Tar sands industry, Enbridge, face collapsing insurance market for spill cleanups

Take heart, water protectors, public pressure is having success in stopping the tar sands oil industry.

Ironically, pressure seems to be more successful on the private sector than government itself, which is supposed to protect the public interest.

This month, Chubb Insurance announced it was dropping coverage on any tar sands oil projects, the result of public pressure, according to the Insurance Business Magazine. (Chubb describes itself as “the world’s largest publicly traded property and casualty insurance company.”)

In June 2020, the Swiss-based Zurich insurance company announced it was dropping its coverage of Canada’s Trans Mountain tar sands pipeline. Zurich had been the pipeline’s lead insurer.

Some 16 insurance companies have dropped Trans Mountain’s coverage.

“Insurers are being pressured by environmental activist groups to exit their coverage of fossil fuel infrastructure because, without insurance, these projects can be stopped in their tracks,” according to an article in the Insurance Journal.

The insurance crunch will have an impact on Enbridge, and raise challenging questions for Minnesota state regulators.

The climate justice movement is broad with many tactics. It includes organizing in the streets, efforts to influence politicians and the regulatory processes, writing letters to the editor, direct action, and legal work.

It also includes divestment campaigns to get financial institutions to stop bankrolling tar sands oil projects and insurance companies to stop insuring them.

The insurance divestment campaign against Trans Mountain was so successful that the Canadian government, which owns the pipeline, successfully sought an order to keep the insurance companies’ names secret.

Enbridge recently submitted a report to the Minnesota Public Utilities Commission (PUC) laying out the collapsing insurance market. Written by Marsh, Enbridge’s risk management consultant, it said the company is going to find it more difficult to insure itself against crude oil spills from Line 3 and the other pipelines in the six-pipeline mainline corridor through northern Minnesota.

Enbridge redacted chunks of the Marsh Report.

Companies are decreasing insurance limits on policies for such things as tar sands oil projects “due to low profitability of insurers and environmental, social and governance (ESG) factors…” the report said.

“As we continue to see insurers reduce participation or withdraw from crude oil infrastructure coverage, replacing their participation will become extremely challenging,” it said. It’s unlikely Enbridge’s current $900 million general liability insurance limit “will continue to be available for Enbridge and other pipeline risks in the near future.” (Emphasis added.)

This raises a serious question about what the PUC and the state of Minnesota will do if, in five or ten years, Enbridge no longer has adequate insure against pipeline spills?

Will they work with the federal government to close the pipelines, or roll the dice and allow Enbridge to keep pumping oil even though clean-up and mitigation costs from a major spill might not be fully covered?

Further complicating matters, the PUC required Enbridge to include the State of Minnesota and several American Indian tribes as additional insureds on its policies. These include: the Fond du Lac Band of Lake Superior Chippewa, Leech Lake Band of Ojibwe, Mille Lacs Band of Ojibwe, Red Lake Band of Chippewa and White Earth Band of Ojibwe.

What role with those Native Nations get to play in determining whether Enbridge has adequate insurance in the future?

According to a Star Tribune story, Enbridge says “it would be responsible for any oil spill clean-up, ‘regardless of the ability to later recover those expenses under an insurance policy.'”

That’s an easy thing for Enbridge to say. But at some point the fossil fuel market will dry up and Enbridge could fold or even declare bankruptcy. That would leave the state of Minnesota, and state taxpayers, holding the proverbial bag.

“A worst-case spill in Minnesota would cost $1.4 billion to mop up and remediate, according to a 2018 Enbridge analysis required by the Minnesota Department of Commerce,” the Star Tribune story said.

That exceeds Enbridge’s current $900 million general liability coverage limits.