Guilty verdict on pipeline spill could impact industry

A guilty verdict last Friday against Plains All American Pipeline condemned the Houston energy company to be found guilty of causing a major California oil spill, adding new ammunition to fight the pipelines. fossil fuels in North America.

The California jury convicted Plains of a crime and eight counts, agreeing with the prosecution that the company had failed to maintain the corroded pipeline responsible for the spill of about 3,400 barrels of oil at Refugio State. Beach in Santa Barbara. L & # 39; incident. The spill, the largest on the California coast for 25 years, has spread to the Pacific Ocean and killed sailors, birds and wildlife.

The verdict comes not only at the time of transition for Plains, but his co-founder and CEO is retiring at the end of September, but also for an energy sector that is desperately trying to build more especially in Texas.

"The overall impact will be to increase the monitoring of new pipelines, not only in California, but throughout the United States, where license battles are becoming longer and more polarizing," said Sandy Fielden. , director of oil research at Morningstar. .

Fielden cited struggles for the still-pending Keystone XL Pipeline in the Midwest and the recently completed Dakota Access Pipeline in North Dakota, as well as smaller projects such as the Bayou Bridge Pipeline Expansion. in Louisiana.

The All American Plains verdict could energize pipeline opponents who claim that some companies have reduced maintenance costs to allow investors to pay healthy dividends, Fielden said. The likely outcome is project delays and ongoing constraints on pipelines that could drive up energy prices as producers turn to more expensive rail and trucking services.

Environmentalists, meanwhile, have welcomed the verdict and pledged to fight Plains All American's plans to rebuild the pipeline.

"Plains' criminal negligence has caused this devastating oil spill, and we can not give it a second chance to overturn," said Kristen Monsell, Ocean Legal Director at the California Center for Biodiversity Defense Group. .

Governments frequently launch civil cases against companies for pollution and other cases where they suspect misconduct, seek restitution and financial penalties. Philip Hilder, former federal prosecutor, said that criminal prosecutions, which require a heavier burden of proof, are generally reserved for high-profile cases such as the Exxon Valdez spill in Alaska in the 1980s or the Deepwater explosion Horizon in 2010. private practice.

It is unusual, however, for these criminal cases to be tried, Hilder said. For example, BP, which operated the Deepwater Horizon platform, pled guilty to several crimes and paid billions of dollars in criminal penalties before the case was brought before a jury.

"Businesses tend to settle cases before trial by paying fines," Hilder said. "In the case of a large spill, the government will tend to use them as teaching moments and sue them."

The Santa Barbara spill took place on May 19, 2015, after the rupture of a plain pipeline called Line 901. Corrosion problems had been documented as early as 2012, according to court records. In addition, an alarm that should have signaled the leak was deactivated at that time, allowing more oil to spill and delay reporting to the authorities.

About a year after the spill, a California grand jury indicted Plains All American and an employee, even though the employee was removed from the indictment. Plains All American assumed responsibility for the spill, but vehemently denied having acted criminally.

Despite the verdict of guilty on some counts, the jury concluded that Plains was not guilty of In a press release, the company said: "We are committed to making the right choice. The verdict did not take into account any wrongdoing by Plains or our employees regarding the operation of Line 901, and testimony has established our extensive clean-up effort. "

No officer or employee of the company is at risk of jail time. The plains can still appeal to the case.

Plains could be fined more than $ 1.5 million, but these fines in relation to the $ 150 million Plains reported spending millions of dollars for the extended shutdown of the pipeline.

"All things being equal," said Ed Hirs, an energy economist at the University of Houston, "this is probably the best result Plains could have hoped for."

Plains still faces civil litigation by California fishermen, landowners and investors in the Plains. The lesson here, Hirs added, is that companies must go beyond state and federal regulations to ensure that pipelines are properly inspected and maintained.

"The plains have clearly missed something here," said Hirs. "A pipeline does not corrode or break down in just six months."

The line is part of the "All American Pipeline System", which receives crude from the Santa Ynez field of Exxon Mobil in Las Flores, south of Los Angeles, and ends at Emidio station north of Santa Barbara. Exxon Mobil is requesting the use of tanker trucks to transport oil so that production can be restarted in the region.

Over the past 12 years, Plains and its affiliates reported about 280 incidents that spilled about 30,000 barrels of hazardous liquids, according to the US Pipeline & Hazardous Materials Safety Administration. The number of incidents is one of the highest in the industry, but Plains is one of the largest pipelines in the country.

Plains CEO Greg Armstrong will retire at the end of September after more than 25 years, creating Managing Director Willie Chiang, who joined the company in 2015, to succeed him. Armstrong became CEO in 1992 when the company was launched as Plains Resources. He was renamed Plains All American six years later.

Armstrong will remain president of Plains until 2019.