TransCanada Corporation (USA) (TRP), Enbridge Inc (USA) (ENB): To Be Profitable, We Need More Regulation

Recently, a Canadian train carrying oil crashed in a small town and killed 50 people. This shouldn’t be a great surprise, as more oil is being transported by trains, and statistics show that the risk of a spill by a train is around six times greater than a spill by a pipeline. There is strong opposition to new pipelines like the TransCanada Corporation (USA) (NYSE:TRP) Keystone XL, but recent events show that the government could easily make crude oil transportation safer by approving more pipelines, requiring better monitoring techniques and increased maintenance.

Train proponents are quick to point out that even though trains leak more often than pipelines, pipelines spill on average three times more oil than trains for the same distance. In 2010, Enbridge Inc (USA) (NYSE:ENB) was a prime example. It caused a huge heavy oil spill of more than 1 million gallons. This spill is not completely surprising, as the pipeline section had a history of corrosion problems that federal agencies did not require Enbridge Inc (USA) (NYSE:ENB) to repair.

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The Call for More Regulation

If regulatory agencies had required Enbridge Inc (USA) (NYSE:ENB) to repair more of the issues it found with its pipeline, then there is a lower possibility that the spill would have occurred. There were multiple warning signs that Enbridge Inc (USA) (NYSE:ENB) choose not to listen to.

Another critical part of preventing and decreasing spill volume is better monitoring. Unmanned Aerial Vehicles (UAVs) are slowly being commercialized. They can easily be outfitted with inferred cameras and remotely piloted to visually inspect potential spill sites. This would allow companies to detect spills without spending the time or money to dispatch human inspectors. If the federal government were to require the use of UAVs for pipeline inspection, pipelines would become an even safer form of transport.

The Benefits for the Bottom-Line

Pipeline operators stand to benefit from greater pipeline regulation. Increased regulation will increase maintenance costs, but the improved safety record would make it easier to get new projects built. TransCanada Corporation (USA) (NYSE:TRP) is fighting tooth and nail to get the Keystone XL pipeline approved, and it continues to be difficult battle. Enbridge Inc (USA) (NYSE:ENB) is in a similar situation with its Northern Gateway Pipeline. Local aboriginal and environmental groups are worried about the effect of potential spills and continue to fight the project.