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"Giant corporations have and continue to weaponize ISDS—a secretive and rigged arbitration system," said Sen. Elizabeth Warren. "It's time to shut the door and eliminate ISDS from all existing trade agreements once and for all."
Prominent Democrats on Wednesday called for ending corporate-backed arbitration provisions in trade agreements as the Sierra Club issued a report showing that fossil fuel companies use the provisions to block climate action.
The report calls for the U.S. government to not only stop signing trade agreements with Investor-State Dispute Settlement (ISDS) provisions, as President Joe Biden has already done since taking office, but also end or modify existing agreements that have them. ISDS provisions allow companies to protect their investments in a foreign country and seek compensation from an ad hoc arbitration tribunal, rather than the country's courts, if they are threatened by legislation, regulation, or the cancellation of a project.
"While it has correctly rejected ISDS for future trade agreements, the Biden administration has made no effort to remove these egregious provisions from existing agreements," Rep. Lloyd Doggett (D-Texas) said in a Sierra Club statement. "Powerful multinational corporations continue abusing ISDS to intimidate countries from strengthening environmental and human rights protections."
Many ISDS cases pit powerful corporations against low- and middle-income countries, but wealthy nations are also liable to be sued. TC Energy, a multinational fossil fuel company, sued the US for $15 billion following the discontinuation of the Keystone XL pipeline project, and Canada faces a $20 billion suit over a canceled liquefied natural gas project in Québec. Overall, nearly 20% of the world's 1,206 known ISDS arbitration cases have been brought by fossil fuel companies, according to the Sierra Club report.
The investor-state dispute settlement (ISDS) regime gives polluters license to sue governments for their public interest policies, including those that would reduce the production of fossil fuels.
Now is the time to end ISDS for good.
— Iliana Paul (@iliana_m_paul) May 29, 2024
"ISDS mechanisms corruptly advance the power of big corporate polluters over the interests of the public and the planet. This new report from the Sierra Club makes it clear that ISDS's time is up," Sen. Sheldon Whitehouse (D-R.I.) said in the group's statement. He, too, is pushing the Biden administration to remove ISDS provisions from existing agreements.
While the Sierra Club report focuses on ISDS's climate impacts, the authors argue that the effects of the provisions, which give corporations extraordinary power, are much broader. "The dangers of ISDS are stark not just for climate change, but for a broad swath of public interest policies including ones related to public health, labor protections and workers' rights, green jobs policies, and more," they wrote.
Democrats voiced agreement about the broad consequences of the provisions, which have been the subject of a growing chorus of criticism by politicians and public interests groups.
"Giant corporations have and continue to weaponize ISDS—a secretive and rigged arbitration system that multinational companies use to bypass domestic courts and challenge protections for the environment, workers, and consumers around the world. It's time to shut the door and eliminate ISDS from all existing trade agreements once and for all," said Sen. Elizabeth Warren (D-Mass.) in the Sierra Club statement.
In November, Sierra Club, Public Citizen, the AFL-CIO and more than 200 other organizations called on the Biden administration to dismantle ISDS provisions between the U.S. and countries in the Americas, saying that the president should "free public interest policies from the shadow of ISDS."
That followed an April letter to Biden in which more than 300 law and economics professors, including Nobel laureate and Columbia University professor Joseph Stiglitz, called for an end to ISDS in existing trade agreements, arguing that there's a "bipartisan consensus" for such reform.
The Mountain Valley Pipeline uses pipe with illegal and unsafe corrosion-proof coating that’s “no longer fit for purpose.”
The builders of the Mountain Valley Pipeline are bringing frivolous multi-million dollar SLAPP suits—or strategic lawsuits against public participation—against pipeline protesters in an attempt to bully them into being quiet.
If only they would slap one here, because this vastly underreported coating issue really needs a lot more publicity. But that’s precisely why I doubt that they will. They don’t want anyone, least of all any real investigative reporters, to focus on their pipes’ serious coating problems.
One thing is clear, MVP has been burying, and continues to bury, illegal, dangerous pipe. A study was done which proves that this is not debatable.
The people who are forced to live within MVP’s blast zone should not have to endure the daily stress of knowing it wasn’t built safely.
Bill McKibben hit the nail on the head when he wrote that the “transition away from fossil fuels” language agreed to at COP28 could be either meaningful or meaningless depending on whether or not it is acted upon. This is similarly true for a rule written into the U.S. Code of Federal Regulations and published in the Federal Register, which is, or at least should be, a million times more legally binding than anything that came out of Dubai. That rule says that pipelines MUST be protected from external corrosion by having a protective coating which, among other things, is “sufficiently ductile to resist cracking.”
The rule exists because long sections of pipe flex a great deal between the time they are manufactured and coated at the plant and when they finally come to rest in a ditch. If the corrosion-proof coating on the pipe is not “sufficiently ductile” (flexible) to also flex when the pipe does, then it will crack. Once a crack in the coating opens up, it creates a pathway for moisture to come in contact with the steel and begin corroding the pipe. Corrosion is a leading cause of pipeline explosions. Controlling corrosion is of particular concern regarding MVP because of its huge size (42-inch diameter) and the extremely high pressure (1,480 pounds per square inch, or psi,) it will be operating under.
In 2018 three-year-old Delaney Tercero was badly burned, as were her parents and younger sister, when a pipeline exploded near their home. Delaney died two days later after what must have been an agonizing ordeal in a hospital burn unit. The pipeline that killed her exploded because of corrosion due to defective pipe coating. It was a 10-inch pipeline. MVP is a 42-inch pipeline. It also has defective pipe coating.
On January 30, 2024 there was a gas pipeline explosion in Oklahoma. It shot flames 500 feet into the air. The fire could be seen from 36 miles away, and it took hours to bring it under control. It started because of corrosion in an 8-inch pipeline and is thought to have migrated to a 24-inch pipeline based on the intensity of the fire. MVP is a 42-inch pipeline.
A 24-inch gas pipeline explosion in Oklahoma in January 2024 sends flames 500 feet into the air. MVP is a 42-inch pipeline.
In July 2023, a gas pipeline exploded near Strasburg, Virginia, next to Interstate 81, shutting down traffic in both directions for hours. It was a 26-inch pipeline operating at 777 psi. MVP is a 42 inch pipeline that will operate at 1,480 psi.
Although language was inserted into last summer’s debt deal that allowed MVP to steamroll the normal permitting process, in no way did any of that language negate the “sufficiently ductile to resist cracking” rule, which has been on the books for over 50 years. Even MVP’s own attorney said that the debt deal dealt specifically and only with permitting issues.
The key to understanding why MVP pipe is illegal lies in a study reported on in the Jan/Feb 2020 issue of Corrosion Management (CM), a publication of the Institute of Corrosion. The article (on p. 16) is not very long nor is it difficult to understand, although there may be a word or two that requires googling. Everyone should read it and print a copy for future reference, before it becomes harder to access. To do so you might have to sign up for a free 30-day subscription to Scribd. The wording in the article and the results of the study make clear that MVP pipe coating has serious, unacceptable flaws.
It should be noted who undertook the study and wrote the article. It wasn’t anti-fossil fuel climate activists. Participants and contributors included TC Energy, the company that wanted to build the Keystone XL (KXL) pipeline, and Welspun, the company that manufactured and coated pipe for both KXL and MVP. One of the authors was James Ferguson, who worked for TC Energy (formerly Trans Canada) for over 18 years and who, at the time of the study, was the director of KXL Technical Services.
The point of the study was to determine how effective applying whitewash to KXL pipes was in terms of protecting the pipe coating from ultraviolet (UV) exposure, meaning the harmful effects of the sun. Most fossil fuel pipe, including KXL and MVP pipe, is coated with a greenish fusion bonded epoxy (FBE). FBE is, and is meant to be, flexible or ductile after it is applied and dries. However, exposure to the sun will reduce that flexibility over time and the coating can become brittle and crack. The National Association of Pipe Coating Applicators (NAPCA) recommends that FBE not be exposed to the sun for more than six months.
The beginning of the CM article has a paragraph with the heading “Effects of Ultraviolet Exposure on Fusion Bond Epoxy Coatings.” It says that “previous studies of exposed weathering of FBE coating had identified that UV exposure could have a serious deleterious effect on the inherent physical properties of the coating. This phenomenon is common to all FBE coatings that are primarily designed only for below ground service.” Over time, UV exposure will give the glossy green coating applied at the plant more of a chalky green look. Prolonged UV exposure will lead to “a noticeable reduction in the coating thickness” and cause all FBE coatings to “struggle to retain their original flexibility.” The change from glossy to chalky “clearly is accompanied by an embrittlement of the coating” and “reduction of flexibility performance.”
After KXL pipe was manufactured, the pipeline came up against all kinds of opposition for numerous very good reasons. And so it got delayed for years and was ultimately killed near the end of the Obama administration. Because TC Energy was aware of the problems UV creates for FBE coating, twice during that time period the company applied whitewash to the pipe to act as a sort of sunscreen. (It’s important to note here, and then remember, that whitewash was NOT applied to MVP pipe during the six to seven years it has sat in pipe yards and along the pipeline right of way. Dated satellite images can confirm this, as can photographs taken by frontline pipeline opponents.)
Regarding MVP, Buttigieg could rightly point to Sen. Joe Manchin (D-W.V.) as the reason it is being built. But it is on the secretary and a department under his control to make sure MVP is built safely and according to legal rules and regulations.
After former President Donald Trump was elected in 2016, Keystone XL came back to life, which is what prompted the study of its whitewashed pipe. They wanted to show that the whitewash had protected the FBE coating well enough that the pipe was still usable. But that’s not what they found.
The study tested three different groups of KXL pipe, which was generally stacked five layers high. One group included pipe below the top layer. Those pipes weren’t whitewashed, but they also were shaded from the sun by the pipe above them. The coating on those pipes tested OK.
The second group of pipe was from the top layer that had been whitewashed twice, once after 18-24 months of UV exposure and again four to five years later.
The third group involved the last few feet at the ends of top layer pipe. Those last few feet were not whitewashed so as not to cover up stenciling and markings. Those top layer pipe ends received no protection from the sun, and they best represent the coating on MVP pipe.
In eight out of ten tests, the whitewashed pipe failed to attain acceptable adhesion ratings. The non-whitewashed pipe ends “exhibited complete failures” regarding the adhesion test. In addition, the coating thickness on the non-whitewashed pipe ends had been reduced by more than 50%.
Another way to evaluate how well pipe coating will resist corrosion is to perform a catholic disbondment (CD) test. “The CD results of the non-whitewashed pipe ends exposed to UV were deemed total failures,” the study found.
“The flexibility tests were all deemed failures” on both the whitewashed and non-whitewashed pipe. All the flexibility tests “demonstrated similar results of cracking within the coating” even after they reduced the severity of the flexibility test three times from 2.5 degrees to 2.0 degrees to, finally, as little as 1.0 degree.
The first sentence under “Observations” states, “All non-whitewashed pipe that was exposed to continuous UV at the storage site” was “deemed no longer fit for purpose.” Even for whitewashed pipe, the flexibility of the underlying coating was “adversely affected to the point where it was no longer acceptable.”
In 2018 at an oil and gas forum in Canada, a KXL pipeline manager said that defective coating like this is not something that can be remedied in the field but instead it requires shipping the pipe back to the plant for proper stripping, cleaning, and re-coating. This short video shows the elaborate process undertaken to properly apply FBE coating.
The slipshod method that MVP is applying to its degraded pipe coating is wholly inadequate. The “no longer fit for purpose” phrase in the Corrosion Management article basically means that the pipe has a bad case of terminal skin cancer, which is not something MVP is going to remedy with its sporadic paintbrush-applied Band-Aids.
MVP’s band aid solution; the seven-year-old coating date, 2016, is barely visible.(Photo: POWHR/Mountain Valley Watch)
This coating problem is far from unique to MVP. Since 2010 the fossil fuel industry has built 70,000 miles of pipelines, and they have plans to build another 70,000 miles. Most of those pipelines have been and will be fought against, resulting in pipe sitting above ground for extensive periods of time instead of getting quickly buried.
Right now pipeline giant Williams is building the Regional Energy Access Expansion (REAE) project in Pennsylvania. It will lead to a significant increase in fracking in that state, which the majority of Pennsylvanians say they don’t want. Williams is also building the Louisiana Energy Gateway (LEG) project, which will increase gas flow to the LNG export terminals that the people living along the Gulf Coast are trying to shut down. Both REAE and LEG are being built with leftover pipe from the long dead Constitution Pipeline in New York. That pipe was manufactured and coated 10 years ago, and, like MVP pipe, its coating is shot.
But apparently and naturally, after sitting out in the sun for a decade, the pipe was cheap to buy. Cheap enough that it made economic sense for Williams to ship it all the way to Louisiana from New York. In fact, a Williams executive admitted that acquiring the surplus pipe helped keep costs down, making those pipeline projects possible.
Secretary of Transportation Pete Buttigieg was recently in the news during the one-year anniversary of the train derailment in East Palestine, Ohio. He said his department was doing all it could to prevent a similar disaster from happening again. He blamed Congress for not passing helpful legislation.
Regarding MVP, Buttigieg could rightly point to Sen. Joe Manchin (D-W.V.) as the reason it is being built. But it is on the secretary and a department under his control to make sure MVP is built safely and according to legal rules and regulations. That’s the whole reason that PHMSA, the Pipeline and Hazardous Materials Safety Administration, exists. It’s up to Buttigieg and PHMSA to enforce the “sufficiently ductile to resist cracking” rule. It’s up to them to publicly explain why they are disregarding the Corrosion Management study. The fact that now, in his fourth year on the job, Buttigieg still has not even filled the top job at PHMSA makes one ask just how seriously is he regarding pipeline safety.
MVP would never get built near Manchin’s or Buttigieg’s homes. The people who are forced to live within MVP’s blast zone should not have to endure the daily stress of knowing it wasn’t built safely.
MVP and government regulators may argue that there are ways to detect corrosion and other problems before they cause harm. Yet the biggest climate disaster of 2022 was caused by corrosion and created by the same company, Equitrans, that is building MVP. That huge methane leak occurred just 10 days after the site had been inspected and no problem was detected. It took almost two weeks for Equitrans to bring the leak under control.
In 2008 five people were injured and two homes were destroyed when a Williams gas pipeline exploded near Appomattox, Virginia. It was a 30-inch pipeline operating at about half the pressure MVP will operate at. The cause of the explosion was external corrosion due to defective coating that had been compromised by rocks. An inspection undertaken shortly before the pipe exploded did not identify the corroded section of pipe.
MVP has a rock problem, too.(Photo: POWHR/Mountain Valley Watch)
The Pennsylvania attorney general has charged Equitrans with crimes regarding a 2018 gas explosion that severely burned a four-year-old boy and his parents, killed their dog, and destroyed their home. The explosion resulted from a leaking Equitrans gas well that the company knew was leaking somewhere, but they never bothered to determine exactly where. Equitrans even had a protocol in place to help prevent corrosion at the well, but they didn’t follow it. One Equitrans employee testified that wells were often not serviced for budgetary reasons. And after the explosion, Equitrans didn’t even conduct the legally required investigation to determine the cause.
If Secretary Buttigieg and PHMSA are going to allow 42-inch MVP to come online with degraded pipe coating, they need to be asked, repeatedly, how they square that decision with the Corrosion Management article and the KXL study. And if someday another person meets Delaney Tercero’s fate because of a MVP explosion, Buttigieg and regulators at PHMSA can blame Equitrans and Manchin… but the fault will be theirs too.
"The ISDS regime is undemocratic: It was created for and by powerful, well-organized corporations, and has served their interests almost exclusively," said one critic.
More than 200 civil society groups on Thursday called on the Biden administration to protect climate, health, and other public interest policies across the Americas by dismantling a trade regime that the United States spearheaded nearly three decades ago—giving corporations broad authority to sue governments if they claim their profit margins are harmed by public programs.
Public Citizen, Sierra Club, and the AFL-CIO led hundreds of organizations in sending the letter to President Joe Biden, urging him to take legal action to terminate the Investor-State Dispute Settlement (ISDS) system within the Americas Partnership for Economic Prosperity (APEP), a trade framework between the U.S. and 11 countries in Central and South America and the Caribbean.
As Lori Wallach and Daniel Rangel, the director and research director of ReThink Trade, explained in a column in July, "ISDS elevates multinational corporations and foreign investors to equal status with national governments."
Under 43 ISDS-enforced agreements among the 12 APEP countries, corporations have launched more than 230 legal attacks, including a demand for $15 billion from the U.S. government—funded by taxpayers—by the Canadian firm that proposed the Keystone XL pipeline.
"The ISDS regime is undemocratic: It was created for and by powerful, well-organized corporations, and has served their interests almost exclusively," said Mario Osorio, senior fellow at the Center on Inclusive Trade and Development at Georgetown University Law Center. "It also poses a real threat to the world's climate action efforts, having already been used against them."
There are currently 73 pending ISDS cases totaling $47 billion in corporate claims, the civil society groups noted on Thursday.
"ISDS claims are often in the millions or billions of dollars," the groups wrote in the letter. "An unaccountable three-person tribunal decides the fate of each case. The tribunal can even decide a company should be paid for the 'expected future profits' it may have earned in the absence of the government policy in question. The ISDS regime has been especially detrimental to public health, climate and environmental protections, Indigenous land rights, financial regulations, and democratic sovereignty."
The system, said Cathy Feingold, international director at the AFL-CIO, "creates an unfair playing field that prioritizes the needs of corporations over those of workers, their families, and the environment."
"ISDS should be removed from our trade framework and replaced with policies that promote good jobs, strong communities, and a sustainable environment," Feingold added.
The organizations acknowledged that Biden has thus far followed through on a campaign promise to not pursue new trade and investment agreements with ISDS, but as Sen. Elizabeth Warren (D-Mass.) said in a statement supporting a report on the system released last week by ReThink Trade, "future agreements are only part of the battle."
"The United States is still locked into many preexisting agreements that allow corporations to weaponize ISDS when we do something that they don't like. I'm going to keep on fighting until every last one of our trade agreements is ISDS-free," said Warren, who has previously criticized the scheme.
The senator also sent a letter to Biden this week, along with more than 40 colleagues, calling on him to remove ISDS from existing APEP agreements.
Thursday's letter came a day before Biden was scheduled to host the heads of state of Latin American countries for an APEP meeting.
The report by ReThink Trade detailed legal mechanisms that the U.S. and its APEP partners can use to terminate ISDS liability, including:
Joseph Stiglitz, economics professor at Columbia University, noted that the call to exit ISDS is "especially relevant" because Biden launched APEP partially with the aim of "fighting climate disaster and economic inequality, improving public health, [and] strengthening democracy."
"To achieve any of these goals, ISDS has to go. It is a direct hindrance," said Stiglitz. "Launching this as a group exit would be very helpful in protecting our neighbors from one of the factors that leads some countries not to exit. That is the fear, not grounded actually with much evidence but still it's a fear, that investors will see an individual country leaving the system as a signal of some sort that they're not committed to good investment. When a bloc of countries exit together, there's safety in numbers."
The civil society groups noted that "the tide is turning" against ISDS in other countries, with 10 European countries abandoning the Energy Charter Treaty due to its ISDS rights for fossil fuel companies, and countries such as South Africa, Indonesia, and India working to exit similar agreements.
"Continued movement away from ISDS by the United States," said the groups, "would be a powerful signal to other governments considering taking similar action."