Keystone Pipeline to Fully Restart After Oil Spill, Repairs

The 2,700-mile Keystone pipeline shut down Dec. 7 after a rupture in Kansas spilled an estimated 14,000 barrels of crude oil, according to TC Energy—the largest such reported leak in the line’s history. The company earlier this month partially reactivated the pipeline, but the so-called Cushing extension had remained offline. 

Keystone originates in the Canadian province of Alberta and delivers about 622,000 barrels of crude a day to refiners in the Midwest and the Gulf Coast. It is one of nearly two dozen pipelines that pass through the oil storage complex in Cushing—the pricing hub for the U.S. benchmark West Texas Intermediate crude, and the physical delivery point for the benchmark New York Mercantile Exchange oil futures contracts.

Front-month futures contracts for West Texas Intermediate slipped to $78.40 a barrel on Thursday. 

Canada’s oil traditionally trades well below the WTI benchmark and fetched a $20-per-barrel discount to WTI prices at Cushing prior to the spill. As supplies of the Canadian grade declined at Cushing, the discount narrowed to $7 per barrel last week, before widening out again to $17 per barrel Wednesday, according to data collected by Argus Media. 

Despite the dearth of crude flowing into Cushing, storage tanks there held about 25 million barrels the week ended Dec. 23, according to the Energy Information Administration—roughly one million more than at the beginning of the month. The buildup was in part attributable to traders sending more crude from the Gulf Coast to Oklahoma as they sought to store and sell the barrels at a profit at a later date, said

Robert Yawger,

executive director for energy futures at Mizuho Securities.

TC Energy didn’t say what caused the leak, which prompted a cleanup operation of a creek involving hundreds of individuals. The cleanup is ongoing. As of Dec. 20, TC Energy had recovered 7,599 barrels of oil from the stream, according to the company. It didn’t say when recovery and remedial operations would be completed. 

The company said on Thursday that it would share the findings of an investigation it is conducting into the incident as they become available. “No incident is ever acceptable to us,” said Richard Prior, TC Energy president of liquids pipelines.

The company said that it would operate the line at reduced operating pressures. It had previously been permitted by regulators to operate the pipeline at a higher pressure than would otherwise be allowed under regulation, which allowed the operator to save on costs.

—Collin Eaton contributed to this article.

Write to Benoît Morenne at [email protected]