Keystone pipeline shut after spilling 9,000 barrels of oil in North Dakota

(This October 31 story removes reference to 1990s in paragraph 14)

(Reuters) - An estimated 9,120 barrels of oil have spilled from TC Energy Corp’s Keystone crude pipeline in North Dakota, state authorities said on Thursday, a major leak at a time of increased regulatory scrutiny of oil pipeline expansions.

The initial estimate makes it one of the biggest onshore crude spills in the past decade and the largest for Keystone, according to U.S. Pipeline Hazardous Materials and Safety Administration (PHMSA) data back to 2010.

The cause of the rupture has not been disclosed.

Pipeline operator TC Energy is seeking to expand its pipelines linking Western Canadian oil fields to U.S. refineries with its proposed Keystone XL project. The $6 billion project has faced regulatory and environmental hurdles despite backing by U.S. President Donald Trump.

A nearly 10-year legal fight between TC Energy, formerly called TransCanada, and environmental activists has delayed development of the line that would run from Alberta, Canada to the U.S. Gulf Coast. A Nebraska court in August affirmed an alternative route through the state, raising hopes the project might proceed and provide badly needed transport for Alberta’s crude.

Western Canada Select heavy oil traded on Thursday at $20 per barrel less than U.S. benchmark WTI, the biggest discount in 11 months, according to Net Energy Exchange.

On Wednesday, TC Energy said its 590,000-barrel-per-day (bpd) Keystone pipeline system to the United States was shut after a drop in pressure was detected. It said there were no injuries and it was investigating the cause of the breach near Edinburg, North Dakota.

The company has not said when pipeline operations would restart, but told shippers that service to U.S. Midwest refiners would remain shut during the outage. The line could remain shut for at least a week, according to market sources on Thursday.

TC Energy has begun using backhoes and vacuum trucks to recover the spilled oil, said Brent Nelson, an emergency response manager for Walsh County who visited the site.

“At this time I would estimate 50 – 75 persons on site working between two shifts ... they are focusing on oil recovery at this time and will then move to making repairs,” he said.

The exact amount of oil released will not be available until recovery has been completed, TC Energy said in a statement on Thursday.

In 2017, a Keystone crude pipeline leak in rural South Dakota spilled nearly 6,600 barrels, the PHMSA data showed. Earlier this year, Keystone was partially shut after leaking 43 barrels of crude in Missouri.

The latest release also affected a wetland area, a statement from the North Dakota Department of Environmental Quality said.

“They’ve had a few spills ... more than you would hope to have on a line that’s still fairly new,” said Carl Weimer, executive director of the Pipeline Safety Trust in Bellingham, Washington, a nonprofit promoting pipeline safety.

Keystone has leaked substantially more oil, and more often, in the United States than the company indicated to regulators in risk assessments before operations began in 2010, according to a Reuters review in 2017.

The Keystone outage also disrupted flows on the Marketlink pipeline out of the Cushing, Oklahoma, storage hub, roiling oil prices at the delivery point for U.S. crude futures.

Reporting by Devika Krishna Kumar in New York, Additional reporting by Eileen Soreng and Sathya Narayanan in Bengaluru, Laila Kearney and Scott DiSavino in New York, Rod Nickel in Winnipeg; Editing by Diane Craft and Stephen Coates