Spokane City Council hesitatingly approves new deal with pipeline operator

The city of Spokane now has the strongest conditions on a petroleum pipeline since its construction decades ago – but some City Council members continue to question whether they are adequate.

After years of delay that included lawyerly back-and-forth and deferment by elected leaders, the Spokane City Council finally agreed last week to a new agreement with the operators of the Yellowstone Pipeline.

City Council President Breean Beggs, who staunchly pushed for the city to demand more from the pipeline’s operator, voted against the agreement.

The pipeline, which was permitted and built in the 1950s, begins in Montana and carries motor fuels to storage facilities in Spokane and Moses Lake. Its course within city borders is actually quite short, briefly running through parts of northeast and southeast Spokane before circling the city’s southern border, where it passes once again through the city near Spokane International Airport.

The city of Spokane has been without a new agreement with the pipeline’s operator since the previous deal expired in 2005.

Some council members expressed consternation about the risk the pipeline poses to the city, but felt that having an agreement in place was better than none at all.

“What we have now is really nothing,” said Councilwoman Lori Kinnear, who described the situation as being between a proverbial rock and a hard place.

The lengthy list of concessions won by the city under the new agreement was recited by Assistant City Attorney Tim Szambelan, who has led the negotiations with Yellowstone Pipeline, at a council meeting on Monday.

With the agreement signed, Yellowstone Pipeline plans to replace the pipe that runs beneath the Spokane River near Felts Field.

The terms of the new agreement include a $25,000 annual payment to the city, a major boost from the $200 fee under the old contract.

Yellowstone Pipeline will pay the city $75,000 for an assessment of the risks the pipeline may pose to the city’s water supply. The deal includes a requirement that Yellowstone Pipeline carry $100 million in liability insurance – the former agreement had no liability insurance mandate.

Though $100 million is a hefty sum, Beggs argued it would be far below the actual cost of remedying a catastrophic oil spill that infiltrates Spokane’s aquifer and contaminates its drinking water.

Beggs is adamant that the safest way to transport oil is through underground pipelines but wants to ensure taxpayers wouldn’t be on the hook for the cost of a cleanup. He’s concerned that Yellowstone Pipeline Co. is established in a way that could insulate its owners – including majority shareholder Phillips 66 – from liability.

He also said if a spill were to occur, the actual cost would far exceed the $100 million of insurance carried by Yellowstone Pipeline, and the city could be unable to recoup the rest from Phillips 66 – and potentially have to pay for the cleanup itself.

To bolster his credibility, Beggs points to his experience as a private attorney following the explosion of a different pipeline in Bellingham in 1999 that killed three people. Beggs represented the family of one of the victims in civil legal action and later helped found the Pipeline Safety Trust, a nonprofit dedicated to advocacy for pipeline safety.

Beggs had eyed a short-term agreement with Yellowstone Pipeline of about three years, which would buy time to complete a safety assessment. That offer was rejected, but Yellowstone did agree to revisit the amount of its liability insurance in five years, provided the city can prove an increase is necessary. That clause, according to Szambelan, is unique.

In the meantime, the vulnerability assessment will be completed on the pipeline company’s dime.

Still, there’s “nothing that would compel” a renegotiation of the insurance policy, Beggs said.

“That was one of the things I was trying to get in negotiations, was some objective third-party person who would referee that,” he added.

Phillips 66 stands by the safety of the pipeline.

“We have multiple safety and integrity management programs in place to ensure the safety and reliability of the pipeline, and to protect the community and the environment,” Rich Johnson, a spokesperson for Phillips 66, wrote in an email to The Spokesman-Review. “These include 24/7 monitoring, safety shutoff valves, right-of-way inspections, in-line inspections, cathodic protection, damage prevention and public awareness programs, employee training, and other layers of protection.”

Ultimately, cities like Spokane have little control over the pipelines that run beneath their rivers and under their streets.

The pipeline falls under the auspices of the federal Pipeline and Hazardous Materials Safety Administration. Safety standards and inspections are enforced by the state Pipeline Safety Commission.

Bill Caram, executive director of the Pipeline Safety Trust, acknowledged that Spokane’s deal has an unusual level of protections for the city but added, “that says more about how weak they tend to be than it does about the relative strength of this franchise agreement.”

“If the goal is to ensure zero unfunded liabilities in the case of a catastrophic spill, Council President Beggs is correct that this may very well fall short,” Caram wrote in an email to The Spokesman-Review.

City attorneys warned council members Monday that it was unlikely the city could force Phillips 66 to move the pipeline, even if they refused to sign a new agreement.

Still, Beggs said he doesn’t plan to give up his fight. He’ll look to introduce a new city law that would require any operator of a pipeline to pay for the cost of a spill.