January 27, 2023

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Keystone pipeline shut after oil spill into Kansas creek By Reuters

2 min read

© Reuters. FILE PHOTO: TC Energy’s logo is pictured on a smartphone in this illustration taken, December 4, 2021. REUTERS/Dado Ruvic/Illustration/File Photo

By Brijesh Patel and Rod Nickel

BENGALURU/WINNIPEG (Reuters) – Canada’s TC Energy (NYSE:) on Thursday said it shut its giant Keystone pipeline due to an oil spill into a Kansas creek, and it is unclear how long the line will be closed.

The size of the leak, which occurred about 20 miles south of a key junction in Steele City, Nebraska, is currently unknown. The 622,000 barrel-per-day Keystone line is the primary artery shipping heavy Canadian crude from Alberta to refiners in the U.S. Midwest and the Gulf Coast.

U.S. Pipeline And Hazardous Materials Safety Administration (PHMSA) personnel are investigating the leak, which occurred near Washington, Kansas, a town of about 1,000 people.

Keystone shut the line at about 8 p.m. CT on Wednesday (2 a.m. Thursday GMT) after alarms went off and system pressure dropped, the company said in a release. TC said booms were being used to contain the creek.

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

Two Keystone shippers said TC had not yet notified them how long the pipeline may be shut down. TC did not comment further, referring reporters to its release.

Keystone’s shutdown is expected to hamper deliveries of Canadian crude both to the U.S. storage hub in Cushing, Oklahoma and to the Gulf, where it is processed by refiners or exported. The shutdown is expected to widen the discount on Western Canada Select (WCS) heavy oil from Alberta to , which was already weak due to lackluster demand for heavy, sour grades from Canada.

WCS heavy blend crude for January delivery in Hardisty, Alberta, settled at around a $26-per-barrel discount to U.S. West Texas Intermediate (WTI) on Wednesday. [O/R]

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

On Nov. 15, the company announced it would curtail volumes on the pipeline due to some severe weather-related incidents without specifying the size or duration of the curbs.