Talk about dangerous timing.
Days earlier than Nebraska regulators are set to rule on TransCanada Corp.’s XL extension to its Keystone pipeline, the prevailing conduit has sprung a serious leak. It spilled about 5,000 barrels of oil early Thursday in South Dakota, handing new fodder to environmentalists against the XL venture. The firm shut the road, and foes had been fast to reply.
The spill “should be a stark reminder of the risk Nebraska would be signing up for,” mentioned Anthony Swift, director of the Natural Resources Defense Council’s Canada Project, a bunch that opposes the pipeline. “The likelihood of spills should weigh into their decision.”
The spill occurred in Marshall County, the corporate mentioned in a badertion. The pipeline, which may carry about 600,000 barrels of crude a day from Alberta’s oil sands to the U.S. Midwest, is anticipated to stay shut whereas the corporate responds to the spill. TransCanada tentatively plans to restart the road Nov. 23, an individual accustomed to the matter mentioned Friday.
Analysts have mentioned a protracted shutdown would have an effect on distribution of heavier oil. The line will stay shut till repairs are accomplished and TransCanada receives approval from the Pipeline and Hazardous Materials Safety Administration, Terry Cunha, an organization spokesman, mentioned in an emailed badertion.
While a 2011 state legislation precludes the Nebraska regulators from factoring pipeline security or the potential for leaks into the choice on Keystone XL, the spill nonetheless sends a tough sign out at a key time for the corporate.
“The timing of this outage isn’t excellent from TransCanada’s standpoint,” mentioned John Auers, government vp at vitality advisor Turner Mason & Co. in Dallas, by phone. “Theoretically, it should not have an impact in Nebraska. I think TransCanada will handle this spill very well, and get it up and running quickly. It could be a good indication that pipes are safe, and they can handle incidents.”
The longer the pipeline stays down, the extra crude will fill storage tanks. As they prime out, the low cost paid for heavy Canadian oil might want to widen to make delivery by rail automobiles reasonably priced, in accordance with Kevin Birn, a director at IHS Energy in Calgary. “We always thought we would see increased movements by rail,” Birn mentioned by phone. “This will accelerate that time line.”
The shutdown of the road additionally comes as falling Venezuelan manufacturing and cuts by the Organization of Petroleum Exporting Countries have diminished the provision of heavy crude oil alongside the U.S. Gulf Coast. Western Canadian Select heavy crude’s low cost to West Texas Intermediate futures widened to $14.20 a barrel, in accordance with information compiled by Bloomberg. It was unchanged Friday.
“While it remains too early to badess the length of the outage,” differentials are anticipated to widen, Tudor Pickering Holt & Co. mentioned in a badysis report Friday. The extent of the spill may end in a longer-term shutdown, the report mentioned.
A major change in pricing will negatively have an effect on some drillers. MEG Energy Corp., Imperial Oil Ltd and Cenovus Energy Inc. would see essentially the most affect, Tudor Pickering mentioned.
Meanwhile, a call by Nebraska’s Public Service Commission on Keystone XL, an $eight billion, 1,179-mile conduit on the drawing boards since 2008, is scheduled for Nov. 20. The board will determine whether or not to permit the Calgary-based firm’s line to cross the state. While any ruling there will definitely face authorized challenges, an approval would take away a key hurdle to development.
The venture, as deliberate, would ship crude from Hardisty, Alberta, by way of Montana and South Dakota to Nebraska, the place it would hook up with pipelines resulting in U.S. Gulf Coast refineries. The firm’s open season for gauging producers’ curiosity closed late final month, and TransCanada executives have indicated that they’ve secured sufficient delivery commitments to make the venture commercially worthwhile.
If Nebraska denies approval, ruling it’s not within the public curiosity, it may very well be the demise knell for the long-stalled extension, badysts have mentioned. While the choice may be challenged in court docket, uncertainty over the venture’s prospects has loomed over TransCanada’s capability to safe oil producer commitments to make use of the conduit.
The line is one in every of three oil-sands pipeline tasks which have been authorized by both the Canadian or U.S. authorities over the previous yr and, with a ultimate approval, may very well be constructed as early as this decade. New pipelines are wanted to stop a bottleneck as Canada’s oil-sands manufacturing grows.
The current Keystone system is second solely to Enbridge’s mainline within the quantity of heavy Canadian oil-sands crude it might ship to the U.S. Midwest. The U.S. Pipeline and Hazardous Materials Safety Administration has deployed 4 technical consultants to the location of the spill, and is investigating, a spokesman mentioned.
The longer the outage, “the larger the affect,” he said “I don’t anticipate it to be down for lengthy because it’s a vital pipeline. There is each incentive for TransCanada to convey it again up.”
— With help by Kevin Orland