Pipeline spills and leaks are not a major financial concern for the average midstream company, according to a new report by financial services firm Morningstar.

The typical oil and gas pipeline operator experiences fewer than 10 spills per year and accrues "well under" $10 million in annual costs related to the incidents, Morningstar reports. The firm counted just seven incidents since 1999 in which costs exceeded $100 million.

"Pipeline spills damage reputations, but not pocketbooks. These incidents are notorious for creating negative buzz for the oil and gas industry. Despite the notoriety, spill-related costs have a minimal impact on pipeline operators' cash flow," Morningstar analysts wrote in the Dec. 5 research note.

The upshot is that oil spills and gas leaks are not a material consideration for investors with money in the 18 midstream companies that Morningstar covers. Those companies generated $71.3 billion in EBITDA in 2018, while the cost of pipeline incidents that year was nearly $1 billion, according to Morningstar analysis of data from the U.S. Pipeline and Hazardous Materials Safety Administration.

Morningstar analyzed PHMSA's pipeline incident figures as part of a report on the impacts of environmental, social and governance factors for midstream companies. That report found spills are less of a financial concern for midstream investors than greenhouse gas emissions, since a carbon tax would "modestly reduce midstream fair values."

The study of pipeline incidents did not prompt Morningstar to make significant changes to its forecasts for midstream operating expenses. Even large spills "don't have a material long-lasting impact on the operators' cash flows as most of the costs are recovered through insurance policies," the firm said.

Pipeline safety advocates have long complained that the penalties for spills and leaks are not high enough to incentivize pipeline operators to change, allowing companies to prioritize profit over safety. The industry often rebuts that pipeline operators are inherently motivated to avoid the cost and reputational risk associated with the incidents.

Morningstar said U.S. policies such as limiting oil spill liabilities to $75 million under the Oil Pollution Act of 1990 have "the potential to accelerate investment in increasing oil production while encouraging oil and gas firms to reduce investments in safety."

The issue became a major sticking point in federal legislation to reauthorize PHMSA's pipeline safety program this year. Congressional Democrats are pushing to increase the maximum penalty for violating pipeline safety statutes to $20 million, up from the current cap of $200,000 per violation. They would also toss out a $2 million cap for repeated violations and make it easier to bring criminal charges against pipeline operators.