Keystone oil pipeline restart hinges on regulators

Fri Jun 3, 2011 2:09pm EDT
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By Jeffrey Jones

CALGARY, Alberta (Reuters) - U.S. regulators will likely set some conditions before allowing TransCanada Corp to resume operating its pivotal Keystone oil pipeline, which was shut Friday for a fifth day following a small leak.

Calgary-based TransCanada, which had earlier said only that it expected the 591,000 barrel a day export line to resume flowing "in the coming days", said on Friday that it was awaiting approval of a plan to restart the line from the U.S. Pipeline and Hazardous Materials Safety Administration.

Spokesman Terry Cunha said in an email that he did not know how long it may take the regulator to rule on the line. The company said it was still making repairs and modifications to a Kansas pump station following equipment failure that caused about 10 barrels of oil to leak on Sunday.

U.S. regulators have been under pressure to get tough with energy companies after numerous pipeline ruptures, leaks and outages over the past 12 months, many of which have complicated operations for Canadian crude shippers and U.S. refiners. Regulators imposed stringent restart conditions at times.

The outage of the line, which runs from Hardisty, Alberta, to the U.S. oil pricing hub of Cushing Oklahoma, has driven Canadian physical crude discounts to their lowest since March. It also caused U.S. oil futures to jump by $2 on Tuesday.

It was the first time TransCanada has said that a restart depends on regulatory approval.

"After they have completed their thorough and prudent review, we expect that PHMSA may issue an order that could identify certain conditions that will be required to restart and operate the Keystone system," he said. "At that time, we will safely restart the Keystone pipeline system and gradually ramp up throughput to fulfill commercial obligations."

Keystone was also shut in early May due to the failure of a different type of fitting at a North Dakota pump station that caused a 500-barrel spill.   Continued...