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Vital Canadian Pipeline To Remain Offline After Oil Spill

The section of the Keystone oil pipeline in North Dakota where some 9,000 barrels of crude spilled last month will remain shut until operator TC Energy, formerly TransCanada, submits a restart and return-to-service plan.

That’s an order by the U.S. Pipeline and Hazardous Materials Safety Administration, which found if the pipeline continued operating before repairs were done, it would be dangerous for local communities and the environment, Reuters reports.

“After considering the age of the pipe, the circumstances surrounding the failure, the hazardous nature of the product being transported, the pressure required for transporting the material, the other recent failures of the Keystone Pipeline in 2016 and November 2017, .... I find that a failure to issue this Order expeditiously to require immediate corrective action would result in likely serious harm to life, property, and the environment,” a PHMSA official said in the order.

In a separate report, Reuters said workers for TC Energy had already plugged Keystone in that section in order to access the damaged area and see what caused it. It remains unclear how long the repairs would take but one thing is certain: the incident would not go unnoticed by pipeline opponents.

Related: What’s Really Behind The Ethanol Crisis?

This is the second shutdown of the 590,000-bpd pipeline that transports Albertan crude to the United States. In mid-October, TC Energy itself shut down the pipeline declaring force majeure after severe snowstorms in Manitoba.

The Keystone pipeline is one of the few vital outlets for Canadian crude and any disruption in its operation is bound to affect prices sharply due to the lack of alternative outlets. Unfortunately for the industry, there were several spills from the pipeline over the last ten years, as noted in the PHMSA order, which will strengthen the anti-pipeline arguments of various groups.

The immediate effect, however, will be on Canadian crude prices, which although much higher than their December 2018 trough, are still trading at a substantial discount to WTI.

By Irina Slav for Oilprice.com

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