South Dakota regulators say they could revoke Keystone permit after spill

WASHINGTON (Reuters) - South Dakota regulators said on Tuesday they could revoke TransCanada Corp’s permit to operate the Keystone crude oil pipeline in the state if an initial probe into last week’s spill finds the company violated its license.

An aerial view shows the darkened ground of an oil spill which shut down the Keystone pipeline between Canada and the United States, located in an agricultural area near Amherst, South Dakota. REUTERS/Dronebase

Last week the Keystone system linking Alberta’s oil sands with U.S. refineries spilled 5,000 barrels in rural northeastern South Dakota, days before neighboring Nebraska approved a proposed a route for the company’s separate Keystone XL expansion project.

The spill in Marshall County was the third along the Keystone route in under 10 years, a concern to state regulators since the pipeline’s lifespan is up to 100 years.

“We are waiting to see what the forensic analysis comes back with to see if any of our conditions were violated,” Kristie Fiegen, chair of the three-person South Dakota Public Utilities Commission, told Reuters, adding a violation could lead to a suspension or cancellation of the permit.

Chris Nelson, another commissioner, agreed.

“The PUC needs to determine whether any of the permit conditions for this pipeline were violated. Those conditions were placed on the permit to ensure safe construction and operation of the pipeline,” he said.

“If it was knowingly operating in a fashion not allowed under the permit or if construction was done in a fashion that was not acceptable, that should cause the closure of the pipe for at least a period of time until those challenges are rectified,” said Gary Hanson, the third commissioner.

TransCanada did not immediately respond to a call for comment. Its website said it has cleaned up around 380 barrels of oil so far and that repair plans will be confirmed once it can safely excavate the pipe section that leaked. No restart date has been set.

The South Dakota PUC issued the Keystone permit in 2007 with 57 conditions, ranging from construction standards to environmental requirements. It can revoke or suspend it if the company is found to have made misstatements in its application or does not comply with the conditions.

The PUC expects a preliminary report about the spill from federal and state technical experts within the next 10 days. A more comprehensive analysis could take several months.

Separately, the Nebraska Public Service Commission on Monday approved a route for TransCanada’s Keystone XL expansion, lifting one of the last major regulatory hurdles for the long-delayed project, but leaving open questions about its economic viability after a surge in U.S. drilling since it was first proposed in 2008.

Reporting by Valerie Volcovici in Washington; Additional reporting by Nia Williams in Calgary; Editing by Matthew Lewis