BUSINESS

Keystone Pipeline Springs Second Leak

05/31/2011 04:13 EDT | Updated 07/31/2011 05:12 EDT

(The Canadian Press) -- TransCanada Corp. is grappling with another pump station leak that has shut down its Keystone pipeline, as it seeks to convince U.S. authorities that a controversial expansion will be environmentally safe.

The Calgary-based company (TSX:TRP) said Tuesday it has suspended crude oil shipments along Keystone while it completes repairs and cleans up oil that spilled at a Kansas pumping station.

The latest spill comes just 2 1/2 weeks after the major energy shipper experienced a similar problem at a pumping station in North Dakota.

The failure of a three-quarter inch fitting in early May was responsible for a leak of 500 barrels of crude at that pumping station.

The more recent leak spilled only a about 10 barrels of oil, although TransCanada had originally said Tuesday that as much as 40 barrels were released onto the pump station's property.

"Unfortunately, on this weekend (in Kansas), it was a half-inch fitting -- a different type of fitting -- that broke, resulting in some crude oil being released onto our property," said TransCanada spokesman Terry Cunha.

Keystone normally carries between 400,000 and 450,000 barrels per day of Alberta crude to refineries in Illinois and a major storage hub in Oklahoma. It has capacity to carry 591,000 barrels per day.

"We don't expect (the disruption) to have any impact on our ability to deliver for our customers," Cunha said.

News of the Keystone closure was one of the reasons the price of benchmark West Texas Intermediate crude for July delivery gained US$1.82 to US$102.41 per barrel on the New York Mercantile Exchange Tuesday afternoon.

The energy industry has been under increased scrutiny recently, with a series of high-profile spills grabbing headlines -- from the huge BP offshore well blowout in the Gulf of Mexico more than a year ago, to the Enbridge Inc. (TSX:ENB) pipeline rupture in Michigan last summer, to a major spill on the Rainbow pipeline in northern Alberta a month ago.

Environmentalists and landowners in several U.S. states oppose TransCanada's US$7-billion plan for Keystone XL, which will double the system's capacity and extend its reach further south to refineries in Texas.

The U.S. State Department is expected to decide on Keystone XL later this year.

The chief executive officer of the Canadian Chamber of Commerce is set to speak to the Calgary Petroleum Club later Tuesday on the need for a Canadian energy strategy.

"Where we really need a lot of action right now is in the United States, particularly with Keystone XL," Perrin Beatty said in an interview ahead of the speech.

He said this would potentially allow for Canadian oil to displace about 40 per cent of crude imported from the Middle East into the U.S.

"And it's not only a matter of economic security for the United States, but a matter of national security as well, because today it is dependent on oil from regions of the world which are unstable and where the source of supply is far from assured."

All major construction projects are going to encounter some degree of NIMBY -- Not in My Back Yard --attitudes from the public, but pipelines are by far the safest way to transport crude, Beatty said.

"In terms of the environmental impacts, they're far easier to control and to mitigate by pipeline than by moving it in any other way, and what the Canadian pipeline companies have demonstrated is that where there has been a problem, they've acted very quickly to try to clean it up."