TC Energy restarts part of Keystone pipeline after oil spill

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TC Energy Corp. has restarted a section of the main trunk of its Keystone pipeline from Hardisty, Alberta to the U.S. midwest, as well as a branch extending eastward to Illinois, following a large spill of crude into a Kansas Creek last week.

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The company said in a statement late Wednesday that it had resumed flows on sections that were unaffected by the 14,000-barrel spill on Dec. 7. “The affected segment of the Keystone Pipeline System remains safely isolated as investigation, recovery, repair and remediation continues to advance,” TC Energy said.

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The affected portion of pipeline won’t be restarted until it is safe to do so and approved by the company’s U.S. regulator, the Pipeline and Hazardous Materials Safety Administration, TC Energy said.

The company has not provided a timeline for a complete restart of the line, nor has it indicated what caused the failure that resulted in one of the worst onshore crude spills in the U.S. in nearly a decade.

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Producers and analysts had speculated that a partial restart would be possible since the location of the spill is directly south of Keystone’s junction in Steele City, Nebraska.

However, the remaining outage will continue to hinder flows of crude oil to a key storage hub at Cushing, Oklahoma, and on to U.S. Gulf Coast refineries.

The disruption to operations on the 622,000-barrel-a-day pipeline is particularly frustrating for Canadian producers who were already contending with a growing price discount on Canadian heavy crude oil, compared with benchmark West Texas Intermediate (WTI).

A combination of factors — from a shortage of refinery space and plummeting prices for some refined products made from heavy oil, to the release of primarily sour barrels from the U.S. Strategic Petroleum Reserve — has caused the price of benchmark Western Canadian Select (WCS) to fall over the past six months.

Storage and pipeline export capacity in Alberta have improved, however, since the last time there was a Keystone outage in 2019. Expansion of Enbridge Inc.’s Line 3 boosted overall export capacity last year, and analysts say they expect more Canadian barrels to be put into storage rather than sold at a discount.

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