that its Keystone XLtar sands pipeline will be the safest pipeline ever built. And questions were raised about how the pipeline company’s financial dealings are set up duringPublic Utilities Commission hearings in Pierre, South Dakota this week where state regulators are tasked to decide if the company is capable of following the rules the state set when the original Keystone pipeline permit was granted in 2010.
A team of lawyers representing Native American tribes and the grassroots group Dakota Rural Action took the upper hand during the proceedings as they tried to have a TransCanada executive’s testimony impeached. The proceedings took on a circus-like atmosphere when TransCanada was unable to prevent lines of questioning it didn’t like. 
The commissioners seemed unsure of its own procedures. At one point, Commissioner Gary Hanson expressed frustration that he was having trouble drawing a distinction between TransCanada’s evidence and its advertising statements.
The testimony of TransCanada’s key witness, Corey Goulet, president of Keystone Pipeline Projects, turned out to be an important centerpiece of the hearing.
In pretrial testimony filed by Goulet, he stated the company would have no problem meeting the Commission’s amended conditions.
However, TransCanada’s promises to build safe pipelines have been called into question with several high-profile incidents involving its existing pipelines, particularly the corrosion problems with the Keystone 1 pipeline. 
TransCanada 'root cause analysis' document, made available online by DeSmog on Tuesday, shed troubling light on the external corrosion encountered on the Keystone 1.

ROOT CAUSE ANALYSIS’ DOCUMENT CREATES HEADACHESQUESTIONS FOR TRANSCANADA

When Goulet was questioned about the significant corrosion discovered on the Keystone 1 pipeline in Missouri in 2012 — when the pipeline’s wall had corroded in one spot to the thickness of a dime — he downplayed the incident, claiming that none of the defects were close to rupturing.

“None of the defects, in my experience in 30 years of pipelines, would be injurious from the perspective of being close to rupturing. Therefore the only problem would have been the depth of corrosion,” Goulet testified. (Audio of Goulet testimony, relevant corrosion section at ~ 32:45 – 33:40)   
Bruce Ellison, one of the lawyers for the interveners, had handed Goulet a copy of the company’s root cause analysis report of the incident, before pointing out the corrosion area was much larger than Goulet had described. One of the defects involved a section of pipe where the wall had eroded 96.8 percent, which Ellison noted was close to a rupture incident.
TransCanada lawyers objected to any reference to the report because Goulet claimed he had never seen it and that it was classified. But since the report had already been entered into evidence, the interveners’ lawyers were allowed by the Commission to continue questioning him. 
In the course of discovery, TransCanada provided the report in question as part of the unclassified documents, and therefore could not exclude the report from evidence, the Commission said.
After that dispute was settled, Goulet admitted he knew the location of sites where the pipeline had been dug up for inspection and repair. 
As indicated in the ‘root cause’ report, Site 5 was only 200 feet from the Mississippi River, the primary drinking water source for 18 million Americans, as well as agricultural water for crop production. 

Image of Site 5 defect from TransCanada's report pg. 22. 
Evan Vokes, former TransCanada employee turned whistleblower, and an expert witness for the interveners, told DeSmog he has never seen a pipeline coating corroded as badly as the failed coating of the Keystone 1. It looked as if “it had been gnawed at by rats,” he told DeSmog.
Another former TransCanada employee reviewed the report and found it shocking. The fact that damaged sections of the pipe were repaired instead of replaced concerned him greatly. “We cut out better pipe than what I’ve seen in those pictures,” he told DeSmog. 

TRANSCANADA’S TAX REVENUE CALCULATIONS OFF BY A LOT

Goulet testified that the considerably lower amount of taxes TransCanada paid was less than had been estimated before construction — although the tax rate has since increased. 
While he stated he didn’t know the technical details of how the taxes are applied, he went on to testify that “TransCanada Pipeline LP is the owner of the Keystone XL pipeline,” explaining that it is a wholly owned subsidiary of TransCanada Corporation. While TransCanada Corporation has assets in excess of $50 billion, not all of that value would be assessed for tax purposes. Only the subsidiary’s assets would, Goulet explained. While TransCanada estimated that Keystone 1 would deliver at least $45 million in tax revenue to communities, Goulet admitted that the company has only paid $18.4 million over the first 5 years of the pipeline’s operation. That’s roughly a third of what TransCanada had estimated as the benefit it would deliver in tax revenue to affected communities.
 Goulet cited higher capital and operating costs for the discrepancy, blaming regulatory delays, technical changes, and inflation were responsible for the costs ballooning to nearly $2 billion for the Keystone 1 project. (Audio of hearing, relevant section on taxes at ~ 1:22:15 – 1:32:00)
The tax revenue discrepancies could have real impacts on communities that bank on the future of the Keystone pipeline.
In Harding County a bond was passed and a new school was built on the premise that TransCanada’s pipeline taxes would help pay for it,” Bret Clanton, a member of Dakota Rural Action said.

TRANSCANADA BULLISH ON BUILDING KEYSTONE XL DESPITE OIL PRICE SLUMP 

In afternoon testimony (audio from ~1:48:00 on), David Diakow, TransCanada’s Vice President, Commercial, Liquids Pipelines, opened the door to information that related to TransCanada’s business dealings related to the project.  
Diakow revealed that the company intends to build the pipeline no matter how low the price of oil goes. (audio ~ 1:54:40 – 1:57:15)
Robin Martinez, a lawyer for the interveners, described what came next as unusual in an email to DeSmog,
Paul Blackburn, one of the attorneys for the intervenors in the proceedings, started to question Mr. Diakow about market demand for the KXL pipeline. He began inquiring as to whether TransCanada’s customers were demanding changes to their contracts, which TransCanada objected to, claiming their contracts and communications with customers were highly confidential. TransCanada then argued that Mr. Blackburn’s questions relating to market demand for the pipeline were not relevant to the question of whether or not TransCanada could meet the conditions imposed by the Commission when it granted the original permit in 2010. However, by placing Mr. Diakow’s written testimony into the record they opened the door to full cross-examination of him under the applicable administrative procedure rules. Apparently not wanting to have him questioned, TransCanada withdrew him as a witness and asked the Commission to strike his testimony from the record.”
The Commission limited the scope of all further testimony for both parties to be pertinent to the amended conditions of the original 2010 permit, strictly limiting evidence presented for the remainder of the trial.
Peter Caposella, the lawyer representing the Rock Sioux Tribe said in all his years as an attorney, he had never seen a plaintiff remove their own witness in such a manner.  
As the near failure of the Keystone 1 line proved, the consequences of siting TransCanada’s bitumen-carrying export lines so close to drinking water supplies is a risk we can ill afford to accept in an age of water scarcity and climate disruption. 
Even if President Obama denies the permit for the pipeline to cross international borders, the next administration could reverse that decision. 
However, if the South Dakota Public Utility Commission decides TransCanada isn’t up to the job, TransCanada will have to start the entire re-permitting process again. 

Image credit: External corrosion pitting on Keystone 1 Pipeline, via TransCanada 'root cause analysis' report, pg. 28.

Tuesday, July 28, 2015

Evidence Released at TransCanada’s Keystone XL Permit Renewal Hearing Sheds Light On Serious Pipeline Risks

Keystone XL protest by Doug Grandt

Just because TransCanada continually states that the Keystone XL pipeline will be the safest pipeline ever built, doesn’t mean it is true.

The company’s pipeline construction record is facing intense scrutiny in America’s heartland, where many see no justifiable rationale to risk their water and agricultural lands for a tar sands export pipeline.
New documents submitted as evidence in the Keystone XL permitting process in South Dakota — including one published here on DeSmog for the first time publicly — paint a troubling picture of the company’s shoddy construction mishaps. This document, produced by TransCanada and signed by two company executives, details the results of its investigation into the “root cause” of the corrosion problems discovered on the Keystone pipeline.
TransCanada Corporation is continuing its push to build the northern route of the Keystone XL pipeline. On July 27, the company appeared at a hearing in Pierre, South Dakota, to seek recertification of the Keystone XLconstruction permit that expired last year. 
The South Dakota Public Utilities Commission must decide if TransCanada can guarantee it can build the pipeline under the conditions set in 2010, which it must do in order to have the permit reapproved.
High-profile spills and other incidents already tar TransCanada’s safety record. The company faces at least two known ongoing investigations by the Pipeline and Hazardous Materials Safety Administration (PHMSA). The incident records of thesouthern route of the Keystone XL (renamed the Gulf Coast Pipeline) and the Keystone 1 Pipeline call into question TransCanada’s claim that its pipelines are among the safest ever built. 
Over the last couple of years TransCanada’s public relations team, with the help of friendly regulators, have kept critical evidence away from the public and quashed many media inquiries.
But evidence of TransCanada’s poor performance continues to emerge. Earlier this year, DeSmog obtained documents revealing extreme external corrosion in a section of the Keystone 1 pipeline that was only two years old.

This figure from TransCanada's “root cause analysis” report shows damage to the Keystone pipeline.
  
Talk about a near miss,” Robin Martinez, a lawyer for the grassroots citizens group Dakota Rural Action fighting to stop the permit, told DeSmog.
Documents the group obtained during discovery show that the corrosion occurred dangerously close to the Mississippi River near St. Louis.
“Had the pipeline failed, the drinking water supply for a significant number of people could have been destroyed,” Martinez said.
The Commission is abrogating its responsibility by refusing to look at evidence we want to present,” Martinez told DeSmog.“ It is abundantly clear to us the Commission doesn't want to look at anything from any other agencies.”  
Although Dakota Rural Action was denied the opportunity to enter into evidence documents showing TransCanada failed to follow the federally mandated code of construction while building the southern route of the Keystone XL, Martinez still believes he can present a very strong case against TransCanada’s permit renewal request.
Granting a permit would be a risky venture for South Dakota, putting the state’s land and water at risk,” he said.
According to Martinez, the witnesses the group will present, including Evan Vokes, former TransCanada employee turned whistleblower, will make it clear that TransCanada’s corporate culture put profits over safety.
report by DeSmog earlier this year revealed an alarming rate of external corrosion to parts of TransCanada’s Keystone 1 pipeline. Documents obtained through a freedom of information act request indicated the pipeline was 95% corroded, leaving it paper-thin in one area (one-third the thickness of a dime) and dangerously thin in three other places, causing TransCanada to immediately shut it down.
In fact, TransCanada’s instrument readings state it was 96.8% corroded.
Due to PHMSA’s open investigation of the pipeline, regulators refused to turn over any documents that might explain the cause of the pipeline failure. 
But lawyers for the Dakota Rural Action group were able to compel TransCanada to turn over documents to which DeSmog and other media sources had been denied acess to - documents the group entered into evidence and is making public.
The documents include TransCanada’s root cause analysis explaining what caused the external corrosion incident in the Keystone 1 pipeline, where it took place and what the damaged pipeline looked like. The report shows how close to a catastrophic failure that pipeline was before a mandatory test exposed the problem. 
What caused such deep corrosion in Keystone 1 in a short period of time? Stray current interference, the company argues. A spokesperson for TransCanada told Politico the problems were linked to “low –voltage electric currents from the Keystone and a nearby pipeline interfering with one another.”
In laymen’s terms, that means “a bunch of professional engineers were behaving badly,” Vokes told DeSmog, “because there are adequate checks and balances in the regulations to avoid this.”
Vokes was not surprised when he reviewed the root cause analysis report, although it was the first time he saw photos of the pipeline’s coating that looked as if “it had been gnawed at by rats.”
When the line was shut down, Vokes advised reporters to look into what happened because he suspected that something very serious had gone wrong. “You don’t shut a pipe down that earns millions of dollars a day over a small anomaly,” he said. And that is how TransCanada described the incident to reporters in 2012.
Even with such damaging evidence, Vokes has doubts the Keystone XL permit will be denied.
How are we supposed to have a fact-based hearing if the Commission won’t admit the documents into evidence?“ Vokes wonders.
TransCanada’s technical shortcomings are not the only hurdle the company has to overcome. The company is being challenged by Native American tribes. “Tribes have a trump card— the treaty rights,” Gary Dorr, of the Nez Perce Nation told DeSmog. “Treaty rights are the supreme law of the land.”
*The hearing will stream live on the South Dakota Public Utilities Commission site.


Image credit: Protest against the Keystone XL pipeline in Ft. Pierre, South Dakota on July 26, 2015.  © Doug Grandt

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