AUGUSTA, Maine — As revenue to a state oil spill clean-up fund shrivels, officials are investigating why Pan Am Railways has not paid the legally required monthly fees into that fund for crude oil the company has shipped over Maine rails.
Every company that ships crude oil or refined petroleum products through Maine is required to pay a 3-cent-per-barrel fee on the first of each month. As first reported by The Portland Phoenix, Pan Am has not filed reports or paid the fee since April.
“It’s not uncommon for there to be a small delay, but after two months, it’s about the time we start following up,” said Jessamine Logan, a spokeswoman for the Maine Department of Environmental Protection.
“We are investigating and following up with them, and may take appropriate actions if necessary,” Logan said.
Punitive options available to the state include a 10 percent fine tagged on to the original unpaid fee amount.
The fee collected by Maine DEP pays for the department’s Coastal and Inland Surface Oil Clean-up Fund. After a decline in the amount of oil transported through the Portland-Montreal Pipeline, money in that fund has shriveled to below one-third of the $6 million cap set by the Legislature, prompting concern among some officials about whether Maine could handle a disaster.
According to Maine DEP figures obtained by Reuters, revenues into the fund dropped from $6.7 million in 2003 to $3.7 million in 2012. That’s because the amount of oil shipped to Canada’s refineries through the pipeline — the largest contributor to the fund — has declined, even as the number of barrels shipped by rail has increased.
By December 2012, the fund’s balance dropped to $1.9 million. That decline has raised concerns from some members of the committee that helps oversee the fund.
“Anything below $2 million puts us in a precarious spot,” said Joe Payne, a member of the state’s oil spill advisory committee. “With this much of a drop, how is the fund going to do anything but eventually peter out?”
Transportation of crude through the state dropped off 60 percent from 2005 to 2012, mostly because of a decline in flows from the pipeline after refinery closures in Montreal crimped demand.
Output from the pipeline has dropped from more than 350,000 barrels per day in 2007 to about 150,000 barrels per day in the first five months of 2013. Logan said the pipeline contributed about $1.86 million into the cleanup fund per year in 2011 and 2012.
Meanwhile, transportation by rail has grown, from zero barrels in 2010 to 25,000 barrels in 2011 and more than 5.2 million barrels in 2012. This year is already on pace to beat the 2012 record. In the first five months of 2013 — excluding the two months missing for Pan Am’s shipments — railroads have carried more than 3.4 million barrels. In 2012, fees for petroleum shipped by rail totalled more than $157,000.
But it’s still not enough to cover the losses from decreased shipments through the pipeline.
Questions have been raised about the safety of Maine’s railroads after an oil-tanker train operated by Montreal, Maine and Atlantic Railway exploded in the Quebec town of Lac-Megantic on July 6, leaving 60 people dead or missing, according to the most recent police estimates.
Ed Burkhardt, chairman of MMA, appeared in Lac-Megantic on Wednesday, where he said improperly set brakes were the likely culprit in the deadly catastrophe. He was met by calls of “murderer!” from residents of the town.
Cynthia Scarano, executive vice president for Pan Am, was not available for comment this week. Scarano is the only Pan Am employee authorized to talk to reporters.
Logan said that the state agency continued to ensure that “expenses are below revenue” and said it had instituted “more aggressive cost-recovery mechanisms following a spill” that require the responsible party to pay for the cleanup.
She also said that if revenue to the fund becomes insufficient to support the necessary costs of the Department, DEP would propose adjustments to the fee structure.
Peter Blanchard, director of response services for the agency, said short-term funding was secure but acknowledged his staff was stretched thin, with planning for future spills often inhibited by the need to respond to other kinds of accidents.
Payne said he doubted the current revenues would be enough, given the declines in crude transport by pipeline and the amount traveling by rail.
“There may be less oil coming through Maine, but that doesn’t mean there’s less risk of a major spill,” he said. “Accidents can happen, and we need to be ready to respond”
Follow Mario Moretto on Twitter at @riocarmine.
Reuters contributed to this report.