Keystone pipeline shut down in Kansas after 14,000 barrels of oil spilled

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

The cause of the spill, which occurred about 20 miles south of a major interchange in Steele City, Nebraska, in Kansas, is unknown. This is the third spill of several thousand barrels of crude oil into the pipeline since it first opened in 2010.

The 622,000-barrel-per-day Keystone line is a critical artery carrying heavy Canadian crude oil from Alberta to refineries in the US Midwest and Gulf Coast. It is unclear how long the closure will last.

The U.S. Environmental Protection Agency said in a statement that while surface water in Mill Creek was affected, there were no impacts to drinking water wells or the public. It sent two coordinators to the site to oversee TC Energy’s response and assess the cause of the spill.

TC ( TRP.TO ) said in a statement that it shut down the Keystone line at 8:00 p.m. (0200 GMT Thursday) on Wednesday after alarms sounded and system pressure dropped. He said that booms were used to prevent the collapse.

“The system remains closed as our crews actively respond and work to contain and recover the oil,” he said.

According to the US Pipeline and Hazardous Materials Safety Administration (PHMSA), it would be the largest crude oil spill since more than 20,000 barrels of oil leaked from the Tesoro pipeline in North Dakota in October 2013.

PHMSA is also investigating a spill near Washington, Kansas, a town of about 1,000 people.

According to PMSA data, there have been seven Keystone spills since it began operating in June 2010. The largest was in South Dakota in December 2017, when more than 6,600 barrels of oil were spilled, and in November 2019, North Dakota spilled more than 4,500 barrels, according to PHMSA figures.

According to a source with direct knowledge, the TC has declared a force majeure situation related to the cut, referring to unforeseen external circumstances that prevent the contracting party from fulfilling its obligations. TC did not respond to a request for comment.

Two Keystone shippers said TC has not yet told them how long the pipeline could be shut down.

The closure of Keystone will prevent the delivery of Canadian crude to the US storage hub in Cushing, Oklahoma, and the Gulf, where it is processed by refineries or exported.

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

WCS for December delivery traded at $33.50 below WTI, a bigger discount from Wednesday’s $27.50 below the benchmark, according to one broker.

“If this outage is prolonged, that’s really the worst-case scenario,” said Rory Johnston, founder of energy newsletter Commodity Context, noting that if the price falls further, shippers may prefer to move crude oil by rail.

BMO analyst Randy Ollenberger said Alberta’s Hardisty hub has ample storage space until the pipeline is restarted.

Steele City is roughly the junction where the Keystone splits, with one segment carrying crude oil to an Illinois refinery and the other south to Oklahoma and the Gulf Coast.

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

Past closures have generally lasted about two weeks, but this one could last longer because it involves a body of water, Kwan said.

On November 15, TC announced that it would reduce volumes in the pipeline due to some severe weather-related incidents, without specifying the size and duration of curbs.

TC shares were down 0.1% in Toronto.

Bengaluru by Arpan Varghese, Brijesh Patel and Deep Vakil, reporting by Rod Nickel, Nia Williams and Arathy Somasekhar; Edited by Alexander Smith, Andrea Ricci, and Josie Kao

Our standards: Thomson Reuters Trust Principles.

Bar Nickel

Thomson Reuters

Covers energy, agriculture and politics in Western Canada with a primary focus on the energy transition. He has done brief reporting 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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