TC Energy Awaits Federal Nod on Keystone

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Written by Daniel Graeber for Industrial Info Resources (Sugar Land, Texas)--It's now apparently up to federal authorities to determine if it is safe to resume full operations on the Keystone oil pipeline from Canada, more than a week after one of the worst inland spills in decades.

Operator TC Energy Corporation (NYSE:TRP) (Calgary, Alberta) was said to be testing a pressure increase on the line when it ruptured Dec. 7 near the border between Kansas and Nebraska, releasing an estimated 14,000 barrels of oil.

The spill was among the worst in nearly a decade. The line was carrying bitumen and flows reached an area creek, a serious concern given that the bitumen flowing through the line tends to sink in water.

The U.S. Department of Transportation's Pipeline and Hazardous Materials Safety Administration (PHMSA) already issued TC Energy with a corrective action. Clean-up operations have continued and the company estimates it's been able to remove some 7,600 barrels from the affected creek.

Keystone has a peak design capacity of 622,000 barrels per day. Parts of the pipeline are working again, and TC Energy filed the application to resume full operations, though a final decision rests with federal regulators.

"The affected segment of the Keystone pipeline system remains safely isolated as investigation, recovery, repair and remediation continue to advance," TC Energy said Wednesday. "This segment will not be restarted until it is safe to do so and when we have regulatory approval from PHMSA."

How much the Keystone outage is impacting the regional energy balance is uncertain. Federal data for the seven-day period ending December 9, which includes the date of the Keystone outage, showed total commercial inventories increased by 10.2 million barrels, suggesting the closure had yet to show up for the barrel counters.

Data through December 16 so far looks mixed. Estimates from S&P Global Commodity Insights suggested U.S. crude oil inventories increased 600,000 barrels, while the American Petroleum Institute estimated stocks fell by 3.1 million barrels. Federal data, meanwhile, suggest stocks declined by 5.9 million barrels, though sniping at any one of those data sets is something of a career for many analysts.

Keystone is partially an export artery for Canadian crude, but those barrels must certainly be counted.

Either way, Keystone is a contentious piece of infrastructure. The dozen or so leaks reported since it was commissioned in 2010 all but ruined any chance for the expansion project, Keystone XL, to see the light of day.

The viscous form of crude oil sent through the network is no help either. After Line 6b of the broader Lakehead system leaked some 25,000 barrels of oil in Kalamazoo, Michigan, in 2010, there was talk of banning Canadian crude oil in the region. That's a particular concern for a state that would lean on maritime transports through the Great Lakes without the Lakehead system from Enbridge.

Meanwhile, two broader questions are nagging in the wake of the latest Keystone spill -- its fate during the energy transition and its role in energy security.

Energy companies are bowing to political, investor and advocacy pressure to expand their portfolios of non-fossil-fuel resources. While Alberta's government has gone a long way toward cleaning up the industry, bitumen production is still carbon-intensive. With few pipelines planned in the near-term future in North America, TC Energy could have its work cut out for it moving forward.

The global energy sector, meanwhile, is still adjusting to the loss of Russian barrels, and it's North American producers that are filling some of the void. U.S. crude oil production is set to break a record while upstream activity in Canada is expected to increase by 15% from 2022 levels. Those products may be limited by any further headwinds in the North American midstream sector, complicating the global energy mix.

Keystone may be just one pipeline, but history shows its importance resonates globally.

Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 trillion (USD).