Outside damage by a salvage company in the right of way was the cause but the underlying cause was the pipeline company's failure to restrict activity on that right of way. But the reality is that 75 to 80 percent of pipeline accidents happen because of corrosion, operator error, defective equipment or other causes within the control of the pipeline company. Given this record, the inescapable conclusion is that pipeline companies long ago calculated the economics of their industry and determined that it was cheaper to let accidents happen than it was to prevent these accidents. In other words, most of the victims of pipeline accidents have been victims of an acceptable risk. And judging by the results so far, they were right.
Pipelines are a very profitable business.
In the same year, all Fortune 500 companies had a median return on sales of 4.4 percent. These handsome profits are a direct result of lax regulation of pipelines. After all, if an industry has few regulations and almost no enforcement and can spill without meaningful penalties, it can shortchange maintenance and safety programs, undercut competitors such as marine carriers on cost and make big profits. For example, Colonial Pipeline reduced its engineering services staff by 35 percent from 1994 to 1996, increasing its return on revenues to 28 percent at the same time it had horrendous accidents and expanded its East Coast share of gasoline and other refined products markets. This neglect by regulators and the industry comes at a particularly bad time.