November 8, 2019 / 6:40 AM / 6 days ago

Rare permit for Keystone oil pipeline in spotlight after spills

(Reuters) - The massive Keystone pipeline has been transporting oil from Canada to the United States at a higher-than-standard level of pressure since it started operating in 2010, thanks to a special permit granted by U.S. regulators on the condition operator TC Energy Corp (TRP.TO) would monitor the line closely.

FILE PHOTO: An aerial view shows the darkened ground of an oil spill which shut down the Keystone pipeline between Canada and the United States, located in an agricultural area near Amherst, South Dakota, U.S., in this photo provided November 18, 2017. REUTERS/Dronebase

However, after four significant leaks, including one of the largest of the decade in North Dakota last week, this exemption is in the spotlight and users of the line are concerned it may be at risk.

The coveted permit granted in 2007 allowed TC Energy, then known as TransCanada, to use a higher-than-standard rate of pressure for Keystone in rural areas, according to U.S. regulatory documents reviewed by Reuters, meaning more oil could flow through the pipeline than similar-sized U.S. lines.

Keystone is a crucial artery for crude oil flowing from Canada with a capacity of roughly 590,000 barrels per day going to Midwest refiners and connecting to storage terminals and exporters in the U.S. Gulf Coast.

Keystone had to agree to more than 50 safety conditions to receive the exemption - given out only twice since by the U.S. Pipeline and Hazardous Materials Safety Administration (PHMSA).

Around the time the permit was granted, risk assessments the company provided to regulators indicated the chance of a leak of more than 50 barrels to be "not more than once every seven to 11 years over the entire length of the pipeline in the United States." (tinyurl.com/y2vb7lyc)

Instead, over the past decade Keystone has had two leaks of 400 barrels and two leaks of several thousand, including the spill of more than 9,000 barrels last week, according to PHMSA data.

TC Energy estimates the pipeline can be partially restarted between Sunday and Tuesday, pending regulatory approval, shippers on the line said on Thursday.

TC Energy spokesman Terry Cunha declined to comment on the timing. He said the company has operated under high maintenance and safety standards.

“We take great care in the planning, design, construction and safe operation of our energy infrastructure,” Cunha said in an email. 

PHMSA declined to comment, citing the ongoing investigation into the spill, the cause of which is still not known.

CRUCIAL ARTERY

The special permit for the line is meant to remain in effect for the life of the pipeline unless suspended, modified or terminated by the agency.

Some shippers now believe regulators may revoke the permit, which allows TC Energy to run the pipeline at an operating stress level of 80 percent of the steel pipe’s specified minimum yield strength (SMYS) in rural areas. The normal operating pressure for hazardous liquid pipelines is about 72 percent, according to PHMSA.

“(I’m) concerned they may get their special permit to flow at 80% of max instead of 72% suspended,” one Keystone shipper said, citing “three spills in three years.”

The shipper asked not to be named because they are not authorized to speak to the media.

The North Dakota spill has also added to the concerns of landowners and environmental groups who oppose TC Energy’s plan for Keystone XL, another large pipeline from Canada to the United States.

The project, which has faced a long regulatory battle in the United States, was revived by U.S. President Donald Trump shortly after he took office, but continues to face opposition from landowners worried about pipeline safety.

TC Energy executives have in the past said construction standards would exceed other pipes.

“These permits should not be granted, but certainly not to acompany with repeated safety failures and frequent spills,” said Brian Jorde, an attorney for Nebraska landowners fighting Keystone XL.

“Granting of these permits are supposed to correspond with more vigorous inspections and more frequent inspections by the applicant, but in reality, it is more self-policing which typically falls below the intent of the special permit,” Jorde said.

Reporting by Devika Krishna Kumar and Laila Kearney in New York; Editing by Sonya Hepinstall

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