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Oil spills intensify focus on new pipeline proposals Add to ...

First it was a Michigan river. Then a Chicago suburb. Next was a small stream near an Alberta rancher’s house, followed by a northern Alberta forest.

Now an oil spill at a North Dakota pipeline pumping station is the latest in a string of incidents over the past year that is heightening public worries about the safety of North America’s vast network of oil pipelines. The series of accidents in the different areas has sent oil gushing from cracked pipes or faulty equipment, oozing into waterways and forested land.

For the oil-transportation industry, the pipeline spills could hardly come at a worse time. Billions in new spending hang in the balance, as governments and regulators weigh whether to approve two bold projects meant to dramatically extend the reach of Canada’s oil and gas industry. But the spills have made it increasingly difficult for some to believe corporate claims that pipelines are safe - and have stirred up an increasingly strident opposition to those projects.

Companies have “made their own job of persuasion that much harder,” said Elizabeth May, the leader of Canada’s Green party. “They’ve steepened the incline of the hill they need to climb.”

The most recent spill came this weekend, after 500 barrels of oil leaked into a TransCanada Corp. Keystone pipeline pump station in South Dakota. The Saturday morning leak came from a three-quarter-inch fitting roughly the size of a garden hose. And while most was contained inside the pipeline facility, it also sent a spray of crude into a nearby field. Crude oil flow will be halted for “a few days” while the company cleans up the mess and checks other fittings along the route, said TransCanada spokesman James Millar.

Keystone began commercial crude delivery just nine months ago. Corporate risk assessment documents for the line had estimated such a spill might happen only once in 38 years. Mr. Millar argued, however, that the leak does not indicate Keystone is unsafe. Operations were halted shortly after sensors detected there was a problem, he said. And the pipe itself is intact.

“The integrity of the pipe in the ground is solid. The pipe is safe,” Mr. Millar said.

But the Keystone leak came barely a week after Plains All American Pipeline LP saw its Rainbow line rupture and spill 28,000 barrels in northern Alberta, believed to be the largest such incident in nearly four decades. A few weeks before that, the Trans Mountain system operated by Kinder Morgan Canada was shut down following another, much smaller, leak. And it was only last summer that a pair of ruptures in Enbridge Inc. pipelines fouled a Michigan river and a Chicago suburb.

The cascade of problems has been difficult to ignore - and the Keystone leak comes at an especially delicate time for TransCanada, which is in the midst of seeking U.S. approval for Keystone XL, a major new pipe designed to expand the Keystone system in the U.S.

The leak is “pretty much a non-event from a financial perspective,” said Chad Friess, an analyst with UBS Securities, who calculated a one- to two-penny impact to per-share earnings.

“But it doesn’t help sentiment towards getting a pipeline approved in the U.S. right now. That’s probably the main drawback.”

For Canada’s pipeline industry, the past year was supposed to be a time of celebration, a moment to both bask in the success of past efforts and to lay the groundwork for even more ambitious plans. It was only last July that TransCanada Corp. opened the valves on Keystone pipeline, marking the company’s grand entrance into the world of international crude delivery. Three months later, Enbridge Inc. began commercial shipments through its $3.1-billion Alberta Clipper line.

At the same time, both companies have been pursuing new expansions, including Keystone XL and Enbridge’s $5.5-billion Northern Gateway pipeline, which is designed to open an Asian export market for the oil sands.

The spills, however, have helped stoke criticism of both projects. Northern Gateway has been the object of so much opposition, including native groups, that it became a federal election issue, with debate arising over whether export tankers should be allowed to sail through northern B.C. waters. Enbridge, however, urged critics to remember what Paul Stanway, spokesman for Northern Gateway, called “the context.”

“I know the latest incident always looms large. But the fact of the matter is it’s an amazingly safe system,” he said. “Enbridge’s statistics are better than 99.99-per-cent safe delivery of over 950 million barrels of petroleum products we transported in 2010.”

Yet others point to a more worrisome set of facts. For instance, last August Plains All American agreed with the U.S. Environmental Protection Agency to pay a $3.25-million (U.S.) civil penalty over 10 oil spills in Texas, Louisiana, Oklahoma and Kansas. The company also pledged to spend $41-million to upgrade its massive crude pipeline network.

The company has argued that it has gone above and beyond requirements, inspecting its Canadian pipe using state-of-the-art custom-built technology. It has applied to restart the Rainbow line, but has yet to receive approval to do so.

Yet critics say the series of spills creates bigger questions that need to be answered first. Ms. May, the Green Party Leader, called for an inquiry into whether regulators applied sufficient scrutiny to a company that has experienced major safety lapses.

“It’s got to be more than a quick whitewash of ‘we’ve cleaned up the mess we’ve made and now we want open the pipeline again,’” she said.

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Oil producers scramble on delivery arrangements

Canada’s oil patch says it has largely been able to manage through the spills that have shut down operations at a pair of important crude pipelines.

Crude flow has been halted through the Rainbow line in northern Alberta, which is operated by Plains All American Pipeline, and now the TransCanada Keystone line. Both pipeline systems have leaked crude in the past week and a half, forcing companies that produce oil to stockpile and truck crude in some cases, seek alternative pipeline options in others and even close in some wells.

But the outage has, so far, been short enough that industry says it has been able to maintain most output.

“We haven’t had any interruption of our deliveries of crude or any interruption of the sale of our crude,” said Anthony Marino, the chief executive officer of Baytex Energy Corp.

Graham White, a spokesman for Husky Energy Inc., similarly said that there has been “no significant impact from a corporate-financial perspective, but we are continuing to monitor.”

Nathan VanderKlippe

 
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