Permits Required to Build TransCanada’s Keystone XL Pipeline in Jeopardy As Hearings Reveal Missteps

By Julie Dermansky • Monday, August 3, 2015 - 16:00

(Originally published on DESMOG BLOG)

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TransCanada’s decision to purchase all of the pipe needed to complete the Keystone XL Pipeline before receiving a presidential permit could prove a costly mistake.

Not only is President Obama expected to reject the permit TransCanada needs in order to cross the U.S.-Canadian border, the company must recertify an expired permit before it can install the pipeline though South Dakota as well.

At a hearing that began on July 29 in Pierre, South Dakota, the state Public Utilities Commission (PUC) is tasked to decide if it should recertify the company’s permit to build the Keystone XL pipeline through the state. Those opposing the Keystone XL, referred to as interveners, are making the case that TransCanada is not up to the job.

During the first week of the hearing, a mix of members of the grassroots group Dakota Rural Action, Native American tribes, individual landowners, and a team of all of the interveners’ lawyers began presenting testimony challenging TransCanada’s narrative that the Keystone XL “will be the safest pipeline ever built.” The interveners claim that is a public relations ploy far from the truth about TransCanada’s performance record.

TransCanada bears the burden to prove it is capable of following the rules that the PUC set when the original Keystone Pipeline permit was granted in 2010, so it is no surprise that the company objected to the interveners’ introduction of evidence that showed the company has had problems with its other recently constructed pipelines, including the Keystone XL’s southern route, renamed the Gulf Coast Pipeline.

Lawyers for the interveners have also questioned the PUC’s impartially. They believe the commissioners’ pre-hearing rulings to exclude testimony relevant to their case was unjustified. But instead of letting the PUC’s move weaken their case, they laid the foundation during their examination of witnesses that enabled them to refer to the excluded documents in their cross-examination. It was a technique John White, an attorney for TransCanada, repeatedly objected to, but in many instances his objections were overruled. 

The interveners also challenged the credibility of the witnesses called by TransCanada and the PUC staff by pointing out the witnesses’ lack of expertise and potential conflicts of interest. Though the commissioners did not strike the testimony of any of the witnesses as requested by the interveners, the testimony given by some of those witnesses was tainted. 

“The PUC staff have gotten upset with us for accusing them on the record of being in collusion with TransCanada,” Bruce Ellison, a lawyer for the Dakota Rural Action group, told DeSmog. 

“We are just calling it as we see it based on their continued support of TransCanada to keep the PUC from hearing evidence it should hear about the realities of this trans-national and its hired witnesses – two of whom work for an engineering company that lists TransCanada as one of its clients – who are being called on to support TransCanada’s bid for recertification of its construction permit through South Dakota.”

David Schramm, vice president of EN Engineering, is one of the witnesses hired by the commission to testify as an expert witness on corrosion. When questioned about his relationship with TransCanada, he insisted he never worked for the company and didn’t know if EN Engineering was currently doing business with TransCanada, despite the fact that TransCanada was listed as a client on EN Engineering’s website, according to the interveners' attorney. Schramm did acknowledge the company had done work for TransCanada.

The interveners also questioned the credentials held by Meera Kothari, who was the manager of technical services pipeline engineering for Keystone Oil Projects, and who had oversight responsibility for design and engineering for the Keystone XLPipeline project. She was recently moved to another position in the company, but was one of those chosen by TransCanada to testify about the Keystone project.

Kothari frustrated the interveners by avoiding answering numerous questions by stating, “That isn’t my area of expertise.” Interveners say she seemed to know very little for someone with such a high level of responsibility on the project. Although she lived in Houston for a number of years, Kothari never obtained an engineering license in Texas, a point the interveners stressed.

Precluded from pre-trial evidence were photos of segments of pipe procured for the Keystone XL that were stored at the Gascoyne pipe yard in North Dakota. The interveners were able to introduce the photos during their cross examination of Kothari when she disclosed that the pipe had been purchased by 2011.

At first Kothari claimed the pipe was stored at a few manufacturing facilities, but when questioned about pipe being stored at the Gascoyne pipe yard, she admitted some of it was also at that location.

The photos of the Gascoyne pipe yard show sections of pipeline piled up several layers high and left out in the open. The duration of time the pipes were stored without protection against the elements led the interveners to question the integrity of the pipe materials.

EN Engineering’s Schramm testified that the National Association of Pipe Coating Applicators recommends protecting pipe materials left above ground within six months. But Schramm added that Scotch, a,manufacturer, recommends taking measures to protect the pipe within 12-18 months. (Audio of Schramm’s relevant testimony at 0:23:15 – 0:29:00 on Saturday Aug. 1)

However, Sabrina King, a member of the Dakota Rural Action group who shot the photos referred to during the hearing, claimed the pipe had been at the Gascoyne yard in North Dakota since December 2010.

King’s photos were taken in May of 2013. By August that year, TransCanda did take action and protect the pipe, past both of the recommended times that Schramm mentioned.

“That is 2.5 years of pipe laying out in North Dakota, where the weather is horrendous, before it was fully covered,” King told DeSmog.( Audio of Schramm’s relevant testimony at 20:30 to 26:00 on Saturday Aug. 1)

At the close of the first week, John Harter, a South Dakota landowner and an intervener, described the proceedings as tense at times. “TransCanada has done little to help itself, sending incompetent witnesses,” Harter told DeSmog. He complained of TransCanada “witnesses answering questions with two answers, and witnesses not knowing what they are talking about.”

During questioning of Kothari, she responded that TransCanada is asking the PUC to recertify its permit based on documents submitted into evidence, some of which are out of date and have not been signed off on by engineers.

Kothari also revealed that the engineering for the pipeline is still not complete.  (Audio of relevant cross examination of Kothari at ~1:34-1:38 Saturday Aug 1)

Harter expressed bewilderment that the commission was willing to make a decision with incomplete information. 

Purchasing all of the pipe needed to build the entire project before getting a Presidential permit demonstrates the kind of risks TransCanada is willing to take, the interveners argue.

Despite the huge sums of money the company has spent lobbying for the Keystone XL Pipeline and for advertising, the pipeline’s completion is far from a done deal.

The PUC hearing has turned into a marathon event. Although the process was predicted to wrap up by August 4,the commissioners acknowledged the hearing timeframe would have to be lengthened. Parties involved in the proceedings tried to nail down an end for the hearing unsuccessfully at the start of today’s proceedings.  It is possible a decision on the presidential permit could come before the commission decides on how it will rule on TransCanada’s permit.

Photo: Pipe for the Keystone XL Pipeline at Gascoyne pipe yard in North Dakota. © 2013 Sabrina King

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

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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. 

A 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 HEADACHES, QUESTIONS 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.

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

By Julie Dermansky • Tuesday, July 28, 2015 - 10:45

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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.

A 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

WISE WOMEN MEDIA for August 5, 2015--Interview with Dady Chery, Activist, Broadcaster, Author On Her New Book About Haiti

 SOUNDCLOUD LINK TO SHOW:
https://soundcloud.com/wisewomenmedia/interview-with-dady-chery-on-8515

Wise Women Media will be interviewing Dady Chery and the broadcast will be available on Wednesday, August 5, 2015. Ms. Chery is with News Junkie Post and is an activist, broadcaster and author. We will be talking about Haiti extensively and her new book titled “We Have Dared to Be Free.” The book was written between 2010-2015 and is definitely a story that needs to be told.

A bit about the book: about one half of all US households donated money to various charities for Haiti after the devastating 2010 earthquake. There is information in this book that will help many understand why Haiti has not been rebuilt on a large scale and why the relief situation there has not improved. 

News Junkie Post turned six years old on June 6, 2015. They are branching out to other media such as books, radio and even down the line, to television. A few months ago News Junkie Post decided to launch News Junkie Post Press aka NJP Press. Ms. Dady Chery will have the distinction of being their first published author.  

See more at: http://newsjunkiepost.com/2015/06/26/njp-press-launched-with-dady-cherys-book-we-have-dared-to-be-free/#sthash.DsuKqLPt.dpuf

***LINK TO BROADCAST WILL BE NOTED HERE A FEW DAYS BEFORE THE EVENT. 

The show will be archived on SOUNDCLOUD.

***Post your questions on the FB event wall and I will ask each one during the interview.

Link to the FB Event Page here: https://www.facebook.com/events/412929158892744/

***After my health diagnosis in February 2015, I planned on not doing another show or interview. But frankly, I missed it. And based on how many people asked me to continue the shows and interviews I decided to keep pressing on, perhaps with some updated branding, a new format and shorter segments. Also decided against using BlogTalkRadio as my platform. Thanks everyone for your encouragement!!!