By Dina omeara, Calgary Herald, August 18, 2010
Insurance expected to cover 90 per cent of costs
Clean up costs of an oil spill into Michigan waters could reach up to $400 million, not including environmental fines, according to a subsidiary of Calgary-based Enbridge Inc.
A worker from Enbridge Energy skims oil off the surface of the Kalamazoo River after a pipeline ruptured in Marshall, Michigan, on Tuesday, July 27, 2010. (Photograph by: ANDRE J. JACKSON, MCT) (Click for larger image) |
In a filing with the U.S. Securities and Exchange Commission, Enbridge Energy Partners estimated pre-insurance charges associated with the July 26 oil pipeline rupture near Marshall, Mich. would reach between $300 million US and $400 million.
More than 3.3 million litres of crude oil tainted waterways leading to the Kalamazoo River in south Central Michigan last month, staining the lush riverbank with black gunk for a 40-kilometre stretch.
"These charges will include the emergency response, environmental remediation and cleanup activities associated with the crude oil release, costs to repair the pipeline and related inspection costs, potential claims by third parties and lost revenue," Enbridge Energy Partners said in the filing, released late Tuesday.
The Houston-based affiliate said direct costs to the company would be between $35 million US and $45 million US, also exclusive of fines and penalties, and will not affect cash distributions.
However, the company said the lag time between covering the costs and payback from insurance will affect cash flows into early 2011.
The impact on parent company Enbridge Inc. is expected to be modest, nicking up to six cents per share, including fines, according to analysts.
Insurance should cover 90 per cent of the charges, with total coverage not an issue for Enbridge, said Steven Paget, with FirstEnergy Capital Corp.
The company holds a 28 per cent working interest and tax effects in the U.S. affiliate, he noted. Its shared costs on the spill would translate into $5.6 million, or 1.5 cents per share, and up to 4.7 cents a share depending on fines.
"The impact on earnings is marginal since we're looking at earnings per share of $2.66 in 2010," Paget said.
domeara@theherald.canwest.com
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