Corrosion may have led to North Dakota pipeline leak: regulator

NEW YORK Fri Oct 11, 2013 4:27pm EDT

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NEW YORK (Reuters) - Initial investigations following a 20,600-barrel leak on Tesoro Logistics LP pipeline in North Dakota point to corrosion on the 20-year-old pipeline, state regulators said on Friday.

The six-inch pipeline was carrying crude oil from the Bakken shale play to the Stampede rail facility outside Columbus, North Dakota when a farmer discovered oil spouting from the pipeline on September 29.

This is the largest oil spill in the state since it became a major U.S. producer. It is the biggest oil leak on U.S. land since March, when an Exxon Mobil pipeline spilled 5,000 to 7,000 barrels of heavy Canadian crude in Mayflower, Arkansas.

The release did not pose an immediate threat to groundwater sources or nearby rivers and lakes, the state Department of Health said on Thursday.

Initial concerns the pipeline was punctured by nearby residents were dismissed and the cause appears to be corrosion, according to Brian Kalk, chairman of the state Public Service Commission.

"It started out as a small hole and got bigger," Kalk said.

The U.S. Department of Transportation Pipeline and Hazardous Materials Safety Administration is in charge of investigating the cause of the leak and oversees the pipeline's operation.

But the state commission approves the construction of pipelines and operators' compliance with initial designs submitted to the state, Kalk said.

San Antonio, Texas-based Tesoro Logistics declined to comment on what was behind the spill.

"The cause of the release is currently under investigation," Tina Barbee, a Tesoro spokeswoman said.

PHMSA could not be immediately be reached for comment because of the government shutdown. It is not immediately clear how furloughs related to the standoff in Washington could affect the investigation of the leak or the restart of the line.

CORROSION WOES

The pipeline, which runs 35 miles from Tioga to Black Slough in North Dakota, was built by BP Plc in 1993.

It is a part of Tesoro's "High Plains" pipeline system in North Dakota and Montana that gathers oil from the Bakken shale and delivers it to another Enbridge pipeline and Tesoro's 68,000 barrels-per-day Mandan refinery.

Tesoro bought the pipeline and the refinery from BP in 2001.

Farmer Steven Jensen on Thursday said the smell of sweet light crude oil wafted on his farm four days before he discovered the leak, leading to questions on why the spill was not detected sooner.

"These companies, they've got to step up to the plate and use better technology. There is no reason this shouldn't have come up somewhere," Jensen said.

Kalk, with the state Public Service Commission, said he expects the federal investigation to answer questions on why nearby pumping stations failed to dictate a drop in pressure early on and whether maintenance records failed to reveal problems on the line.

"We'd like to know if this could have been prevented or fixed ahead of time," he said.

EFFECT ON THE BOOM

Tesoro said other oil producers were shipping oil on the pipeline when the leak occurred but declined to identify the shippers or comment on what impact, if any, this will have on oil production.

"We are unable to forecast the potential supply impacts on behalf of our third-party shippers," Tesoro's Barbee, said.

But the state Industrial Commission's Oil and Gas Division said the pipeline's woes will not affect the oil boom.

"Impacts are further down the line. Tesoro lost close to $2 million with that large spill if you figure $100 a barrel of oil," said Maxine Herr, a commission spokeswoman.

North Dakota produced nearly 875,000 barrels-per-day of oil in July, second only to Texas. The state's oil output has doubled in the last two years as new developments in hydraulic fracturing, or fracking, opened up its vast oil resources.

This is the biggest oil spill in the state since 1 million barrels of salt water brine, a by-product of oil production, leaked from a well site in 2006, according to the state Department of Health.

(Additional reporting by Todd Melby; Editing by James Dalgleish and Chizu Nomiyama)

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