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The Canada-U.S. Keystone Oil Pipeline Temporarily Closed Due to Leak, with Less Impact on Oil Prices Than Environmentalists

Canadian energy company TC Energy temporarily shut down the 622,000-barrel-per-day Keystone oil pipeline after a leak was discovered on the outskirts of Kansas Wednesday night, with an unknown amount of oil leaking into a nearby stream. If you're unsure of how the Keystone could spring a leak after President Joe Biden infamously canceled it at the start of taking his new position, here's the reason: Biden killed the Keystone XL, but the affected section of the pipeline has been in operation since 2010 and is the main pipeline used to transport large quantities of heavy Canadian crude oil from Alberta to the U.S. Midwest and Gulf Coast.

The company has not disclosed the cause of the leak nor the amount of oil released, but it did issue an announcement: “Our primary focus right now is the health and safety of onsite staff and personnel, the surrounding community, and mitigating risk to the environment through the deployment of booms downstream as we work to contain and prevent further migration of the release.”

Prices for oil climbed briefly but closed the day lower for the fifth day in a row, which means that the closure doesn't appear to have had a significant impact on the market so far. Traders “shrugged off” the news, according to Reuters, and instead focused “on concerns that global economic slowdowns would slash fuel demand.” Furthermore, inventory levels are believed to be sufficient to withstand a brief closing of the Keystone. 

According to Reuters: “Oil prices rose after the company announced the closure, but the rally dissipated as analysts noted that the U.S. Gulf is likely to have enough inventory to handle short-term outages. Several analysts also said the section of the line that goes to Midwest refiners could be restarted soon. TC Energy has not announced when the pipeline would reopen.” 

The leak happened 20 miles to the south of Steele City, Nebraska, in rural Kansas. The pipeline network of 2,687 miles has delivered three billion barrels of crude oil from Canada to the United States since its opening 12 years ago. It is believed that the Environmental Protection Agency (EPA) and the Kansas Department of Health and Environment are looking into the cause of the leak, the Keystone’s seventh. Previous leaks have required up to two weeks for repairs.

It will be interesting to see whether this poses a significant threat to oil supplies and an additional stumbling block to economic activity. In the meantime, crews are laboring extra hard to make the line operational again.

Expect the anti-fossil-fuel group and environmentalists to exploit this situation to advocate for greater reductions in the use of oil. Already, Massachusetts Democrat Senator Ed Markey wants answers: “I am outraged, but not surprised by the news of yet another oil spill from the Keystone Pipeline. We've seen the same story play out year after year as they dangerously transport some of the dirtiest oil on the planet. We need answers and we need accountability now.”

Every industry has its own incidences of accidents, and oil production is no exception. The aim here is to repair the problem as soon as possible, learn from the cause of this leak, and apply this knowledge to increase safety in the future.

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