EPA Faults State Department Review of TransCanada Pipeline

The U.S. State Department failed to properly analyze potential environmental impacts of TransCanada Corp. (TRP)’s planned pipeline to carry crude from Canada to the Gulf Coast, according to the Environmental Protection Agency.

The department’s review of the $7 billion project lacks information the EPA needs to assess effects on groundwater or air pollution, according to a letter sent to Jose Fernandez, assistant secretary for economic, energy and business affairs. The State Department is reviewing the project because it crosses an international boundary.

Environmental groups and some Democrats oppose the planned 700,000-barrel-a-day pipeline, which would carry crude from Canada’s oil sands across Montana, South Dakota, Nebraska, Oklahoma and Texas to U.S. refineries. The department has said a decision will be issued by the end of this year.

“We have a number of concerns regarding the potential environmental impacts of the proposed project, as well as the level of analysis and information provided concerning those impacts,” according to the letter from Cynthia Giles, assistant EPA administrator for enforcement. “Our concerns include the potential impacts to groundwater resources from spills, as well as effects on emission levels at refineries in the Gulf Coast.”

TransCanada defended the State Department, which conducted a thorough review in the past three years, Terry Cunha, a company spokesman, said in a telephone interview.

“We thoroughly disagree with what the EPA is saying,” Cunha said. Additional tests are unnecessary, he said.

More Study Needed

The EPA raised concerns last year about the project after the State Department released a preliminary environmental review. The agency said more work was needed on potential greenhouse-gas emissions from the project, pipeline safety and impacts on wetlands and migratory birds.

“The State Department clearly isn’t qualified to be in charge of the safety of such a big tar sludge pipeline project,” Jeremy Symons, senior vice president of the National Wildlife Federation in Reston, Virginia, said in an interview.

The pipeline would cross an aquifer providing 78 percent of Nebraska’s drinking water. Senator Ben Nelson, a Nebraska Democrat, has pressed for a detailed study of the environmental issues, citing the potential for a leak that would endanger his state’s drinking water.

Diluting Chemicals

In its review, the State Department said chemicals used to help the heavier crude from Canada’s tar sands flow through the line “may vary between shippers and is considered proprietary information.” As a result, the EPA said it couldn’t determine the potential impacts to groundwater in the event of a spill.

“We believe an analysis of potential diluents is important to establish the potential health and environmental impacts of any spilled oil,” according to the EPA’s letter.

The agency cited a leak at an Enbridge Energy Partners LP pipeline in southern Michigan last year that spilled volatile benzene, added to speed the heavy crude through the line, into the soil. High benzene levels near the accident site prompted an evacuation.

About 20,082 barrels, (843,444 gallons) of crude spilled from the pipeline near Marshall, Michigan, in July. About 8,033 barrels reached Talmadge Creek, which flows into the Kalamazoo River, Enbridge said.

Last week, the U.S. Pipeline and Hazardous Materials Safety Administration issued a corrective-action order to TransCanada after an existing 591,000-barrel-a-day pipeline leaked in May at pumping stations in North Dakota and Kansas. TransCanada of Calgary, Canada’s biggest pipeline operator, restarted the line on June 5 after the regulator approved the company’s plans, TransCanada said in a statement.

‘We Don’t Know’

“There’s a lot we don’t know,” Carl Weimer, executive director of Pipeline Safety Trust, a Bellingham, Washington- based group that promotes fuel transportation safety, said on a conference call with reporters. “You can’t really plan for the safety of the pipeline.”

The proposed route is within one mile of 1,194 water wells in Nebraska, according to Bold Nebraska, a group based in Lincoln, whose goal is to “restore political balance,” according to its website. Many are irrigation wells that would quickly spread contaminants to crops in the event of a spill, the group said.

“TransCanada didn’t build the first pipeline right, and the safety concerns this raises are too grave to allow approval of a second, more dangerous pipeline that will have the potential to leak even more oil into our soil and water,” the group said in a letter to the State Department.

The American Petroleum Institute, the Washington-based association that represents more than 470 oil and natural gas companies, yesterday urged approval of the pipeline. The project will add 20,000 U.S. jobs and lower dependence on oil from the Middle East, said Marty Durbin, an API executive vice president.

To contact the reporter on this story: Jim Efstathiou Jr. in New York at jefstathiou@bloomberg.net

To contact the editor responsible for this story: Larry Liebert at lliebert@bloomberg.net

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