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Enbridge CEO: Pipeline prospects tougher

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CALGARY  -- A U.S. regulator’s stinging criticism of Enbridge Inc’s response to a 2010 pipeline rupture in Michigan will make it tougher to convince Canadians to support a controversial C$5.5 billion oil line to the Pacific Coast, the company’s chief executive said on Wednesday.

CEO Pat Daniel said he disagreed with the chairman of the U.S. National Transportation Safety Board’s (NTSB) characterization last week of Enbridge’s employees as “Keystone Kops” as they struggled to deal with crude spilling into the Kalamazoo River system in the devastating 2010 incident.

Environmental groups and politicians opposed to Enbridge’s Northern Gateway oil pipeline seized on the comments by NTSB Chairman Deborah Hersman, saying the remarks were more evidence the project was too risky for British Columbia.

“To cast doubt on the operational capability of a company that’s considered to be best in the world does create additional challenges for us,” Daniel said in an interview before embarking on a canoe trip on the Kalamazoo to tour boat-launch facilities the company installed following the spill cleanup.

“We just have to ensure that we explain fully to (British Columbia) residents that that was not representative of the culture and outline ... the changes that we have made.”

The Northern Gateway pipeline would ship 525,000 barrels a day of oil derived from the Alberta tar sands to Kitimat, British Columbia, where it would be loaded onto tankers and shipped to markets in Asia and California. It would add to Enbridge’s existing network, already the world’s largest oil and liquids pipeline system.

Prime Minister Stephen Harper’s Conservative government has made shipping oil across the Pacific a top priority, saying it will mean major rewards for the Canadian economy as energy companies diversify their markets and generate richer returns for their production.

However, the rupture of Line 6B near Marshall, Michigan, which spilled more than 20,000 barrels of heavy crude in the summer of 2010, came back to haunt Enbridge as it seeks regulatory approval for that project against the wishes of several native communities and environmentalists who warn against oil spills on land and in coastal waters.

Some analysts have not added Northern Gateway to their financial projections for Enbridge, saying risks of rejection by regulators or legal action still remain too high.

Last week’s NTSB comments have also stained Daniel’s reputation after he had won kudos for his handling of the spill at the time, remaining in the region and making himself available to the public and media.

The Michigan incident was just a few months after the BP Plc spill in the Gulf of Mexico, where former CEO Tony Hayward was sharply criticized for saying during the disaster he wanted his life back and for other gaffes.

Daniel, 65, is due to retire this year. Al Monaco, Enbridge’s president, has been named to replace him.

The NTSB said the main failure in Michigan was due to multiple small “corrosion-fatigue cracks” that grew over time to create a breach in the pipe over 80 inches long. It said Enbridge knew for years that the section of pipe was vulnerable.

It also said that line spilled crude for 17 hours as controllers restarted the line twice following the first alarm.

The report by the NTSB followed a $3.7 million fine imposed by the Pipeline and Hazardous Materials Safety Administration, its largest ever.

Daniel said the comparison of his employees to the “Keystone Kops”, the bumbling police of the silent-film era, was unfair, and does not take into account changes and improvements the company has made in the aftermath of the disaster.

They include about 2,500 excavations on its pipeline system, plans to replace 75 miles of Line 6B for integrity reasons and changes to operating and control room procedures, he said.

“The fact set was published about a month ago and we don’t have any significant issues with the fact set. We participated in the preparation of that,” he said. “But that characterization — we don’t accept it. It’s not representative of the culture at Enbridge.”

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