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South Dakota Could Revoke Keystone Permit Over 210,000-Gallon Oil Spill

Regulators in South Dakota are considering suspending or revoking the operating permit for TransCanada’s existing Keystone pipeline if an investigation concludes that a licence violation led to a 210,000-gallon (795,000-litre, or 5,000-barrel) crude oil spill [1] along the line last week.

“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,” Reuters reports. And all three members of the state’s Public Utilities Commission have taken notice.

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“We are waiting to see what the forensic analysis comes back with to see if any of our conditions were violated,” said PUC Chair Kristie Fiegen.

“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,” agreed Commissioner Chris Nelson.

“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,” added Commissioner Gary Hanson.

In a separate interview, Hanson added [3] that “this is a relatively new pipeline. It is supposed to have an operating life of more than 100 years, and it was supposed to be a state-of-the-art pipeline construction. It appears that it is not,” producing three major leaks on the North Dakota border and two in South Dakota in just a decade.

“One might expect this to take place on a pipeline over a period of 30 or 40 years at the maximum, yet it’s been fewer than 10 years,” Hanson told Aberdeen News.

TransCanada states on its website that it has cleaned up about 380 barrels of spilled oil so far. The company did not respond to a request for comment from Reuters.

The PUC attached 57 conditions to TransCanada’s operating licence for Keystone when it was granted in 2007, “ranging from construction standards to environmental requirements,” the news agency notes. “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.”

TransCanada hasn’t yet identified the source of the spill, there’s no word yet on when the pipeline will be ready to restart, and the company’s shares were down last week [4] on news of the incident.

In neighbouring Nebraska, meanwhile, TransCanada was working through its response to Monday’s Public Utilities Commission decision [5] that rejected the company’s preferred route for the Keystone XL pipeline, but accepted an alternate route that would increase the cost of the C$10-billion megaproject. TransCanada is expected to clarify its plans for the project at an annual investors’ day November 28, but CBC reports [6] those investors are still keen to see the project proceed.

“There might be a lot of court cases and what have you to go, but on the whole I’d like to see them go ahead with this project,” said Manash Goswami, senior vice president and portfolio manager at First Asset ETFs, in a statement that echoed what CBC said it was hearing from other shareholders.

That’s despite the growing reality that “there is no economic rationale, no validity to the investment calculation, no positive bottom line,” according to [7] Tom Sanzillo, finance director at the Cleveland-based Institute for Energy Economics and Financial Analysis. “Our view is that TransCanada is unlikely to build it.”