The Keystone pipeline was shut down after a 14,000-barrel oil spill in Kansas

The Keystone pipeline was shut down after a 14,000-barrel oil spill in Kansas
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Dec 8 (Reuters) – Canada’s TC Energy shut down its Keystone pipeline to the United States after more than 14,000 barrels of crude oil spilled into a Kansas creek, the largest U.S. crude spill in nearly a decade.

The cause of the leak, which occurred in Kansas about 20 miles (32 km) south of a key junction in Steele City, Nebraska, is unknown. It is the third spill of tens of thousands of barrels of crude oil in the pipeline since it first opened in 2010.

The 622,000 barrel-per-day Keystone Line is an important artery that transports heavy Canadian crude from Alberta to refineries in the US Midwest and Gulf Coast. It is not clear how long the closure will last.

There were no impacts to drinking water wells or the public, the U.S. Environmental Protection Agency said in a statement, although surface water in Mill Creek was affected.

Kellan Ashford, spokeswoman for EPA Region 7, which includes Kansas, said Thursday evening that the cause of the leak was still unclear.

TC assembled about 100 people to respond to the spill, while the EPA dispatched two coordinators, Ashford said. Washington County Emergency Management and the Kansas Department of Health and Safety were also on scene.

The Keystone line shut down at 8 p.m. CT Wednesday (0200 GMT Thursday), TC (TRP.TO) said in a release. It says that the boom is being used for spilling.

The US Pipeline and Hazardous Materials Safety Administration (PHMSA) has ordered the pipeline shut down until the regulator reopens it, it said in a statement late Thursday. In addition, the affected section of the line will have to operate at reduced pressure when Keystone is restarted.

Biggest coastal spill in years

According to PHMSA data, this would be the largest crude oil leak since more than 20,000 barrels of oil spilled on a Tesoro pipeline in North Dakota in October 2013.

PHMSA is also investigating the leak, which occurred near Washington, Kansas, a town of about 1,000 people.

According to PHMSA data, seven Keystone spills have occurred since it opened in June 2010. The largest was in December 2017, when more than 6,600 barrels were spilled in South Dakota, according to PHMSA statistics.

“It’s troubling to see so many failures and so many oil spills from any pipeline, but it’s especially troubling from a relatively new pipeline,” Bill Carram, executive director of the nonprofit Pipeline Safety Trust, said in a statement.

The spill came about two months after TC said it would temporarily increase capacity in the system to test certain operations. According to a 2021 Government Accountability Office report, TC has a special permit to operate Keystone at higher stress levels than other US crude lines.

The length of the shutdown is unclear

The TC has declared force majeure, citing unforeseen external circumstances that prevent a contracting party from fulfilling its obligations, according to a source. TC did not respond to a request for comment.

Two Keystone shippers said TC has not yet told them how long the pipeline may remain closed.

The closure of Keystone will disrupt the supply of Canadian crude to the U.S. storage hub in Cushing, Oklahoma, and the Gulf, where it is processed by refiners or exported.

The shutdown is expected to increase the discount on Western Canada Select (WCS) heavy oil to U.S. crude from Alberta, which was already high due to a shortage of heavy, sour Canadian oil.

WCS WTI for December delivery traded below $33.50 a barrel, compared with $27.50 a barrel below the benchmark on Wednesday, according to a broker.

“If this outage lasts, that’s really the worst-case scenario,” said Rory Johnston, founder of energy newsletter Commodity Context, adding that if prices fall further, shippers may opt to move crude by rail.

In addition, heavy Gulf Coast grades and Latin American grades may see their prices rise, analysts said.

Steel City is roughly the junction where the Keystone splits, with one section carrying crude oil to Illinois refineries and the other carrying oil to Oklahoma and the Gulf Coast.

If the spill is located south of the junction, the TC may be able to quickly restart the segment in Illinois, RBC analyst Robert Kwan said in a note.

Past shutdowns have typically lasted about two weeks, but this one could last longer because it involves a reservoir, Kwan said.

TC shares fell 0.1% in Toronto.

Reporting by Arpan Varghese, Brijesh Patel, Ashith Sivaprasad and Deep Vakil, Rod Nickel, Nia Williams and Arathi Somasekhar in Bengaluru; Editing by David Gaffen, Josie Kao and Stephen Coates

Our values: Thomson Reuters Trust Policy.

Rod Nickel

Thomson Reuters

Key areas of energy transition focus cover energy, agriculture and politics in Western Canada. Has done brief reporting work in Afghanistan, Pakistan, France and Brazil and has covered Hurricane Michael in Florida, Tropical Storm Nate in New Orleans and the 2016 Alberta wildfires and political leaders on the campaign trail during two Canadian election campaigns.

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