DEC 8 (Portal) – Canada’s TC Energy said on Thursday it had closed its Keystone pipeline, restricting the flow of Canadian oil to US refineries after it spilled into a Kansas creek, and it was unclear how long the closure would last would last.
The size and cause of the leak, which occurred about 20 miles south of a major intersection in Steele City, Nebraska, is unknown.
The 622,000 barrels per day Keystone Line is a major artery transporting Canadian heavy crude oil from Alberta to refineries in the US Midwest and Gulf Coast.
U.S. Pipeline and Hazardous Materials Safety Administration (PHMSA) workers are investigating the leak, which occurred near Washington, Kansas, a city of about 1,000 people.
Keystone shut down the line around 8pm CT Wednesday (0200GMT Thursday) after alarms went off and system pressure dropped, TC (TRP.TO) said in a press release. Booms were said to have been used to contain the spill.
“The system will remain shut down while our crews actively respond and work to contain and recover the oil,” the release said.
There were no impacts on drinking water wells or the public, the U.S. Environmental Protection Agency (EPA) said in a statement, although Mill Creek’s surface water was affected. It dispatched two coordinators to the site to oversee TC Energy’s response and determine the cause of the spill.
TC has declared force majeure over the outage, according to a source with direct knowledge, which refers to unexpected external circumstances that prevent a party from meeting its obligations. TC did not respond to a request for comment.
Two Keystone trucking companies said TC has not yet told them how long the pipeline may be closed.
Keystone’s closure will hamper shipments of Canadian crude both to the US storage center in Cushing, Oklahoma, and to the Gulf, where it is processed by refiners or exported.
The closure is expected to increase Alberta’s Western Canada Select (WCS) heavy oil rebate on US crude, which was already high due to weak demand for heavy, sour Canadian oil.
WCS for December delivery was trading at $33.50 a barrel below WTI, a bigger discount from Wednesday’s $27.50 a barrel below the benchmark, a broker said.
“It’s really a worst-case scenario if this outage lasts long,” said Rory Johnston, founder of energy newsletter Commodity Context, noting that if prices continue to fall, shippers will choose to transport crude oil by rail could.
The Hardisty, Alberta, hub has plenty of storage space until the pipeline comes back online, BMO analyst Randy Ollenberger said.
Steele City is roughly the intersection where Keystone splits, with one segment transporting crude oil to refineries in Illinois and the other transporting oil south to Oklahoma and the Gulf Coast.
If the spill is south of the intersection, TC may be able to restart the segment quickly after Illinois, RBC analyst Robert Kwan said in a note.
Previous shutdowns have generally lasted about two weeks, but this could be longer given the body of water involved, Kwan said.
Since commissioning in June 2010, there have been seven accidents involving Keystone, according to PHMSA data. The largest were in December 2017, when more than 6,600 barrels were spilled in South Dakota, and November 2019, when more than 4,500 barrels were spilled in North Dakota, according to the PHMSA.
On November 15, TC announced that it would reduce the volume of the pipeline due to some weather-related incidents, without specifying the size or duration of the restrictions.
TC shares closed down 0.1% in Toronto.
Reporting by Arpan Varghese, Brijesh Patel and Deep Vakil in Bengaluru, Rod Nickel, Nia Williams and Arathy Somasekhar; Edited by Alexander Smith, Andrea Ricci and Josie Kao
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