Enbridge Pipeline Expansion Likely to Proceed After Proof of Insurance

Published by Larry Konopacki, Jeffrey A. Mandell on

Enbridge Corporation (“Enbridge”) transports crude oil through a pipeline that runs from Superior, Wisconsin to Pontiac, Illinois. Enbridge wants to expand the volume of crude oil pumped through their line. The Dane County Board of Supervisors granted Enbridge a conditional use permit (“CUP”), subject to two insurance-related conditions. Condition 7 required Enbridge to procure and maintain $100,000,000 in General Liability insurance with a time element exception to the pollution exclusion and $25,000,000 in Environmental Impairment Liability insurance. Condition 8 required the liability insurance in Condition 7 to meet the specifications in a County- commissioned underwriting report, including a requirement that Enbridge provide proof of such insurance at the County’s request.

            While the Dane County Board was considering Enbridge’s permit application, the Wisconsin legislature adopted 2015 Act 55, which limits the insurance requirements that counties can include in CUPs for interstate hazardous liquid pipelines. Specifically, Act 55 prohibits counties from requiring pipeline operators to obtain insurance if the operator “carries comprehensive general liability insurance coverage that includes coverage for sudden and accidental pollution liability.” Wis. Stat. § 59.70(25). Dane County granted Enbridge’s CUP, with Conditions 7 and 8, after Act 55 took effect.

            Enbridge first appealed the inclusion of Conditions 7 and 8 to the Dane County Board. When that failed, Enbridge sought certiorari review in the circuit court.  A month later, seven local landowners filed a separate circuit court action seeking an injunction to enforce Conditions 7 and 8. The court consolidated the two lawsuits. The circuit court decided that (1) the landowners had no standing (that is, legal right) to participate in Enbridge’s challenge to the legality of the CUP, (2) Dane County had agreed that Enbridge’s representations during the permitting process were sufficient to trigger Act 55’s insurance limitations, and (3) Conditions 7 and 8 of the CUP were void and unenforceable. The circuit court struck Conditions 7 and 8 from the CUP, leaving the rest of the permit intact.

            Both the County and the landowners appealed. The Wisconsin Court of Appeals reversed and remanded the matter to the circuit court with instructions to return it to the county zoning committee. The court of appeals held that (1) the landowners have standing to participate in the certiorari review action; (2) Enbridge had not demonstrated that it maintains the required comprehensive general liability insurance; and (3) Act 55 does not preclude counties from requiring pipeline operators from showing, upon request, proof of compliance with the statutory insurance requirements.

1. The landowners had standing to pursue an injunction

            The circuit court, in consolidating the actions of the landowners and Enbridge, initially treated the landowners as intervenor-respondents to the action and told them that they did not need “leave to implead” in the action. There was therefore no reason the landowners should expect that they would be required to file a separate certiorari action to gain standing in an action in which the circuit court had already made them full participants. The court of appeals held that the circuit court’s dismissal of the landowners’ request for an injunction on the basis of standing had no legal foundation.

2. Enbridge did not demonstrate that it carries insurance for

sudden and accidental pollution liability

            Act 55 prohibits counties from requiring a liquid pipeline operator to obtain additional insurance coverage if the operator “carries comprehensive general liability insurance coverage that includes coverage for sudden and accidental pollution liability.” Wis. Stat. § 59.70(25). During the permit review process, Dane County’s underwriter confirmed that Enbridge had the required amount of comprehensive general liability insurance, but noted that the policy was set to expire before any permit would be issued. Because Enbridge had not shown continued or ongoing coverage, it did not demonstrate that it “carries” the required insurance and had not triggered Act 55’s exclusion of other insurance requirements. Further, the Act requires coverage for sudden and accidental pollution liability. The court of appeals reasoned that “sudden and accidental,” as defined in Just v. Land Reclamation, Ltd., 155 Wis.2d 737, 742-57 (1990), includes circumstances that are “abrupt or immediate” or “unexpected and unintended.” The insurance historically carried by Enbridge, even if renewed and ongoing, was a general liability policy with a “time element exception” to a pollution exclusion that covered abrupt or immediate pollution but did not provide coverage for unexpected or unintended pollution. Because there was no coverage for unexpected or unintended pollution, the court held that Enbridge’s comprehensive general liability policy did not trigger the Act 55 exclusion.

3. Act 55 does not preclude a county from including valid permit conditions related to insurance

            The circuit court severed CUP Conditions 7 and 8 from the permit as void and unenforceable but left the rest unchanged. The court of appeals found this action was an impermissible usurpation of authority by the courts, and it remanded the matter to the circuit court with instructions that the permit should be returned to the Dane County Zoning Committee for review. The court also found that Act 55 prohibits counties from requiring compliant operators from obtaining additional insurance, but it does not limit other insurance-related conditions. Thus, even if Enbridge had satisfied the Act 55 trigger, there was no reason Dane County could not require ongoing proof of the compliant insurance policy. In remanding to the County, the appellate court held that the Zoning Committee is the “body best suited to evaluate the facts and weigh appropriate conditions,” such that it can best determine whether to grant the permit and under what conditions.

CONCLUSION

            With Enbridge Energy, Inc. v. Dane County, the court of appeals essentially established three things. First, a court cannot grant a party status as an intervenor, allow the party to rely on that status, and then later dismiss the party on standing grounds for failing to file a separate action in that same case. Second, 2015 Act 55 only prohibits counties from requiring a liquid pipeline operator to obtain additional insurance if the operator has fully met the triggers in the Act. Even if the triggers are met, the Act does not prohibit all insurance-related conditions on conditional use permits, including requirements that an operator show proof of the required insurance. Finally, unless otherwise authorized by statute (e.g., livestock siting), it is inappropriate for courts to rework rather than simply reverse invalid permits issued by counties.

            Although it extends the permitting process for Enbridge, the court’s decision provides a clear, and relatively simple path forward for Enbridge to obtain the CUP. Enbridge should be able to work with its insurer to obtain the coverage outlined in Act 55, including coverage for both “sudden” and “accidental” pollution. And, it should be no hardship to provide ongoing proof of such insurance if required. The decision also clearly limits the role of courts, delineating zoning and permitting as legislative functions. Therefore, with few exceptions, courts should restrict their review to whether a county zoning commission correctly interpreted the law and leave to that body any specific determinations of whether and under what conditions permits should be granted.

Law clerk Leakhena Au assisted with researching and writing this post.

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