08/02/2012 06:44 EDT | Updated 10/02/2012 05:12 EDT

Enbridge faces new conditions on pipeline restart

A U.S. regulator has imposed new conditions that Enbridge will be required to meet before it is allowed the restart its Line 14 pipeline which ruptured last week, spilling 1,200 barrels of oil in Wisconsin.

The Pipeline and Hazardous Materials Safety Administration said Thursday that Calgary-based Enbridge would be required to submit a plan to improve the safety of its entire 3,000-kilometre Lakehead Pipeline system.

And it will also have to hire an independent expert to review, assess and oversee implementation of the plan.

The new conditions came the same day as Enbridge CEO sought to assure the B.C. government the firm will be able to meet all safety concerns about its proposed Northern Gateway pipeline proposed to run from near Edmonton, to a tanker terminal at Kitimat, B.C.

Line 14 carries up to 318,000 barrels of Canadian crude a day to refineries in the Chicago area. It is part of the Lakehead system, which runs from North Dakota through Chicago and on to Buffalo, New York.

The new conditions come on top of an order issued on Tuesday.

That order required Enbridge to submit a written plan for U.S. government approval before it could resume shipping oil. The company was also ordered to conduct testing on the burst segment, reduce operating pressure in the pipeline by 20 per cent, and come up with a plan for long-term monitoring of the pipe, among other conditions.

The spill last Friday dumped oil onto farmland, forcing the evacuation of two homes and threatening a drinking-water source four kilometres away.

Enbridge said yesterday it had completed repairs to Line 14.

CEO confident firm can meet B.C. safety concerns

The order noted that Line 14 had ruptured before, in 2007, when 1,500 barrels of oil spilled in Atwood, Wis. Following that leak, tests by Enbridge found "multiple crack anomalies" in the piping.

"The history of failures on respondent's Lakehead Pipeline system, defects originally discovered during construction, and the 2007 failure indicate that respondent's integrity management program may be inadequate," the order stated.

The leak followed a recent report by the U.S. National Transportation Safety Board that likened Enbridge's handling of a spill two years ago in southern Michigan to that of the "Keystone Kops."

In that case, the ruptured pipeline spilled some three million litres of crude into wetlands, a creek and the Kalamazoo River.

Earlier, Enbridge CEO Patrick Daniel said it was confident it can meet all of the safety demands by the B.C. government about the Northern Gateway project.

"We feel absolutely confident that we can do that," Daniel told a conference call to discuss the company's latest quarterly results.

The B.C. government said last month the company must include "world-leading" plans to prevent and respond to a marine or land oil spill as well as ensure aboriginal and treaty rights are addressed in order to win the province's support.

Daniel said the company is learning from the spills and applying to lessons to improve its operations.

Company reports profit of $11M

"Our ability to quickly detect and immediately respond to and contain the leak on Line 14 was critically important," he said.

The province also wants to receive what it calls a "fair share" of the economic benefits that reflects the risk borne by the province.

The comments by the company came as it reported a second-quarter profit of $11 million or a penny per share on $5.72 billion in revenue, down sharply from $302 million or 40 cents per share on $6.94 billion in revenue a year ago due to unrealized losses on a hedging program.

Excluding one-time items, Enbridge reported an adjusted profit of $277 million or 36 cents per share, up from $258 million or 34 cents per share a year ago.

Enbridge has met stiff resistance from First Nations groups and others over its plan to build the Northern Gateway pipeline so that Canadian crude can be shipped overseas.

The company recently announced a slate of safety improvements, such as thicker pipe and better monitoring, that would push the $5.5-billion project's price tag up by $500 million.

Aboriginal groups, environmentalists and others are among the many critics to voice concern over what a spill on the pipeline, or from a tanker on the West Coast, could have on northern B.C. ecosystems.

A Joint Review Panel had been expected make a recommendation to the federal cabinet on the pipeline by the end of 2012, but a decision is now expected a year later due to the sheer volume of comments it must hear.