Keystone operator recovers about 2,600 barrels of oil from Kansas creek

© Reuters. FILE PHOTO: A satellite image shows an overview of the crude oil spill along Mill Creek following the leak at the Keystone pipeline operated by TC Energy, in Washington County, Kansas, U.S. December 10, 2022. Satellite image 2022 Maxar Technologies/Hando

By Erwin Seba and Stephanie Kelly

WASHINGTON, Kan. (Reuters) - Canada's TC Energy (NYSE:TRP) Corp said it had cleaned up almost 2,600 barrels of oil from the largest U.S. crude spill in nearly a decade, but the timetable to restart the Keystone Pipeline following its rupture last week remained unclear.

TC Energy shut the pipeline after the spill of roughly 14,000 barrels of crude was discovered on Wednesday in Kansas. The company told officials in Washington County on Monday that it has not yet determined the cause and it started excavating around the pipeline.

It is the third spill of several thousand barrels of crude from the Keystone line in the last five years. The 622,000 barrel-per-day Keystone line, which ships heavy Canadian crude from Alberta to U.S. refiners in the Midwest and the Gulf Coast, had received special permits to run at a higher rate than any other crude lines in the United States, and has been doing so since 2017.

TC Energy and county officials met briefly Monday to discuss efforts to contain and clean up the spill, a company official said. The company provided no timeline on the cleanup, Dan Thalmann, owner of the Washington County News and who attended the meeting, said.

The company has been vacuuming oil from Mill Creek into trucks, and there are more than 300 people on-site now, TC said in a late Monday statement.

Aerial pictures show a swath of oil sprayed upward out of the pipeline onto a hillside. The oil spilled down a pasture north of Washington, Kansas, staining the grass, said Randy Hubbard, emergency preparedness coordinator for the county. Farmers raise grain, corn and cattle in the area, located in a county of roughly 5,500 people about two hours from Kansas City.

The affected segment of the line cannot resume operation until regulators approve a restart plan in its entirety, according to a U.S. Department of Transportation document.

The U.S. Environmental Protection Agency and pipeline regulator the Pipeline and Hazardous Materials Safety Administration (PHMSA) are also on the scene. Additional EPA personnel will arrive to monitor the clean-up efforts, the EPA said on Monday.

MARKET WORRIES ABOUT SUPPLY

The shutdown is expected to hamper deliveries of Canadian crude both to the U.S. storage hub in Cushing, Oklahoma, and to the Gulf, where it is processed by refiners or exported.

"For the most part, there is concern in the trading community (the pipeline) is not up yet," a U.S.-based dealer said.

If the outage lasts for more than 10 days, it could push Cushing, Oklahoma, storage levels to near the operational minimum of 20 million barrels, analysts said.

Concerns over the pipeline outage's shrinking supplies at Cushing, also the delivery point for West Texas Intermediate crude futures (WTI), helped boost the U.S. benchmark by over 3% to about $73.50 on Monday.

Prices for sour crude grades in the U.S. Gulf of Mexico were strengthening on Monday, as the shutdown means more demand for heavier Gulf barrels. Differentials at Magellan at East Houston and WTI Midland crude were weakening, keeping levels at Cushing stronger and exports weaker, one trader said.

Oil refiners could be forced to cut production rates by Christmas week if the pipeline does not restart by then, a crude analyst said. Refiners typically hold 10 days of crude supply on hand, the analyst added.