STATE OF MICHIGAN

BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION

In the matter of the application of WOLVERINE PIPE LINE COMPANY for authority under 1929 PA 16 to construct, operate and maintain a pipe line for the Transportation of liquid petroleum products.

Case No. U-l 3225

MICHIGAN PUBLIC SERVICE COMMISSION STAFF’S INITIAL BRIEF

I. Factual Background

This case is the second in a series of two cases evaluating Wolverine Pipeline Company’s

applications to construct a liquid petroleum pipeline in the area. In March of 2000, the Company

proposed its initial application to construct and operate the Jackson to Lapaugh Pipeline, which

began just north of Jackson, Michigan, extends to Wolverine’s pump station near Stockbridge,

and continues north westerly to the Lapaugh Station near St. Johns, Michigan. In the initial

application as well as in the one filed in this matter, Wolverine stated the Mid-Michigan area is

in need of more supply of liquid petroleum products, due in part to the closure of the total/UDS

Alma refinery in 1999. In Commission Order No. U-12334, issued on March 7,2001, the

Commission found there is a need for the pipeline. However, the Commission only approved the

Southern portion of the Jackson to Lapaugh Pipeline because Wolverine had withdrawn the

northern portion of that application.

On December 6,2001, Wolverine filed the Spartan Pipeline application, the subject

matter in this case, as a replacement to the northern portion withdrawn from their last

application. Construction of the Spartan Pipeline will enable Wolverine to take the pipeline

constructed in the late 1930’s between Freedom Junction and its Lapaugh Station out of service.

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The Spartan Pipeline will transport primarily gasoline and fuel oil which are hazardous and

flammable liquids.

II. Procedural History

On January 4,2002, a prehearing conference was held at the Commission before

Administrative Law Judge James M. Rigas. Public comments were heard pursuant to Rule 207

with speakers addressing concerns over the location of the pipeline generally related to safety

issues and property values. Full intervenor status was granted to the City of Lansing and Mayor

David Hollister and to Ms. Lisa Dedden on behalf of herself and the residents of County

Commission District 10. These intervenors joined Wolverine and the MPSC Staff as parties to

the case.

Hearings on the evidence were held on March 25,2002 and March 26,2002.

III. Summary

Wolverine presented 8 witnesses. Mr. Leslie Cole, the general manager of Wolverine

Pipeline Company described Wolverine Pipeline Company, provided the history into why

Wolverine is requesting this route, described the proposed route, and the operation and

maintenance policies for the pipeline. He also testified about how Wolverine complies with Title

49 of the Code of Federal Regulations involving safety procedures (part1 90), response plans

(part 194) and Transportation of Hazardous Liquids by pipeline (part195). In addition, He stated

that Wolverine complies with other applicable regulations, both federal and state, addressing the

environment, health and safety issues. He described that these regulations are minimum

standards of compliance for Wolverine and it is Wolverine policy to use pipeline industry best

practices that are more stringent than regulations require.2TR404

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Mr. C.S. Woodburn, the project Executive for Wolverine testified as to the purpose and

need of the project. He provided the project engineering specifications (Exhibit A-12), a

document (Exhibit A- 13), which compares and demonstrates how the proposed pipeline exceeds

the requirements of regulations promulgated by the U.S. Department of Transportation for liquid

petroleum product pipelines, and a cost estimate (Exhibit A-l 5). Mr. Woodburn testified that the

pipeline capacity is 55,000 BPD at a maximum operating pressure of 1440 psig and the cost of

the project is $17.5 million. Mr. Woodburn also submitted rebuttal testimony concerning Ms.

Cook’s testimony.

Wolverine called Steven J. Koster, principal of Environmental Resources Management

(ERM) and manager of the firm’s Holland office. Mr. Koster presented an Environmental

Impact Review for the proposed pipeline (Exhibit A-5). The document which is a

comprehensive review and evaluation of the proposed route reflects that the construction and

operation of the proposed pipeline will not result in any significant environmental impact along

the proposed route.2TR3 19 Mr. Koster provided rebuttal testimony to Bruce Hensel, James

Ruff, Charles Green, Clyde Dugan and Mayor Hollister.

Wolverine also provided the testimony of Daniel M. Cooper, P.E. President of HT

Engineering with over 20 years of experience. Mr. Cooper was retained to evaluate the safety

aspects of Wolverine’s proposed pipeline. He provided a risk assessment study. Mr. Cooper

testified that the proposed pipeline is safe with respect to both the proposed route and

engineering design. 2TR180 and that the pipeline is designed to meet or exceed Federal codes

and industry standards for hazardous liquid pipelines, and is safe.2TR182 Mr. Cooper also

provided rebuttal testimony to Mr. Green, Dr. Laird and Greg Martin.

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Wolverine provided the testimony of Dr. John Kiefner, Ph.D., P.E. who is president of

Kiemer and Associates. He has over 34 years of experience in pipeline risk assessments,

pipeline integrity studies and failure analysis. The purpose of Mr. Kiefner testimony was to

rebut Dr. Lair-d’s testimony.

Wolverine also filed testimony of Kevin P. Bowman, Supervisor of Blackman Township,

testified in rebuttal to the city of Lansing’s testimony. Mr. Bowman testified that “For the most

part, the City of Lansing’s representations and assumptions on what happened in Blackman

Township are based on misinformation, disinformation or scare tactics that have little to do with

reality” 2Tr257. Mr. Bowman testified that Wolverine is an “excellent corporate citizen, that

remaining environmental damage is negligible, that economic growth has not been adversely

affected and that the vast majority of residents were well served by the effective partnership in

emergency management between Wolverine, Blackman Township and the other organizations

which responded to the incident.“2TR258

Wolverine also presented Thomas J. Woodford, Associate professor and Head of the

Department of Fire Protection and Safety Engineering Technology at Oklahoma State

University. Mr. Woodford testified that he disagreed with Mr. Martin description of a leak that

“could potentially result in a Fountain of Fire with Blowtorch types of effects.” He testified that

a large release would be short lived as the Pipeline’s SCADA system would close the valves and

the isolated pipeline segment would rapidly depressure. He went on to testify that a “blowtorch”

effect requires pressure that would not be present once the valves close. 2TR380

Wolverine also presented Martin N. Sara, a Principal hydrogeologist with ERM. Mr. Sara

testified the route was reviewed for geological and hydrogeological features that would affect the

movements of potential petroleum releases. Mr. Sara review of the 49 well logs in this vicinity

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of the pipeline showed the majority of the pipeline has significant thickness of very low

permeability glacial sediments under it that were ignored by Mr. Dugan and Mr. Hensel. 2TR263

He testified that these clays protect the aquifer from being quickly contaminated by a release

from a pipeline. 2Tr 287 Mr. Sara went on to testify in the areas that did not have thick layers of

clay underlying the pipeline route, that the contaminants would take possibly decades longer than

10 years to get to water table 2TR 284 and that in areas near the Grand river and Sycamore creek

a spill would go toward the creek instead of the water table. 2TR 285

Mayor David C. Hollister of the City of Lansing expressed his objections to Wolverine’s

route through the City of Lansing.

Clyde Dugan employed by the Lansing Board of Water and Light as Director of Special

Projects testified that the pipeline would pass through the Wellhead Protection Area (WPA) of

Lansing and provided Exhibit I-22, which depicts the areas where the pipeline crosses the WPA

and where 10 wells are within a % mile of the pipeline. 3TR593. He testified that the WPA is an

area that contributes water to the public supply within a lo-year time frame. He went on to

testify that he is ‘concerned about leaks contaminating the public water aquifer. 3TR594. He also

testified he had concerns about abandoned wells and private water wells providing a direct

conduit for contaminating the private and public water supply.3TR599

Mr. James A. Ruff Lansing’s Manager of the Planning Office provided Exhibit I- 17

which is a Existing Land use map of the south end of Lansing and Exhibit I- 18 which is

Population and Housing Units map in the vicinity of the pipeline. He also provided additional

exhibits, which deal with proposed land use in the future. He testified that in his opinion the

pipeline is within a highly populated and developed area and an accidental spill could threaten

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and adversely affect persons, households businesses and water resources. 3TR 561. Mr. Ruff

provided rebuttal testimony to Mr. Mazuchowski’s testimony.

Ms. Patricia Cook, Lansing’s Manager of the Economic Development Corporation,

testified that the pipeline will not necessarily produce either jobs or benefits to the local

economy.

Mr. Martin, Lansing’s Fire Chief and emergency management director filed testimony

describing some of the potential and inherent dangers of installing the proposed pipeline in the I-

96 corridor, fi-om the perspective of fire prevention and protection. He went on testify that

potentially a fountain of fire with blowtorch types of effects could occur and he is concerned

with mitigation of fire.3TR505

Mr. Campbell, Professor of Materials Science and Engineering at the University of

Pennsylvania testified for Lansing in his expertise of fracture of materials, material use and

failure analysis. He states that in his opinion there is a significant probability that the design and

structural deficiencies in the proposed pipeline will likely result in a failure in the

pipeline.3TR662

Mr. Hensel a Hydrogeologist for Natural Resource Technology testified on behalf of

Lansing on the potential for migration of contaminants to the drinking water in Lansing in the

event of a pipeline failure. Mr. Hensel testified that in the event of a leak the contamination of

the Saginaw Aquifer could occur perhaps in shorter time frames but it could also take longer and

whether the city’s water supply wells become adversely affected depends on many factors. He

went on testify that the relatively slow rate of groundwater movement provides an opportunity to

mitigate contamination in the event of a leak, if the leak is detected but it is difficult and

expensive. 3TR636.

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Mr. Charles R. Green, a self-employed Real Estate Appraiser and developer testified on

behalf of Lansing by describing two alternate routes around the city of Lansing. Exhibit I-29

depicts both of the alternatives.

A. Jurisdiction

Iv. Argument

The Materials Transportation Bureau, Office of Pipeline Safety Operations has

jurisdiction over the safety of oil and liquid petroleum pipelines once they have been

constructed. This jurisdiction is pursuant to the Transportation of Explosives Act (18 USC 83 l-

835). 49 CFT Part 195 provides regulation concerning the construction and operation of liquid

petroleum pipelines. However, neither the Transportation of Explosives Act nor the associated

federal regulations deal with approving the construction and location or particular routing of a

proposed liquid petroleum pipeline. That aspect of regulation is handled by state or local

control.

In Michigan, the Michigan Public Service Commission has been granted authority to

control and regulate oil and petroleum pipelines pursuant to Act 16 of 1929 PA. Act 16 provides

in applicable part:

An Act to regulate the business of carrying or transporting, buying, selling or dealing in crude oil or petroleum or its products, through pipelines; to authorize the use of public highways and the condemnation of private property; to regulate the purchase and storage of crude oil or petroleum; to provide for the control and regulation of all corporations, associations and persons engaged in such business, by the Michigan public utilities commission; to define the power and duties of the commission in relation thereto; and to prescribe penalties for violations of the provisions hereof.

The People of the State of Michigan enact:

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0 22.1341. Crude oil or petroleum; buying, selling or transporting; law applicable. Sec. 1. Every corporation, association or person now or hereafter exercising or claiming the right to carry or transport crude oil or petroleum, or any of the products thereof, by or through pipeline or lines, for hire, compensation or otherwise, or now or hereafter exercising or claiming the right to engage in the business of piping, transporting or storing crude oil or petroleum, or any of the products thereof, or now or hereafter engaging in the business of buying, selling or dealing in crude oil or petroleum, within the limits of this state, shall not have or possess the right to conduct or engage in said business or operations, in whole or in part, as above described, or have or possess the right to locate, maintain, or operate the necessary pipelines, fixtures, and equipment thereunto belonging, or used in connection therewith, concerning the said business of carrying, transporting or storing crude oil or petroleum as aforesaid, on, over, along, across, through, in or under any present or future highway, or part thereof, or elsewhere, within this state, or have or possess the right of eminent domain, or any other right or rights, concerning said business or operations, in whole or in part except as authorized by and subject to the provisions of this act except further and only such right or rights as may already exist which are valid, vested, and incapable of revocation by any law of this state or of the United States. (MCL 6 483.1.)

0 22.1343. Control by commission; private business excepted. Sec. 3. There is hereby granted to and vested in the Michigan public utilities commission, hereinafter styled the “cornrnission,” the power to control, investigate and regulate every corporation, association or person, now or hereafter exercising or claiming the right to carry or transport crude oil or petroleum, or any of the products thereof, by or through pipeline or lines, for hire, compensation or otherwise, or now or hereafter exercising or claiming the right to engage in the business of piping, transporting or storing crude oil or petroleum, or any of the products thereof, or now or hereafter engaging in the business of buying, selling or dealing in crude oil or petroleum, within the limits of this state: Provided, however, That all corporations, associations, or persons who are producers, or refiners of crude oil, or petroleum, or operators of private trunk or gathering lines or other methods of conveying such products, where the nature and extent of their business is private, and where in the conduct thereof no public interest is involved, are hereby specifically excepted and excluded from the terms of this act. (MCL 0 483.3.)

0 22.1346. Acceptance of act; plat, filing. Sec. 6. Before any corporation, association or person shall have, possess, enjoy or exercise the right of eminent domain, right-of-way, right to locate, maintain, or operate pipelines, fixtures or equipment appurtenant thereto, or used in connection therewith, as authorized by the provisions of this act, or shall have, possess, enjoy or exercise any right conferred by this act, every such corporation, association or person, shall file in the office of the Michigan public utilities commission, an

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explicit authorized acceptance of the provisions of this act; and in cases of pipelines a plat showing in detail the points within this state between which, and the route along which, the trunk line or trunk lines are proposed to be constructed, the intended size and capacity thereof, and the location and capacity of all pumping stations, gate valves, check valves and connections and appliances of all kinds used, or to be used, on said trunk line or lines; and upon demand of the Commission the proper party or parties, as required by said Commission, shall promptly file a plat showing in detail all the lines owned and operated by them respectively, with full and explicit information as to their capacity, size and location, and the valves and connections, of all kinds, respectively required or used in the operation thereof. (MCL 0 483.6.)

0 22.1348. Commission; rules and orders. Sec. 8. The commission is hereby authorized and empowered to make all rules, regulations and orders, necessary to give effect to and enforce the provisions of this act. (MCL 0 483.8.)

0 22.1349. Commission, employment of clerks, inspectors, experts. Sec. 9. The commission is hereby authorized and empowered to employ such clerks, inspectors, and experts as may be necessary to carry out and administer the provisions of this act. (MCL 0 483.9.)

8 22.1342b. Minimizing physical impact and economic damage; good faith effort by pipeline company. Sec. 2b. A pipeline company shall make a good-faith effort to minimize the physical impact and economic darnage that result from the construction and repair of a pipeline. (MCL 0 483.2b.)

These statutory provisions clearly provide the MPSC with broad jurisdiction to approve

the construction, maintenance, operation and especially the routing of oil pipelines delivering

liquid petroleum products for public use. The Commission fulfills these obligations through the

utilization of experienced experts such as Mr. Mazuchowski (Sec. 9), and speaks authoritatively

through its final orders which are binding unless overturned on appeal.

Finally, while the specific phrase public “convenience and necessity” is not found in Act

16, the statute read as whole and as interpreted in Lakehead Pipeline Co. v Delm, 340 Mich App

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25 (1954) contemplates an applicant thereunder make a showing of need for the project so as to

justify obtaining from the Commission the right to the extraordinary power of condemnation by

right of eminent domain of land necessary for the project. The following excerpt fi-om

Lakehead, supra, demonstrates that the longstanding interpretation of Act 16 by the Commission

and the Courts includes the requirement of a showing of need by an applicant tantamount to a

demonstration of “public convenience and necessity”:

In bringing the instant proceeding plaintiff relied on PA 1929, No. 16, as amended (CL 1948,s 483.1 et seq. [Stat Ann and Stat Ann 1953 Cum Supp 6 22.1341 et seq.]). In its petition, filed in circuit court on September 11, 1953, it averred compliance with the provisions of the statute, claimed that the right-of- way across the land of defendants was necessary for the public use in the construction of the pipeline, and that it had been unable to acquire such right-of- way. An order was sought appointing three qualified commissioners to determine the necessity for the taking and use of the easement and the amount of the damages to be paid.

The answer to the petition, in substance, denied plaintiffs right to maintain the proceeding. Testimony relating to the issues raised was taken before the circuit judge, who came to the conclusion that defendants’ objections to the jurisdiction of the court were not well founded. Plaintiffs corporate organization, the nature of the project in which it was engaged, and its compliance generally with the requirements of the statute were shown. Among other maters, it appeared that plaintiff had made application to the public service commission of the State for approval of the location and construction of the pipeline in question, and that after a hearing, at which certain intervenors contested the granting of the approval sought, an order was entered authorizing plaintiff to construct, operate and maintain as a common carrier a 30-inch oil pipeline as planned. The use of two 20-inch pipes across the Straits of Mackinac was approved, and the commission further directed that plaintiff should comply in all respects with PA 1929, No. 16, above cited.

In accordance with his conclusion, the circuit judge entered an order appointing commissioners to determine the necessity of plaintiffs obtaining an easement across the land of defendants and to determine the compensation and damages payable therefore. On the 6’h of October, 1953, proofs were taken before the commissioners, from which it appeared that plaintiff intended to operate the pipeline as a common carrier of petroleum products, that negotiations with different parties in Michigan had been conducted for the delivery of oil to Michigan refineries, and that the establishment of “take-off points” for other purchasers requesting delivery in this State was contemplated. Testimony was

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offered tending to establish that the construction of the pipeline and its operation in the manner intended would result in industrial benefits to the areas concerned. Plaintiffs president testified that in addition to delivering oil to refineries and other purchasers in Michigan the company would be prepared to transport Michigan oil between points in this State, or between points herein and consignees outside of the State, if available therefore. It may be noted in this connection that on the hearing before the circuit judge on the jurisdictional questions raised by defendants the assistant secretary of the plaintiff testified that oil would be transported through the pipeline in intrastate commerce if future production in this State rendered such service possible.

Based on the proofs taken before them, the commissioners concluded that a public necessity existed for the taking of the easement across the property of the defendants, and that a public necessity likewise existed for making the proposed improvement. Lakehead, supra, at 28-30. (Emphasis supplied).

B. Need for the Pipeline

In its March 3,200O Opinion and Order in Case No. U-12334, the Commission found

that there was definitely a need for a liquid petroleum pipeline in Mid-Michigan. (March 3,200l

Order, p. 15). The Commission cited the testimony of Mr. Mazuchowski and Mr. Woodburn

who make similar recommendations in the instant case, referring especially to the need for a

replacement source for gasoline supplies following closure of the Total/UDS refinery in Alma,

and the clear superiority from both safety and economic standpoints of a modern high-tech

pipeline over the only other alternative, tanker trucks. (Tr. 444, Woodburn; Tr. 740,

Mazuchowski)

Moreover, Mr. Woodburn testified that the existing 8 inch pipeline does not possess

sufficient capacity to supply current and future needs of southeastern and central Michigan (Tr.

444), a fact that is echoed in the Commission’s March 3,200l Order in U-12334 at pp. 15-l 6. In

light of this and the inability of intervenors to demonstrate otherwise, the need for the Spartan

pipeline is firmly established.

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C. The MPSC Staff Position

The Staff sponsored Donald J. Mazuchowski as its witness. He has a Bachelor of

Science Degree in Biochemistry and a Bachelor of Science Degree in Chemical Engineering.

Mr. Mazuchowski has 20 years of experience as a Petroleum Engineer with the Staff of the

MPSC and that experience includes primary responsibility for evaluating petroleum pipeline

applications during that period, including evaluation of the initial Wolverine application in Case

No. U-12334. Mr. Mazuchowski testified that after reviewing the proposed route in this case,

and those presented in Case No. U-12334, the Staff believes utilizing the I-96 corridor is the

preferred route for the Mid-Michigan area. He recommends approval of the application

contingent upon Wolverine agreeing to the additional safety features discussed below. (2 Tr.

744). Mr. Mazuchowski then summarized the benefits of the proposed route.

Q- A.

What are the benefits of the route of this pipeline?

The freeway corridor is isolated, fenced, has minimal easements and contractors have to be permitted by MDOT before they are allowed to work inside the corridor. As mentioned earlier, this corridor will minimize third party damage because of the limited access provided by the highway and the regulation by the MDOT. The route utilizes existing corridors almost the entire length, which in turn, minimized the impacts to the residents and their property and minimizes environmental damage. The route had no residences within 50 feet of the pipeline and few residents within 150 feet from the pipeline. In general, most residences are not located near the highway. Unlike almost every other potential corridor, in the future, most residences will not build near the edge of the freeway. The freeway corridor will act as a buffer area for safety. Also, Wolverine has designed into this pipeline additional safeguards in addition to what is required to meet the Federal Regulations.

Q. What additional safeguards have been designed into the pipeline?

A. Mr. Woodburn’s Exhibit A- 13 (CSW-2), provides a comparison between what is required by Federal Regulations and the additional safeguards Wolverine is utilizing. Some of the more important safeguards are that: (1) Wolverine is adding extra wall thickness for its pipe which will further minimize the potential for corrosion leaks and make it more difficult to fail if there was a third party contract; (2) In the sections of the pipeline to

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be directional-drilled, Wolverine will be utilizing additional wall thickness and special coating for the pipe; (3) Redundant over-pressure protection, experienced inspectors and extra. coverage depths will be utilized; (4) Wolverine will internally inspect (smart pig) each pipeline segment every 5 years; (5) Wolverine will provide extra remotely operated mainline valves and hydrocarbon detectors which will quickly shut down the pipeline in the event of a leak thus minimizing the volume of any product lost; and (6) Aerial patrols will be scheduled weekly.

Mr. Mazuchowski then went on to compare the route of the Spartan Pipeline proposed in

this case to the route Wolverine proposed in Case No. U-12334 in Meridian Township and East

Lansing.

Q- How does the route of the Spartan Pipeline compare to the route Wolverine proposed in Case No. U- 12334 in Meridian Township and East Lansing?

A. I compared the proposed Spartan Pipeline route with Wolverine’s original proposed route through the highly congested area of Meridian Township and East Lansing. The risk of third party damage is enormously reduced with the Spartan Pipeline route. Utilizing the limited access I-96 corridor creates a distance buffer between the businesses and residents. The previously proposed pipeline in Meridian Township and East Lansing has 14 houses closer than 50 feet while the entire Spartan Pipeline has none. The Michigan Gas Storage alternative, which was one of four Staff recommended alternatives has more houses closer than 150 feet to the pipeline than the Spartan proposal. The Michigan Gas Storage alternative was the most remote location of the four alternatives. The previously proposed pipeline was very close to the two schools, the water treatment facility, Meridian Mall, two retirement homes, and it bisected apartment and condominium complexes. In the unlikely event of a leak on the Spartan Pipeline, disruptions to the residents will be minimized because the corridor is already isolated. Exhibit S-34 (DJM-5) list these and other differences.

Mr. Mazuchowski also addressed the potential effects the proposed pipeline may have on

the drinking water supply in the area.

Q. What has the Staff done to evaluate the potential effects the proposed pipeline may have on the drinking water supply in the area?

A. In addition to meeting with our own geological engineers on this issue, Staff has met with officials of the U.S. Geological Survey (USGS) and the Drinking Water and Radiological Protective Division of the Michigan Department of Environmental Quality (MDEQ). Staff met with these

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Q. A.

Q- A.

Q*

A.

Q.

officials to discuss the potential impact of the pipeline on the area’s groundwater, consequences of a spill, remediation methods and contingency plans to minimize the risk. Most of the drinking water wells in this area are covered with significant layers of impervious clay above the bedrock aquifer. However, some wells do not have this protective layer and are at greater risk. Currently the precise location of the areas without the impervious layers, that are near water wells, are unknown but we believe the areas are small. The Staff agrees with USGS and the MDEQ that its is difficult if not impractical in today’s society to eliminate all new threats or risks to the area. That is the reason a state of the art contingency and response plans would minimize any risk to these wells. Included in the plan should be an aquifer vulnerability study near the pipeline attempting to located areas that do not contain the protective clay areas.

What is the Wellhead Protection Program?

It is a state managed program developed by Municipalities, to protect public contamination. Protection is provided by identifying the area contributing groundwater to public water wells, identifying sources of contamination within the area, developing methods to cooperatively manage the area, and developing a contingency plan for water supply emergencies.

Does Lansing have a Wellhead Protection Program?

Yes. Lansing had been involved with the MDEQ and the surrounding local communities in developing a plan for this area.

Mr. Pandy, in testimony for the City of Lasing submitted with its petition to intervene in this case generally testified that the Mason Esker, which runs from Dewitt, through Lansing, to Mason is of concern because water moves very rapidly through the sand and gravel of an esker. If contamination occurred in the Mason Esker, it would also move very quickly and impact the drinking water. Do you agree with these statements?

No. Most of the Lansing water wells are completed in the bedrock. In the unlikely event of a leak, Wolver.ine’s contingency plan would contain the leak before it reached the bedrock drinking aquifer. Currently in Lansing, many gasoline stations have underground storage tanks which leaked and contaminated the ground with gasoline, which is the main product transported in the Wolverine Pipeline. These contaminated sites are in varying stages of remediation to remove the contamination from the ground. I am not aware of any situation where a leak has affected Lansing’s drinking water.

Are there existing facilities in the Lansing area that pose a similar or greater threat to the drinking water supply?

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A.

Q.

A.

Q.

A.

Yes. Existing railroad and highway traffic, landfills, and other industrial sites can transport or store potential hazardous liquids.

In your opinion, how does the Wolverine’s proposed Spartan Pipeline impact the local wellhead protection area?

One of the main parts of a Wellhead Protection Program is to address potential sources or areas that could be a threat to the water supply. Once identified, contingency plans are added to the plan to minimize threats to the water supply. The Lansing area has a Wellhead Protection Program that has been in place since 1990, which has adequately protected the local water supply and demonstrated Lansing is well equipped to handle threats to their water supply. This same: technology used to clean up contaminates around underground storage tanks can be utilized to contain and remove any potential contaminates from the Wolverine Pipeline. Wolverine should work with the City of Lansing to develop a specific contingency plan to minimize any impact to the area.

How do you know the contingency plan will be adequate to protect the local water supply?

The technology to clean up gasoline contamination is currently being utilized in the Lansing area and to my knowledge gasoline has not contaminated the drinking water. The unfortunate spill in Blackman Township, almost two years ago., of a larger diameter higher pressure pipeline than proposed now by Wolverine, has shown with proper planning and emergency procedures, significant damage to the environment can be minimized. No water wells were contaminated and the spill posed minimal permanent damage to the environment. Wolverine recovered 80% of the product lost and has removed and replaced, as much as practical, the contaminated soil around the site of the lead and nearby creek bank. Wolverine is monitoring the area and continuing to work with the MDEQ. Wolverine has shown that with the help of the Federal, State and Local officials, they can effectively contain a leak and protect the public as well as their source of drinking water. Furthermore, as a last resort type of protection, Lansing’s water supply can be gathered in a central location and treated to remove any contaminant that may reach the water supply.

Mr. Mazuchowski also discussed the possible impact of abandoned water wells on the

pipeline and what should be done to reduce the threat of contamination along the pipeline.

Q. A.

What impact does abandoned water wells have on the proposed pipeline?

Abandoned wells that are not properly plugged are a potential threat to contaminate the water supply system. Any type of contaminate spilled

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Q-

A.

nearby that enters the abandoned well bore could potentially pose a threat. Lansing is working on a 10 year plan to plug these wells in the area.

What should be done to reduce a threat of contamination along the pipeline route?

Lansing has identified 73 abandoned wells, approximately a half mile from the pipeline. Even though Wolverine’s pipeline has the proper safeguards to operate safely in this area, Wolverine’s contingency plan should address the location of th.e abandoned wells to assure, in the unlikely event of a spill, that contaminants would not get into these wells. In addition, Staff believes it would be prudent for Wolverine and the City of Lansing to develop and implement a plan to properly plug the abandoned wells in the near future. Plugging these wells would provide another layer of protection near the pipeline as well as minimize threats to the Wellhead Protection Area from a number of other sources.

Mr. Mazuchowski stated that the pipeline should cause only minimal impact to the

environment if constructed and operated as proposed in the Environmental Impact Report since

the areas along the I-96 right of way have previously been disturbed and have not damaged the

environment (Tr. 75 1).

As noted by Mr. Mazuchowski, the Office of Pipeline Safety (OPS) of the U.S.

Department of Transportation regulates the safety of the pipeline. Exhibit S-35 contains a letter

from OPS which explains the jurisdiction and auction taken by OPS to date. Mr. Mazuchowski

testified Staff believes the pipeline is designed in a manner that exceeds the Hazardous Liquid

Pipeline Safety Regulation administered by the OPS and can be operated in a safe mariner (Tr.

752). However, Staff believes additional safety features can add protection that would further

reduce the possibility of a leak and reduce the threat to the Lansing area’s drinking water.

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Staff’s Additional Safety Recommendations

1. To provide rapid shutdown of any failed pipeline segment, Staff recommends

Wolverine install at least two alternative-operatIed mainline valves in the I-96 corridor. In the

alternative, Wolverine could install a safety device that would automatically detect leaks.

2. To provide an extra layer of protection against corrosion leaks or from third party

damage, Staff recommends Wolverine utilize pi.pe with a wall thickness of 0.5 inches in the area

underlain by the Mason Esker.

3. Finally, Staff recommends the C~ommission require Wolverine to develop a

specific detailed Emergency Response Plan for this pipeline and work with state and local public

safety officials to ensure the plan can be carried out.

Mr. Mazuchowski testified that with these additional safety features the Staff believes the

proposed Spartan Pipeline can be operated in a ‘manner that will minimize any safety risk to the

general public as well as to the ground water. (‘I?. 753).

D. Intervenor Objections to the Pipeline.

Intervenor City of Lansing and Commissioner Lisa Dedden opposed the application due

to concerns with the route that allege undue safety risks to the people of Lansing, especially with

respect to possible effects on groundwater in the event of a pipeline leak, and possible fire

hazards resulting from a major leak for which tlhe City is allegedly unable to adequately respond.

Also, concern was expressed over the Wolverine spill in Blackman Township near Jackson,

which intervenors designate as “catastrophic”. Finally, Intervenors question the integrity of the

pipeline itself and seek further exploration of alternate routes. The following comments address

these related topics.

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1. Groundwater

The City of Lansing produced three witnesses who discussed concerns over the

groundwater issue. The groundwater allegations are from Mayor Hollister, Clyde Dgan of the

Lansing Board of Water and Light, and Mr. Hensel, a Hydrogeologist for Natural Resource

Technologys.

Mr. Dugan’s concern is that the pipeline would pass through the Wellhead Protection

Area and could contaminate the public water aquifer. (3 Tr. 594). He is also concerned about

abandoned wells and private water wells providing a direct conduit for contaminating the private

and public water supply. (3 Tr. 599). However both Mr. Dugan and Mayor Hollister rely for

specifics concerning groundwater issues on the testimony of Mr. Hensel whose testimony is

addressed below.

As previously noted, Mr. Hensel testifie:d that in the event of a leak, the contamination of

the Saginaw Aquifer could perhaps occur within 10 years or possibly even a shorter term.

However, he also testified that it could take longer, and whether the city’s water supply wells

become adversely affected depends on many factors. He further stated that the relatively slow

rate of groundwater movement provides an opplortunity to mitigate contamination of the leak if

detected, but it is difficult and expensive to do ;so. (3 Tr. 636).

The credibility of these concerns did not survive cross examination, and they have been

effectively and comprehensively addressed by Wolverine and the additional safety

recommendations of the Staff. First, the basis for the concern with the pipeline crossing the

Wellhead Protection Area (WHPA) is the lack of a continuous confining layer of clay soil or

shale bedrock between the water table aquifer and the Saginaw aquifer. According to Mr.

Hensel, if a continuous confining layer is present, then potential for migration to the Saginaw

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aquifer is low. If the confining layer is absent or discontinuous, or otherwise breached, then the

two aquifers are hydraulically connected and there is potential for migration to the Saginaw

aquifer if hydraulic gradients are downward. (Tr. 633). According to Mr. Hensel, the hydraulic

gradient along the pipeline corridor is downward,. (Tr. 635). Moreover, he testified that in five

of the seven reviewed boring logs near this pipeline indicate there is no shale confining layer

between the Saginaw aquifer and the water table aquifer. Accordingly, Mr. Hensel believes

there is potential for migration of dissolved constituents to migrate to LBWC water supplies if

the proposed pipeline should leak within the WHPA. There are several problems with

characterizing this scenario as realistic and serious enough to reject the pipeline proposal. First,

the basis for the data indicating a non-continuous layer of clay or shale insulation present within

the WHPA is the well logs that were used. As Mr. Hensel admitted, the drillers who compiled

the well logs featured in Mr. Hensel’s Exhibit I-25 are not trained geologists knowledgeable in

indentification of glacial or soil materials. (Tr. 643). By contrast, accordingly to Mr. Hensel,

when a geologist drills, the log for a monitoring well or for a bore hole is designed for truly

accurate geological characterization, “we’ll pull discreet samples ahead of - whatever drilling

tool we use. So that we’ll drill five feet and then we’ll sample two to five feet depending on

what sort of sampling equipment we’re using ahead of that.” Mr. Hensel went on to testify that

“A driller does not do that. Instead of pulling up an actual sample of what he’s drilling through,

he’s just trying to identify by little bits and pieces that happen to come up though the bore hole

and those bits and pieces could be from the intlerval he’s working in. They could be from five

feet above the interval he’s working in. And there is no real guarantee that the textual

characterization of those pieces isn’t going to be jumbled up as they work their way up the bore

hole.” (Tr. 643-644). Mr. Hensel then agreed that based on the well logs in his exhibit he is

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really not sure whether the clay or shale barrier is there. (Tr. 644). In any event, it is difficult to

understand the negative inference Mr. Hensel draws concerning the clay barrier, since with

respect to wells contained in his Exhibit 25, the: well logs indicated ample clay overlays ranging

from 17 feet to 55 feet. (Tr. 645).

Moreover, Mr. Hensel’s testimony not only was seriously undermined on cross-

examination, it was squarely contradicted by otlher expert witnesses. Wolverine witness Steven

J. Koster is a professional engineer with a Bachelor of Science Degree in both civil engineering

and a Masters Degree in Environmental Engineering, both from the University of Michigan. He

has over 15 years of experience in environmental site assessments and remediation which,

significantly, includes groundwater hydrogeological investigations and soil and groundwater

corrective actions at sites of environmental contamination. (Tr. 3 15-3 16). Mr. Koster disputes

much of Mr. Hensel’s description of the WHPA, but more significantly, the following excerpt

from his testimony seriously undermines Mr. Hensel’s concerns regard the lack of a “continuous

confirming clay or shale layer of protection:

Further, at page 6, lines 3 through 8 of Mr. Hensel’s prefiled direct testimony, he first testifies that it is unlikely that light petroleum product could directly enter the water supply wells. He then goes on to state that chemical constituents in the petroleum product will dissolve in groundwater if the pipeline leaks and that chemical constituents such as MTBE are very mobile when dissolved in groundwater. In response to Mr. Hensel’s concerns, it must be noted that there is no MTBE in gasoline shipped by Wolverine in Michigan. Also, other gasoline constituents that can dissolve in water, such as benzene, are subject to mechanisms that retard their movement like biodegradation and adsorption to soil.

In addition, page 7 and a portion of page 8 of Mr. Hensel’s prefiled direct testimony include a discussion indicating the lack of a continuous coming layer (either clay or shale) between the upper glacial aquifer and the lower drinking water aquifer. This is based on an examination of 7 well logs, the EIR statement that clay layers in the area are not continuous, and the presence of the Mason Esker. ERM has examined these same ‘7 logs, plus 14 additional public water well logs and numerous private well logs, as well as specific soil information provided by the U.S. Geologic Survey (USGS) to identify localized geologic

20

features. While the clay layer between the two aquifers is not continuous throughout all portions of the WHPA, all 21 public water well logs show a clay layer present, and several show an additional confining shale layer. Furthermore, the great majority of the route intersecting the Lansing WHPA is underlain by a clay layer, which serves to protect the lower drinking water aquifer.

Geologic cross sections of the soil underlying the proposed route in the Lansing WHPA show only one small area (approximately 100 feet in length) where clay appears to be absent. The WHPA area n.earest the Mason Esker is underlain by clay, while the Mason Esker itself is located outside the WHPA. Therefore, in the unlikely event of a spill in the esker area, it would take more than 10 years for contaminants to reach the closest well. In fact, depending on the release location, impacted groundwater may flow toward Sycamore Creek and never reach any public water well. While certainly no leak is desireable, in this scenario it is preferable that the leak would flow toward a surface water body where it would be more visible, and more easily controlled and cleaned up.

Page 8, line 16 through 20 of Mr. Hensel’s prefiled direct testimony indicate that a potential exists for dissolved chemical constituents to migrate to the LBWL water supply wells in the event of a leak from the proposed pipeline. However, the likelihood of a leak impacting LBWL wells is extremely low based on the discussion of soils and the behavior of gasoline leaks provided herein. This is further supported by the fact that, in spite of several hundred existing and potential contamination sources within Lansing’s WHPA, including many leaking gasoline storage tanks, no gasoline constituents are reported by the LBWL to be impacting any city water wells. Furthermore, the likelihood of a leak occurring at all is very low; based upon the DOT Office of Pipeline Safety data for pipelines built in or after 1970 and as reported in the 199 1 through 2000 time period, the probability of failure is once in every 2,450 years.

Finally, this analysis does not account for the protective location of the pipeline in the Michigan Department of Transportation’s (MDOT) right-of-way (ROW), the sue of thicker wall pipe in the esker areaL, or the increased burial depth in the area of the esker, all of which make a leak even less likely.

Also undermining Mr. Hensel’s testimony is the rebuttal testimony of Wolverine witness

Martin N. Sara, also a hydrogeologist, who, as a principal of Environmental Resources

Management, is responsible for performing groundwater hydrogeology projects involving the

evaluation of geological conditions and groundwater flow. Mr. Sara has more than 32 years of

experience as a hydrogeologist. (Tr. 280). His testimony addressed the potential environmental

impacts along the proposed pipeline route. He testified that the majority of environmental

21

concerns expressed by Mr. Hensel and Mr. Dugan did not address the actual geological

conditions of surficial glacial sediments. According to Mr. Sara:

They only described the bedrock geology without considering the surficial clay units that protect the bedrock aquifers corn surface contamination. For example, the glacial drift along the portion of the proposed pipeline that runs north from Lansing Road to the Lansing Terminal is similar to the portion along the south side of Lansing with numerous clay layers. This northern portion is less populated and only one municipal public: supply well is located within 0.5 miles of the proposed pipeline. Delta Township well #7 is located near MDOT milepost MP92.1 and geologic logs of the well show 96 feet of clay overlying the bedrock utilized for obtaining water. The majority of these low permeability clay till units are 20 to 50 feet thick within the WHPA. (Tr. 28 1).

Mr. Sara then discussed the geological conditions that could affect the movement of

groundwater toward the water well supplies:

Most of the surface topographical features in mid-Michigan are the result of the Wisconsin glacial period. The glacial ice that once the state melted about 8,000 to 14,000 year ago. As the ice melted, a mantle of glacial drift was left on the beds of sandstone, limestone, and other sedimentary bedrock of the Paleozoic age. Ingham, Eaton, and Clinton County terrain is characterized by nearly level to rolling till plains and end moraines. The glacial till plains and end moraines in this area are fine grained, containing silts and clays, with limited areas on interbedded outwash materials consisting of sand and gravel. The glacial drift ranges from a few feet to several hundred feet in thickness. The thickness, hydraulic relationships and permeability of these glacial sediments are the primary mode for the control of petroleum movement in the subsurface. (Tr. 282).

Mr. Sara testified that the Spartan pipeline route had been reviewed for geological and

hydrogeological features that would affect the movements of potential petroleum releases from

the proposed pipeline, noting that the most important criteria that can affect groundwater

movement to water supply facilities is the geology underlying the pipeline route. He concluded

that “Much of the City of Lansing’s expressed concerns focused on environmental issues that

22

included only the partial evaluation of the role of the geologic and hydrogeologic aspects that

control movement of petroleum products.” (Tr. 283). Mr. Sara explained:

The route of the proposed pipeline project was divided into a series of segments based on the WHPA. These segments were evaluated according to the geologic conditions present under the pipeline along the WHPA, as developed from borehole data from 49 well logs obtained form the State of Michigan. These borehole data were developed into a series of cross sections specific to the WHPA identified above. The majority of the pipeline route was shown to have significant thickness of very low permeability glacial sediments. The presence of these glacial till clay layers were ignored in the testimony of both Mr. Dugan and Mr. Hensel, even when they appeared in the logs used in their testimony. (Tr. 283).

Mr. Sara also evaluated the areas within the WHPA that do not have thick layers of clay

underlying the pipeline route, stating that as a result of such evaluation he “was hard pressed to

find significant sandy zones based on cross-sections derived from well data and United States

Geological Survey cross section information:

For example, our cross section through ,the northern Delta Township WHPA shows clay. A USGS cross section for the Delta/Windsor Township WHPA areas (where the Grand River crosses the proposed route) shows at least some clay in every log near the highway. In addition, almost all of the Lansing Board of Water and Light (LBWL)WHPA is protected by clay along the proposed route.

Q- WHAT DID YOU OBSERVE IN GEOLOGIC CROSS-SECTIONS FOR THESE AREAS?

A. The cross-sections can be divided into two basic hydrogeologic types: (1) areas with sandy soils and downward gradients, and (2) sandy areas located near discharging streams or rivers. The first type includes a small area in the Lansing WHPA, the easterly portion of the area near Sycamore Creek/Mason Esker, and a similar small area in the Michigan State University (MSU) WHPA. The second type includes an area at the southern Grand River crossing (although clay is also observed in this area) and the westerly portion of the Sycamore Creek/Mason Esker area.

If we consider Sycamore Creek/Mason Esker as a potential vulnerable area, our review of USGS modeling data plus the cross sections shows three things: (1) the part of this sandy area that is in the WHPA is actually underlain by clay; (2) the next part to the east is outside the WHPA, but not actually in the esker itself. A spill here may go toward a well, but would take possibly decades longer than 10

23

years to get there even without accounting for the time required for migration in the unsaturated zone. Using SESOIL modeling for calculation of unsaturated flow provides tens of more years before a release could reach the water table; and (3) the most eastern part is the esker itself and is within the influence of Sycamore Creek - a spill here will go to the creek. This is due to the upward gradients that discharge to adjacent streams or rivers such as Sycamore Creek and the Grand River. Both locations show hydrogeologic hydraulic characteristics of protective upward gradients that would discharge releases from the pipeline to surface water rather than into underlving bedrock aquifers. (Tr. 285).

There are small areas within the Lansing WHPA and the MSU WHPA where the base

grade of the pipeline would be in contact with sandy soils, Mr. Sara evaluated those areas using

the SESOIL model, a program developed for the United States Environmental Protection

Agency’s Office of Water and Toxic Substances. (Tr. 285). The results of the study are

reassuring. According to Mr. Sara:

Both the small sandy areas in the Lansing WHPA and in the MSU WHPA were modeled using both the unsaturated and saturated flow models described above. In these cases, the levels of benzene reached Drinking Water Standards within 500 feet of the potential release area. Other areas with even minor thickness of clay soils showed that the release would not even reach the water table in 60 years. (Tr. 286).

With respect to the testimony of Mr. Hensel and Mr. Dugan, Mr. Sara concludes, as

should this Commission, that there is reason to re-examine the testimony of those witnesses since

they portrayed the potential risk to the WHPA along the proposed pipeline as resulting from the

pipeline being directly connected to the bedrock aquifers. To the contrary, Mr. Sara’s more

scientific analysis demonstrate that the actual conditions there show “thick layers of very low

permeability clays underlying the majority of the pipeline route in the WHPA. These clays

protect the aquifer from being quickly contaminated by a release from the pipeline,” according to

Mr. Sara. (Tr. 288).

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Finally, it is noteworthy that the well logs results utilized by Mr. Sara were substantiated

by checking results in several instances with the results of on site excavations. (Tr. 301). This is

another indication of the reliability of Mr. Sara’s analysis compared to that of Mr. Hensel, whose

study is based in logs of dubious quality which were not checked for accuracy by comparison

with excavation results.

The Staff believes the foregoing evidence clearly favors a finding that no reasonable risk

to groundwater supplies can be demonstrated by the intervenors. This, taken together with the

extra measures for safety required in Mr. Mazuchowski’s testimony, is ample reason to consider

the groundwater issue satisfactorily addressed assuming the Staff recommendations are adopted

by this Commission.

2. Fire Hazard Response

City of Lansing Fire Chief Greg Martin testified that in the case of a catastrophic failure

of the pipeline system, there is always the danger of fire which, because of the volume of product

in the pipeline, could potentially result in a “fountain of fire” with “blowtorch” types of effects

which could create life-threatening risks to those situated near the fire. (Tr. 505). Mr. Martin

also stated that his Fire Department does not have the capability to extinguish large flammable

liquid fires. He also claimed that during the pipeline leak near Jackson that Wolverine failed to

shut down the pipeline for approximately four hours and might not have the capability to

effectively respond to such an incident in a densely populated metropolitan area such as Lansing.

However, Chief Martin’s testimony was quickly unmasked on cross-examination. First,

with respect to the Blackman Township incident, Mr. Martin admitted he has not talked with

anyone in Blackman Township and was relying solely on a report from the Michigan State

Police’s Emergency Management Division, a report he did not have with him. (Tr. 5 10).

25

Moreover, the statement about the four hour delay in shutting down the pipeline is highly suspect

as it is directly contradicted by the testimony of Blackman Township Supervisor Kevin P.

Bowman who testified:

With respect to Mr. Martin’s suggestion that Wolverine did not shut down the pipeline for approximately four hours, that is contrary to what I viewed in the eye of the storm. Wolverine’s response was immediate, i.e., the spill occurred at 8:45 a.m., Wolverine’s Dallas Control Center recognized the problem and the line was immediately shut down and blocked in. The only reference I know of to four hours is the time it took to completely drain the product between remotely controlled valves. (Tr. 261).

Moreover, in the Blackman Township incident there was no “fountain of fire” or “blow

torch” effect. (Tr. 512). Indeed, it appears from Mr. Bowman’s testimony that the

characterization of the Blackman incident as a catastrophe, and of Wolverine’s response as being

in “disregard for the safety of the Community” (Tr. 505) is inaccurate. Mr. Bowman stated:

Later in my testimony, I will address the numerous governmental, public and private entities that joined hands almost immediately to form the effective partnership which resolved the situation. The point to be made here is that in the early hours, I kept a close eye on Wolverine’s hour-by-hour interactions with the emergency management team to see if Wolverine would try to cut costs and not keep its commitment. Instead, Wolverine went beyond what I believe it was required to do. Simply stated, Wolverine was an outstanding corporate citizen. (Tr. 261-2).

Nor would the public in Lansing be solely dependant on the Lansing Fire Department to

deal with a pipeline leak. Mr. Martin admitted on cross that Lansing is part of a hazardous

materials team to address accidents with the East Lansing and Delta Township Fire Departments

being the other members of the team. (Tr. 5 19). Further, Lansing has mutual fire aid agreements

with the Dewitt Township, Lansing Township, East Lansing Township, Meridian Township,

Delhi Township, and Capitol City Airport. (Tr. 520-521). And of course, based on the record,

there would be full cooperation and aide from Wolverine itself. In summary, the concern that

26

there are insufficient resources to deal with the unlikely scenario of a significant pipeline leak is

unfounded.

E. The Design of the Pipeline is Exemplary.

City of Lansing witness Dr. Campbell Laird raised concerns about alleged design

deficiencies in the Spartan pipeline which “will likely result in a catastrophic or non-catastrophic

failure in the pipeline” (Tr. 118). However, Wolverine witness John F. Kiefner, Ph.D., PE

effectively refuted Dr. Land’s allegations with great specificity and this rebuttal testimony was

not undermined on cross-examination. According to Mr. Kiefner, witness Laird’s testimony

“should be discounted as being based primarily on speculation and lack of thorough review of

the basis for the safe construction and operation of liquid petroleum pipeline.” (Tr. 118).

Mr. Kiefher went on to reference various technical documents which Dr. Laird would

have been well advised to consult and concluded that he had done so “he might have opined

differently.” (Tr. 118).

Mr. Keifner addressed each area of Dr. Laird’s concerns. The technical and highly

specific nature of this testimony is not susceptible to capsulizing or paraphrasing. Hence, the full

text of Mr. Keifher’s comments from Tr. 119 through 127 follows below in order to facilitate the

Commission in its role as factfinder.

Q7 PLEASE ADDRESS DR. LAIRD’S CONCERNS AT PAGE 5, LINES l-5 OF IIIS PREFILED DIRECT TESTIMONY REGARDING DAMAGE TO PIPE COATING.

Al At page 5, line 1 of his prefiled direct testimony, Dr. Laird states that “[clonceming construction, vis., trenching and pipe laying - the main concerns in the Wolverine documents appear to be rights of way limitations, personnel protection and traffic flow. While these concerns are legitimate, the documents do not adequately address the prevention of damage to the pipe coating. There is only a passing reference to such prevention but no details are given.”

27

Dr. Laird’s testimony overlooks the fact that Wolverine has chosen to coat the pipeline with FBE (fusion-bonded epoxy) coating, one of the most damage-resistant coatings known. The coating will be inspected and repaired if necessary prior to laying and backfilling. After a pipeline is backfilled, operators rely on the application of cathodic protection to mitigate corrosion that might otherwise occur at locations where the coating has been damaged. A considerable body of research exists, e.g. A.W. Peabody, Control of Pipeline Corrosion, which shows that corrosion is satisfactorily mitigated by the application of adequate cathodic protection, and that electrical measurements required by federal regulations (US DOT 49 CFR Part 195) are useful in assessing the adequacy of cathodic protection. It is my understanding that Wolverine will use both impressed current and sacrificial anodes for cathodic protection in this case.

Q8 PLEASE ADDRESS DR. LAIRD’S STATEMENTS AT PAGE 5, LINES 7-22 OF HIS PREFILED DIRECT TESTIMONY CONCERNING WELDING AND SLEEVE JOINTS.

A8 Dr. Laird testifies at page 5, lines 8 thru 9 that “[i]f sleeve joints are used, which is supported by review of the footage in the video tape provided by Wolverine, then serious questions are raised.” It appears that Dr. Laird is under the impression that the pipeline will be constructed by joining the pieces of pipe with sleeves. This is a mistaken belief, however. Wolverine will use the standard girth-butt-welding method and will follow API Standard 1104 in so doing. Sleeve-type joining is sometimes used for repair purposes on operating pipelines and may on occasion be used for tying in sections in a new pipeline, but I am unaware of any instance in modern pipelining (i.e., since World War II) where welded sleeves are used to construct a pipeline.

Q9 PLEASE ADDRESS DR. LAIRD’S COMMENTS AT PAGE 6, LINES l-8 OF HIS PREFILED DIRECT TESTIMONY CONCERNING THE BENDING OF PIPE.

A9 At page 6, lines 1 through 8 of his prefiled direct testimony, Dr. Laird criticizes Wolverine’s plan to field bend pipe. With respect to the bending of pipe, Dr. Laird seems to be unaware that this is the standard pipeline-construction technique for effecting changes in direction. The smooth bending of line pipe to a radius of 18 times the diameter (18 D) of the pipe is a common practice that has been found to have negligible detrimental effects on either the properties of the pipe or the coating and it

28

has never caused a failure. The stress-riser effect of an 18 D bend is also negligibly small. The absence of failures related to smooth bends in the DOT pipeline-incident database attests to the fact that smooth bends create no abnormal risk to pipeline integrity.

QIO PLEASE ADDRESS DR. LAIRD’S CONCERNS AT PAGE 6, LINES 9-18 OF HIS PREFILED DIRECT TESTIMONY REGARDING COATING “HOLIDAYS” AND REPAIRS.

Alo At page 6, lines 9 through 18 of his prefiled direct testimony, Dr. Laird states that “[dlamage to the pipe protective coating is anticipated during pipe laying and it is stated that “holiday” (meaning, gap or defect in the coating) detection will be employed. No details are supplied concerning the method to be used, the segment lengths of pipe over which it will be used, the resolution of the method and its ability to deal with different holidays.”

To begin with, it should be noted that every joint of pipe will be tested for “holidays” (i.e., areas where there are holes in the coating) in the coating plant and all holidays will be repaired and retested. Further, although damage may occur during transit to the field and during installation, Wolverine will apply the standard method of detecting coating “holidays” which involves a “jeep” holiday detector, a high-voltage device with a ground connection to the steel pipe at a fixed location. The device is rolled continuously along the axis of the pipeline after the pipeline has been coated. The detector provides 360 degree coverage around the circumference and loo-percent coverage along the length of the pipe except at appurtenances. The latter can be examined by means of “wand”-type high-voltage devices. Holes in the coating provide low resistence paths such that the high voltage of the devices sees the hole as a short circuit to ground and issues an alarm (a “jeep” sound). The coating fault is marked, and it is subsequently repaired by follow-up repair crew before the pipeline is laid in the ditch. Wolverine’s coating-repair technique for FBE coating involves a two part epoxy mix, which is one of the standard techniques used by pipeline operators. In addition, cathodic protection will be used to supplement the protection of the coating.

Qll PLEASE ADDRESS DR. LAIRD’S COMMENTS AT PAGE 6, LINES 19-22 OF HIS PREFILED DIRECT TESTIMONY CONCERNING CATHODIC PROTECTION.

A11 At page 6, lines 19-22 of his prefiled direct testimony, Dr. Laird questions how the pipeline will be cathodically protected and how the cathodic protection will be maintained. Dr. Laird overlooks the fact that a federally

29

regulated pipeline must install a cathodic-protection system. The level of protection, the pipe-to-soil potential level, must be maintained according to one of the standard measurement levels defined in NACE RP-0 169. Annual pipe-to-soil potential readings must be taken. Areas with substandard pipe-to-soil potentials must be remedied, and the operability of rectifiers must be monitored six times a year at intervals not exceeding 2-l/2 months. See US DOT 49 CFR Part 195.

412 PLEASE ADDRESS DR. LAIRD’S CONCERNS AT PAGE 7 LINES 1-4 OF HIS PREFILED DIRECT TESTIMONY REGARDING DIRECTIONAL DRILLING.

A12 Dr. Laird expresses concern at page 7, lines 1 through 4 of his testimony that coating could be damaged during directional drilling. Dr. Laird fails to recognize that directional drilling is a preferred method for effecting pipeline crossings under obstructions. Moreover, Wolverine will use an abrasion resistant top coat over the FBE coating and it will be passed through a drill hole while being lubricated by drilling mud. The potential for damage is much less than in the case of pulling pipelines through eased holes, the standard practice of 30 to 40 years ago.

Q13 DO YOU HAVE ANY COMMENTS CONCERNING DR. LAIRD’S STATEMENTS AT PAGE 7 LINES l-19 OF HIS PREFILED DIRECT TESTIMONY?

A13 Yes. Dr. Laird critiques Wolverine for not disclosing its assumptions in its loss rate calculations. It is my understanding that neither Dr. Laird nor the City of Lansing ever requested the assumptions. Suffice it to say that the various methods of calculation involve sets of assumptions and depend on the fluid used. So it is readily possible for two or more observers to obtain results that do not agree. Since the laws of physics govern these calculations, differences in results must arise from differences in the inputs to the calculations. This can be easily resolved by reviewing the two sets of calculations side by side. Even if this is done, however, two different observers could still quarrel over the validity of inputs to the calculations. I do not see much significance to this exercise anyway. The amount of a release, should one occur, will depend on many factors, some of which cannot be readily anticipated in advance.

414 DO YOU HAVE ANY COMMENTS CONCERNING DR. LAIRD’S STATEMENTS AT PAGE 7, LINE 20 THROUGH PAGE 8 LINE 22 OF HIS PREFILED DIRECT TESTIMONY?

A14 Yes. Dr. Laird questions the “static” design of the pipeline in view of the fact that the pressure level in the liquid petroleum pipeline tends to vary significantly with time. All pipelines are in fact designed under the assumption of a static maximum operating pressure. The maximum

30

design pressure under the ASME B3 1.4 code for liquid petroleum pipelines and under the ASME B3 1.8 code for gas pipelines is calculated via the “Barlow” formula using a safety factor of 1.388. The Barlow formula is:

where

P=B D

P is the maximum operating pressure or “design” pressure

S is the allowable circumferential stress, 72 percent of the specified minimum

yield Strength (SMYS) of the pipe material

t is the nominal wall thickness of the pipe material

D is the outside diameter of the pipe material.

This is what federal regulations (DOT CFR Title 49, Part 195) require. The designer is not required to take into account the fact that the pressure cycles might cause a significant defect to grow, though both B3 1.4 and B3 1.8 recommend that designers consider any factor that might affect the integrity of the system.

Historical-performance records of pipelines and experimental research have shown that pressure-cycle-induced fatigue can cause significant preexisting defects to grow to failure. However, in the absence of a significant defect, no incident of fatigue failure in a pipeline is known to have occurred. Furthermore, proprietary research has shown that the numbers of large pressure cycles required to cause a sound piece of pipe to fail are well beyond the number of cycles that a pipeline could possibly experience during its useful life. The problem of pressure-cycle-induced fatigue has been studied in some detail. Pipeline operators who have experienced the problem have been successful in controlling the problem with timely hydrostatic tests or in-line inspections with crack-detecting tools (smart pigs.) Pipeline operators building new pipelines can prevent or forestall the occurrence of pressure-cycle-induced fatigue failures by installing their pipelines free of significant defects, by monitoring and controlling their rights-of-way to prevent excavation damage, and by operating their pipelines in a manner that tends to minimize pressure fluctuations. Criteria exist for judging the pressure-cycle severity of any given pipeline operation based on recorded pressure fluctuations as a function of time. Above all, experience shows that very few pipelines have experienced pressure-cycle-induced fatigue failures.

Dr. Laird’s comment about the vulnerability of pipe less than 3/8-inch thick has no foundation. The example he cites of a 3/4-inch-thick pipeline that failed catastrophically from previously inflicted but concealed damage has no bearing on the vulnerability or lack thereof of the proposed Wolverine pipeline. In the case to which he refers, the pipe material was

31

manufactured at a point in time where it was technologically impossible to obtain a line-pipe material of that thickness in the as-rolled condition with adequate toughness. In fact, a thinner material made at that time quite likely would have survived the damage inflicted or at least failed in the mode of a leak rather than a catastrophic rupture. There is simply no absolute, objective standard by which Dr. Laird can say that the proposed pipeline has inadequate wall thickness.

Finally, Dr. Laird is incorrect when he states or implies (a) that deficiencies exist in the design of the proposed pipeline and (b) that nothing can be done to prevent failures in the pipeline in the event it does contain latent manufacturing or construction defects or suffers degradation in service after it is placed into operation. He offers no support for the proposition that the design is deficient other than to say that fatigue was not considered. As I noted previously, however, pipeline operators are not required to consider fatigue. Instead, he acknowledges that his main issue is lack of information and he clearly lacks objective support to back his speculative assertions. Thus, he is without objective support when he claims that “these methods (hydrostatic testing and in-line inspection) cannot cope with small defects in welds or the pipe itself, which lend to insidious fatigue failures.” In fact, I and others have shown that these technologies are effective at preventing failures from a variety of causes including both fatigue and corrosion. Furthermore, the USDOT in writing their regulations for integrity assessment in high consequence areas (e.g. highly populated or environmentally sensitive areas), anticipated that pipeline operators will utilize either hydrostatic testing and/or in-line inspection to verify the safety of their pipelines in these areas.

Q15 DOES THIS CONCLUDE YOUR TESTIMONY

45 Yes, it does

F. No Feasible Alternative Routes Exist

The I-96 route is superior to any alternate route. For the reasons stated by Staff witness

Mazuchowski, which are cited earlier herein, the I-96 route is the best one available. (See Staff

position at pp. 12-14 herein).

Q. What are the benefits of the rout of this pipeline?

A. The freeway corridor is isolated, fenced, has minimal easements and contractors have to be permitted by MDOT before they are allowed to work inside the corridor. As mentioned earlier, this corridor will minimize third party damage because of the limited access provided by the highway and the regulation by the MDOT. The route utilizes existing

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corridors almost the entire length, which in turn, minimized the impacts to the residents and their property and minimizes environmental damage. The route had no residences within 50 feet of the pipeline and few residents within 150 feet from the pipeline. In general, most residences are not located near the highway. Unlike almost every other potential corridor, in the future, most residences will not build near the edge of the freeway. The freeway corridor will act as a buffer area for safety. Also, Wolverine has designed into this pipeline additional safeguards in addition to what is required to meet the Federal Regulations.

Q. What additional safeguards have been designed into the pipeline?

A. Mr. Woodburn’s Exhibit A-13 (CSW-2), provides a comparison between what is required by Federal Regulations and the additional safeguards Wolverine is utilizing. Some of the more important safeguards are that: (1) Wolverine is adding extra wall thickness for its pipe which will further minimize the potential for corrosion leaks and make it more difficult to fail if there was a third party contract; (2) In the sections of the pipeline to be directional-drilled, Wolverine will be utilizing additional wall thickness and special coating for the pipe; (3) Redundant over-pressure protection, experienced inspectors and extra coverage depths will be utilized; (4) Wolverine will internally inspect (smart pig) each pipeline segment every 5 years; (5) Wolverine will provide extra remotely operated mainline valves and hydrocarbon detectors which will quickly shut down the pipeline in the event of a leak thus minimizing the volume of any product lost; and (6) Aerial patrols will be scheduled weekly.

City of Lansing witness Mr. Charles Green, a real estate appraiser, testified that he had found

two possible alternate routes that would avoid highly populated areas.

A6 Yes. In fact, I found two possible routes that would avoid highly populated areas, which I believe would be much safer than the route proposed by Wolverine.

Q7

A7

WOULD YOU DESCRIBE THEM?

Yes. One route leaves the Stockbridge Tank Farm in a northwesterly direction to Section 33 of Wheatfield Township, Ingham County, thence northerly in a corridor between Zimmer and Burkley Roads directly to the Consumers Energy Transmission line. I have inspected this area and have determined that the route involves open farm lands and wood lot areas.

The second route, which has also been inspected and is also through open farm lands, leaves the Stockbridge Tank Farm and traverses approximately 1 % to 2 miles northeasterly to Section 32 of White Oak Township and then traverses north between Procter and Dietz Roads through Leroy and Lock Townships in Ingham County and Perry Township in Shiawassee County where it meets the Consumers Energy Transmission line.

33

Mr. Green also recommended a route in Clinton Township along a powerline since that

facility “intercepts the Diamond Shamrock pipeline to the Total Tank Farm.” (Tr. 696-7).

However, virtually no real analysis of these proposals appears in the record and, hence, there is

nothing to indicate these routes are really either feasible or desirable. Accordingly, the testimony

favoring these proposals should be given virtually no weight at all and should not stand in the

way of approving Wolverine’s proposed route.

V. Conclusion

While there is no absolutely perfect route for any pipeline proposal, the Spartan pipeline

route is about as good as it gets. Quite literally, it is the route that runs through nobody’s back

yard. Together with the high-tech specifications being utilized and the extra measures of safety

recommended by Mr. Mazuchowski the project poses no unreasonable risk and addresses a

critical need for liquid petroleum supplies in Mid-Michigan. Staff believes construction and

operation of the Spartan pipeline consistent with Mr. Mazuchowski’s recommendations would

serve the convenience and necessity of the public. Accordingly, we urge the Commission to

approve the project.

Respectfully Submitted,

MICHIGAN PUBLIC SERVICE COMMISSION STAFF

William W. Derengoski (P34242) ’ Assistant Attorney General Public Service Division 6545 Mercantile Way, Suite 15 Lansing, MI 489 11 Telephone: (517) 241-6680

DATED: April 12,2002

34

STATE OF MICHIGAN

BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION

In the matter of the application of WOLVERINE PIPE LINE COMPANY for authority under 1929 PA 16 to construct, operate and maintain a pipe line for the Transportation of liquid petroleum products.

Case No. U-l 3225

PROOF OF SERVICE

STATE OF MICHIGAN )

1 ss COUNTY OF INGHAM )

Mishelle R. Pagels, being first duly sworn, deposes and says that on April 12,2002, she served a copy of Michigan Public Service Commission Staffs Initial Brief upon the following parties via e-mail and depositing the same in a United States postal depository enclosed in an envelope bearing postage fully prepaid, plainly addressed as follows:

Albert Ernst (P24059) Christine Mason Soneral (P58820) Attorneys for Wolverine Pipe Line Co. 800 Michigan National Tower Lansing, MI 48933 ae~ns’k!ikj.~d~~-~a~~~*~~?~, ~ ~~~~~~O~~~~d~~~~~~~ COITl ..l.““l” :........... id.- _... ““..” ~..t-----”

Paul O’Konski Wolverine Pipe Line Law Department P.O. Box 2220 Houston, TX 77252-2220 Paul.f.o’konski@exxonmobil.com

James Smiertka (P20608) Brian W. Bevez (P28736) City Attorney 5* Floor, City Hall

Assistant City Attorney gfh Floor, City Hall

Lansing, MI 48933 Lansing, MI 48933 jsmiertk@ci.lansing.mi.us bbevez@ci.lansing.mi.us

Commissioner Lisa Dedden (P4663 1) Ingham County Commissioner, District 10 4206 Southgate Avenue Lansing, MI 489 10 ldedden@ingham.org

Subscribed and sworn to before me

on Expires: 07/23/2004