Keystone Pipeline Sludge Delays Work Needed to Assess Damage

(Bloomberg) — Excavation work at a Keystone Pipeline oil spill has been delayed because crews must clean up sludge around the site, according to the North Dakota Department of Environmental Quality. 

Heavy equipment has been moved close to the location of Tuesday’s leak that spewed 3,500 barrels of oil across a remote area of the state, but digging can’t commence until a mixture of crude and water is removed, agency official Marty Haroldson said by phone on Friday. The excavation, which had been expected to start on Thursday, is the first step in repairing the pipe system that hauls Canadian oil to US markets.

South Bow Corp.’s Keystone conduit can transport more than 620,000 barrels of crude daily from Alberta to refineries in the Midwest and Gulf Coast. The line that’s been shut since Tuesday’s spill normally accounts for about 15% of Canadian oil exports to the US. Canada is the largest US supplier of foreign crude, sending its southern neighbor about 4 million barrels a day.

Canadian heavy crude prices have remained strong since the shutdown amid low inventories in Canada, oil-sands maintenance work that’s curtailed some output, and extra hauling capacity on other pipe systems. 

Western Canadian Select crude in Alberta’s discount to US benchmark West Texas Intermediate widened to $10 a barrel from $9.80 on Thursday, according to a person familiar with prices and General Index data compiled by Bloomberg.  The discount averaged about $15 over the past two years. 

Enbridge Inc., operator of the largest oil pipeline export system in Canada, isn’t rationing space this month and the expanded Trans Mountain pipeline shipped a record volume of crude by tanker from a marine terminal near Vancouver last month.

“While our Mainline is typically running at capacity, there was some flexibility this month due to seasonal maintenance activity among our customers,” Enbridge said in an email. “This allowed us to accommodate those shippers seeking transportation on our system due to the Keystone leak.” 

South Bow has committed to not restart the pipeline without prior US government approval, according to a statement from the Pipeline and Hazardous Materials Safety Administration. A total of 910 barrels have been recovered and PHMSA has dispatched eight inspectors to investigate the cause of the spill, the agency said.

(Adds Canadian oil price in fourth, fifth paragraphs.)

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