REDACTED_JUSTIFICATION_AND_APPROVAL_ENBRIDGE_3-4-2016.pdf

JUSTIFICATION AND APPROVAL

FOR OTHER THAN FULL AND OPEN COMPETITION

Control No. JA‐2015‐03

1. CONTRACTING AGENCY:

Department of the Army, Corps of Engineers, Chicago District

231 South LaSalle Street, Suite 1500, Chicago, Illinois 60604

Procuring Contracting Officer: Regina G. Blair

Office Symbol: CELRC‐CT

Phone Number: (312) 846‐5371

2. DESCRIPTION OF ACTION: By this Justification and Approval, request is being sought to enter into a sole source, firm‐fixed services contract with Enbridge, Incorporated.

a. TYPE OF FUNDS: Funding has been allocated under Civil Works appropriations, which will be utilized during the full term of the contract performance period.

b. PROPOSED CONTRACT VALUE: The estimated value of this procurement is $ .

c. PERFORMANCE TIME: The proposed contract will incorporate a performance period of 5 years, wherein continuous monitoring and reporting will begin in year one and run through year 5.

3. DESCRIPTION OF SUPPLIES/SERVICES:

The proposed sole source provider (hereinafter, “Enbridge”) will be required to furnish, install, and test a corrosion monitoring system for Enbridge, Line 6A at Romeoville, Illinois in the vicinity of the Chicago Sanitary and Ship Canal (CS&SC) Fish Barrier. Enbridge Line 6A is a 34 inch diameter crude oil pipeline that originates in Superior, Wisconsin, and terminates in Griffith, Indiana. The pipeline is approximately 467 miles in length. The corrosion monitoring system requiring Enbridge’s installation and testing will need to be executed in accordance with 49 CFR Part 195, Transportation of Hazardous Liquids by Pipeline and Enbridge Pipeline standards.

The work will entail short and long term monitoring tools on the Enbridge 6A line and communication of monitoring at their Griffith, Indiana office for monitoring of pipe corrosion. The work also includes laboratory testing and modeling to assess the impact of pulsed DC on the Enbridge 6A pipeline;

installation of a counterpoise wire that will be installed adjacent to the pipeline, and annual monitoring reports.

There will be eight (8) locations where test equipment will be installed.

The intent of this work is to install corrosion monitoring equipment and communication of monitoring results in real time to the pipeline operator.

4. AUTHORITY CITED: 10 U.S.C. 2304(c) (1), as implemented by FAR 6.302‐1, and DFARS 206.302‐1, only one responsible source and no other supplies or services will satisfy agency requirements.

5. REASONS FOR AUTHORITY CITED

a. Background:

Since September 2010, the Corps, through its contractor Black & Veatch, has been monitoring for the presence and impact of electrical current on Enbridge Pipeline 6A, which is located north of the dispersal barrier project. While tests through August 2011 showed no influence from the barriers, by July 2012 tests showed a voltage shift at the pipeline out of conformance with cathodic protection standards. Federal regulations require that steel pipelines (like Line 6A) have a negative (cathodic) voltage of at least ‐0.85 volts; the tests showed a positive voltage of +3 to +4 volts.

A report from Black and Veatch, dated October 2012, concluded: “Stray current interference caused by the CS&SC fish barrier has been identified on Enbridge Line 6A. Stray current interference is a potential threat to the integrity of below grade pipelines because it can dramatically affect the external corrosion rate of the pipeline and also damage the pipeline's external protective coating.

Stray current interference can be caused by steady‐state, e.g., foreign pipeline cathodic protection system, or dynamic, e.g., electrified transit system, sources. Stray current interference caused by the fish barrier is dynamic in nature because the frequency and duration of the pulses produced by the barrier vary.”

Because of the variable nature of dynamic stray current interference, it is difficult to predict how much, if any, effect the interference will have on the corrosion rate of Line 6A. The effect of the stray current interference on the integrity of Line 6A is not known.

The report recommended additional in‐line inspection of the pipeline to determine whether corrosion was occurring; hence, the necessary services being required, as described hereunder.

b. Justification:

Over the past 65 years, Enbridge has become a leader in the safe and reliable delivery of energy in North America. It transports, generates and distributes energy, operating the world's longest, most sophisticated crude oil and liquids transportation system.

Because millions of North Americans count on the energy Enbridge delivers, it focuses on maximum safety and reliability. Transporting as much as 1.6 million barrels (about 67 billion gallons) of North American crude oil every day through an extensive underground pipeline system, Enbridge has instituted many procedures to ensure safe transportation of that crude oil beginning with the materials and special coatings used to manufacture their pipelines, cathodic protection measures to prevent corrosion, 24‐hour computerized pressure monitoring of the crude oil being transported, routine aerial monitoring, internal pipeline inspection tools to periodically monitor integrity and an integrity dig program. Having these types of measures in place, makes Enbridge the most befitting source to carry out the requirements of the scope of work.

Under the proposed contract, Enbridge will need to obtain all required environmental permits to perform this work. As it has a regular preventative maintenance program along its pipeline network, it has upheld its commitments to maintain the highest levels of safety for the environment. Having built a strong reputation and the credibility known to protect the environment via the strictest regulatory requirements, Enbridge will undergo a seamless process for obtaining the environmental permits.

Furthermore, it has work within environmentally sensitive areas and has established special mitigation measures to minimize potential impacts. Moreover, Enbridge works with federal and provincial/state regulatory organizations, and local emergency responders, to verify that these integrity management plans, pipeline testing, and preventative measures are appropriate for the conditions along the route segment.

One of the most vital activities of the proposed contract is corrosion monitoring, wherein Enbridge would be required to install the monitoring system and perform testing in accordance with 49 CFR Part 195, Transportation of Hazardous Liquids by Pipeline and Enbridge Pipeline standards. Enbridge has the knowledge, expertise and experience which already meets the contract requirements. In particular, it has resources that are accredited/certified as a Corrosion Specialist or a certified Cathodic Protection Specialist that includes education and experience in corrosion control of buried or submerged metallic piping systems. Additionally, through its use of cathodic protection, Enbridge has continued to pursue new methods to prevent or manage corrosion. In consideration of the protocols it has in place, which pair with the scope requirements, there will be no issues with Enbridge meeting contract scope requirements in this major area.

Under the proposed Contract, the contractor will need to furnish real estate to the USACE. Since Enbridge is the sole owner of all land, easements and rights of way needed to perform the Scope of Work, this makes Enbridge the only source that can permit the access and use of its real estate.

With regard to the work required to compile and submit the reports for Test Station Installation and the successive 5 Annual Monitoring Reports, these items are subset requirements related to the actual conditions related to the stray voltage and are the direct output of the testing parameters. Enbridge is in possession of the equipment and has a vested interest in proper and complete test reports.

c. Impacts:

Line 6A is the largest of Enbridge's three main arteries that supply the key U.S. storage hub in Cushing, Oklahoma. Line 6A is a 34‐inch, 670,000 barrel‐per‐day line transporting light synthetics, heavy and medium crude oil from Superior, Wisconsin, to Griffith, Indiana. Any impacts of going off line causes a spike in oil prices on the expectation that supplies could be disrupted. If the pipe is ruptured, it can bubble up from the ground near the Fish Barrier site in Romeoville, IL. Businesses, industries and the citizenry rely on the canal and failure of an oil pipeline would negatively impact the environment.

If this action is not approved, the government cannot ascertain whether, or not there are adverse effects on the Elbridge steel pipeline resulting from the potential IR/ER produced form the Fish Barrier, nor can it determine the extent of any degradation, if any, on the steel pipeline. Failure to take immediate action, in light of the recommendation to do additional in line testing to determine if corrosion is occurring would not be in the best interest of the Government of the United States.

If Enbridge is not awarded the contract, a failure of the pipeline could cost anywhere between $60 Million and $600 Million to repair.

d. Alternatives: Due to the private ownership of the pipeline, the uniqueness of the fish barrier construction and the expertise necessary to install testing equipment to monitor the corrosion rates, we are limited in any feasible alternatives. There are no other known means and methods that could be implemented to more successfully accomplish this work.

6. EFFORTS TO OBTAIN COMPETITION: As of the effective date of this J&A, Enbridge remains the sole owner of the Pipeline and has not sold its real estate rights. Therefore, competition for this procurement is not feasible.

7. ACTIONS TO INCREASE COMPETITION: On December 22, 2014, the requirement was announced at the Government’s point of entry, the “Federal Business Opportunities” (FBO) website. Under the notice, the District publicized its intent to sole source the proposed work to Enbridge. From that announcement, one response resulted. Once the respondent gained a full understanding of the scope of work, it acknowledged that it could not perform the contract requirements.

8. MARKET RESEARCH: To ensure that market research efforts would provide comprehensive acquisition management information, our search focused on information contained in the public domain, via on‐line resources and information retrieved from the lead engineer for this procurement.

As mentioned above, the FBO notice was published on December 22, 2014, informing all interested parties of the Government’s intent to award a sole source contract to Enbridge. Although one firm responded, it subsequently acknowledged its inability to comply with the contract requirements.

9. INTERESTED SOURCES: As required by FAR 5.201, a notice was published at FBO, informing of this intended procurement. The notice period began on December 22, 2014 and ended on January 6, 2015.

As mentioned above, one response resulted. Once the respondent gained a full understanding of the scope of work, it acknowledged that it could not perform the contract requirements.

10. OTHER FACTORS:

a. Acquisition History: None

b. Small Business (SB) Subcontracting Opportunities: Since Enbridge owns the pipeline, property rights and has the certifications necessary to fulfill the proposed contract requirements, it is highly unlikely that SB subcontracting opportunities will avail. However, the District will encourage the contractor to use small businesses where possible, and to the maximum extent practicable.

Control No. JA-2015-03

Control No. JA-2015-03