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TC Energy shuts down Keystone pipeline after oil spill in Kansas creek

Dec 8 (Reuters) – Canada’s TC Energy said on Thursday it had shut down its Keystone pipeline, squeezing the flow of Canadian oil to U.S. refineries after a spill in a Kansas creek, and it was unclear how long the shutdown would last.

The size and cause of the leak, which occurred about 20 miles south of a key intersection in Steele City, Nebraska, is unknown.

The 622,000 bpd Keystone line is a critical artery that carries heavy Canadian crude from Alberta to refineries in the US Midwest and Gulf Coast.

US 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 down the line around 8 p.m. CT Wednesday (0200 GMT Thursday) after alarms went off and system pressure dropped, TC ( TRP.TO ) said in a release. It said booms were used to contain the spill.

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

There have been no effects on drinking water wells or the public, the US Environmental Protection Agency (EPA) said in a statement, although surface water in Mill Creek was affected. It sent two dispatchers to the site to monitor TC Energy’s response and evaluate the cause of the spill.

The TC declared force majeure over the blackout, according to a source with direct knowledge, which refers to unexpected external circumstances that prevent a party to a contract from fulfilling its obligations. TC did not respond to a request for comment.

Two Keystone shippers said TC had not yet notified them how long the pipeline might be closed.

Keystone’s shutdown will hamper deliveries of Canadian crude both to the U.S. storage center in Cushing, Oklahoma and to the Gulf, where it is processed by refiners or exported.

The shutdown is expected to increase the discount of Western Canada Select (WCS) heavy oil from Alberta to U.S. crude, which was already high due to weak demand for heavy, sour Canadian oil.

WCS for December delivery traded at $33.50 a barrel below WTI, a bigger discount than Wednesday’s settlement of $27.50 a barrel below the benchmark, according to a broker.

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

The Hardisty, Alberta, hub has sufficient storage until the pipeline is back online, said BMO analyst Randy Ollenberger.

Steele City is roughly the intersection where the Keystone splits, with one segment moving crude oil to Illinois refineries and the other carrying oil south to Oklahoma and the Gulf Coast.

If the spill is located south of the junction, the TC could quickly restart its segment into Illinois, RBC analyst Robert Kwan said in a note.

Previous shutdowns have generally lasted about two weeks, but this one could last longer as it involves a body of water, Kwan said.

There have been seven spills at Keystone since it became operational in June 2010, according to PHMSA data. The largest were in December 2017, when more than 6,600 barrels spilled in South Dakota, and in November 2019, when more than 4,500 barrels spilled in North Dakota, according to PHMSA.

On November 15, TC announced that it would reduce volumes on the pipeline due to some severe weather-related events, without specifying the size or duration of the curbs.

TC shares ended down 0.1% in Toronto.

Reporting by Arpan Varghese, Brijesh Patel and Deep Vakil in Bengaluru, Rod Nickel, Nia Williams and Arathy Somasekhar; Editing by Alexander Smith, Andrea Ricci and Josie Kao

Our standards: Thomson Reuters Trust Principles.

Bar nickel

Thomson Reuters

Covers energy, agriculture and politics in Western Canada with energy transition a key area of ​​focus. Has done short reporting stints in Afghanistan, Pakistan, France and Brazil covering Hurricane Michael in Florida, Tropical Storm Nate in New Orleans and the Alberta wildfires in 2016 and the campaign trail of political leaders during two Canadian elections.

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