Keystone spill comes at a bad time
CALGARY Talk about bad timing.
Days before Nebraska regulators are set to rule on TransCanada Corp.’s XL extension to its Keystone pipeline, the existing conduit sprang a major leak, spilling 795,000 litres of oil early Thursday in South Dakota, handing new fodder to environmentalists opposed to the XL project.
The company shut the line, and said 75 people along with government officials were already cleaning up the mess. But foes were quick to respond.
The spill “should be a stark reminder of the risk Nebraska would be signing up for,” said Anthony Swift, director of the Natural Resources Defense Council’s Canada Project, a group that opposes the pipeline.
“The likelihood of spills should weigh into their decision.”
The spill occurred in Marshall County. The pipeline, which can carry about 600,000 barrels of crude a day, is to remain shut while the company responds to the spill. TransCanada tentatively plans to restart the line Nov. 23, a person familiar with the matter said Friday.
Analysts have said a prolonged shutdown would affect distribution of heavier oil. The line will remain shut until repairs are completed and TransCanada receives approval from the Pipeline and Hazardous Materials Safety Administration, Terry Cunha, a company spokesman, said in an emailed statement.
While a 2011 state law precludes the Nebraska regulators from factoring pipeline safety or the possibility of leaks into the decision on Keystone XL, the spill still sends a difficult signal out at a key time for the company.
“The timing of this outage is not very good from TransCanada’s standpoint,” said John Auers, executive vice-president at energy consultant Turner Mason & Co. in Dallas, by telephone. “Theoretically, it should not have an impact in Nebraska.”
The longer the pipeline stays down, the more crude will fill storage tanks. As they top out, the discount paid for heavy Canadian oil will need to widen to make shipping by rail cars affordable, according to Kevin Birn, a director at IHS Energy in Calgary. “We always thought we would see increased movements by rail,” Birn said by telephone. “This will accelerate that time line.”
Meanwhile, a decision by Nebraska’s Public Service Commission on Keystone XL, an $8-billion, 1,900-kilometre conduit on the drawing boards since 2008, is scheduled for Nov. 20. The board will decide whether to allow the Calgary-based company’s line to cross the state.
While any ruling there will certainly face legal challenges, an approval would remove a key hurdle to construction.
The project, as planned, would send crude from Hardisty, Alta., through Montana and South Dakota to Nebraska, where it will connect to pipelines leading to U.S. Gulf Coast refineries. The company’s open season for gauging producers’ interest closed late last month, and TransCanada executives have indicated that they’ve secured enough shipping commitments to make the project commercially worthwhile.
If Nebraska denies approval, ruling it’s not in the public interest, it could be the death knell for the long-stalled extension, analysts have said.