Keystone pipeline shut after spilling 1.4 million litres of oil in North Dakota

An estimated 1.4 million litres of oil have spilled from TC Energy Corp.'s Keystone crude pipeline in North Dakota, state authorities said on Thursday, a major leak at a time of increased regulatory scrutiny of oil pipeline expansions.

The cause of the rupture has not yet been disclosed. But the initial estimate makes it one of the biggest onshore crude spills in the past decade and the largest for Keystone, according to U.S. Pipeline Hazardous Materials and Safety Administration (PHMSA) data.

Pipeline operator Calgary-based TC Energy has been seeking to expand its pipelines linking Western Canadian oil fields to U.S. refineries with its proposed Keystone XL project. The $6 billion US ($7.8billion Cdn) project has faced regulatory and environmental hurdles despite backing by U.S. President Donald Trump.

A nearly 10-year legal fight between TC Energy, formerly called TransCanada, and environmental activists has delayed development of the line that would run from Alberta to the U.S. Gulf Coast. A Nebraska court in August affirmed an alternative route through the state, raising hopes the project might proceed and provide badly needed transport for Alberta's crude.

On Wednesday, TC Energy said its 93.8 million litre-per-day (lpd) Keystone pipeline system to the United States was shut after a drop in pressure was detected. It said there were no injuries and it was investigating the cause of the breach near Edinburg, N.D.

The company has not said when pipeline operations would restart, but told shippers that service to U.S. Midwest refiners would remain shut during the outage. The line could remain shut for at least a week, according to market sources on Thursday.

TC Energy has begun using backhoes and vacuum trucks to recover the spilled oil, said Brent Nelson, an emergency response manager for Walsh County who visited the site.

"At this time I would estimate 50 to 75 persons onsite working between two shifts.... They are focusing on oil recovery at this time and will then move to making repairs," he said.

The exact amount of oil released will not be available until recovery has been completed, TC Energy said in a statement on Thursday.

In 2017, a Keystone crude pipeline leak in rural South Dakota spilled nearly 1.04 millionlitres, PHMSA data showed. Earlier this year, Keystone was partially shut after leaking 6,800 litres of crude in Missouri.

The latest release also affected a wetland area, a statement from the North Dakota Department of Environmental Quality said.

"It [Keystone]went in during the 1990s. They've had a few spills ... more than you would hope to have on a line that's still fairly new," said Carl Weimer, executive director of the Pipeline Safety Trust in Bellingham, Wash., a non-profit promoting pipeline safety.

Keystone has leaked substantially more oil, and more often, in the U.S. than the company indicated to regulators in risk assessments before operations began in 2010, according to a Reutersreview in 2017.

Marketlink pipeline disrupted

The Keystone outage also disrupted flows on the Marketlink pipeline, whichhas a capacity to flow 119 millionlpdand is connected to Keystone, roiling oil prices at the delivery point for U.S. crude futures.

On Wednesday, TC Energy said on its website that the Marketlink systemwas not affected by the Keystone outage, which was shut from Hardisty, Alta.,to Cushing and to Wood River-Patoka, Ill.

By Thursday, sources said the rates on the Marketlink were reduced, with one source saying the line was operating at about 30 million lpd.

However, market intelligence firm Genscape said on Thursday afternoon that Marketlink shut from reduced rates at approximately 47 million lpd earlier in the day.

"[This incident]underscores the structural issue plaguing the Canadian oil industry," said Michael Tran, managing director of global energy strategy at RBC Capital Markets.

"While it is too soon to draw comparisons to last year's historic pricing disconnect, the stranded barrels may raise similar fears if the outage proves longer than historical precedents," Tran said.

TC Energy said in a statement it would focus on cleaning up the spill and preparing to make Keystone pipeline repairs.

The Sierra Club said the latest spill was an example of why the Keystone XL should not be built.

"We don't yet know the extent of the damage from this latest tarsands spill, but what we do know is that this is not the first time this pipeline has spilled toxic tarsands, and it won't be the last."

Democratic presidential candidate Bernie Sanders took to Twitter on Thursday to condemn the pipeline and Trump for supporting the pipeline extension.

Sanders said he would shut down the existing pipeline if elected.