Efforts ongoing to clean up Keystone oil leak, largest U.S. spill in nearly a decade

(Reuters) - Crews in Kansas continued clean-up efforts on Friday after TC Energy's Keystone pipeline leaked 14,000 barrels of oil into a creek, but the cause of the largest crude spill in the United States in nearly a decade remained unknown.

Canada's TC Energy detected the leak and by Wednesday evening, shut down the key artery bringing more than 622,000 barrels of Canadian crude per day (bpd) to various parts of the United States.

"We're beginning to get a better sense of the clean up efforts that will need to be undertaken in the longer-term," Kellen Ashford, spokesperson for the U.S Environmental Protection Agency (EPA) Region 7, which includes Kansas, said.

He could not estimate how cleaning up the spill would take.

"It definitely won't be a day or two," he added.

This is the third spill of several thousand barrels of crude on the pipeline since it first opened in 2010. While TC Energy is yet to give details on when it will restart the pipeline, a previous Keystone spill had caused the pipeline to remain shut for about two weeks.

TC Energy remained on site with around 100 workers leading the clean-up and containment efforts, and the EPA was providing oversight and monitoring, Ashford said. TC is responsible for determining the cause of the leak.

A corrective action order from the U.S. Pipeline and Hazardous Materials Administration (PHMSA) to TC on Thursday said the company shut the pipeline down seven minutes after receiving a leak detection alarm. The affected segment, 36 inches (91 cm) in diameter, was Keystone's Phase 2 extension to Cushing, Oklahoma, built in 2011.

Washington County, a rural area of about 5,500 people, is about 200 miles (320 km) northwest of Kansas City.

The oil spill has not threatened the local water supply or forced local residents to evacuate, Washington County Emergency Management Coordinator Randy Hubbard told Reuters. Workers quickly set up a containment area to restrict oil that had spilled into a creek from flowing downstream.

"There is no human consumption drinking water that would come out of this," he said.

Livestock producers in the area have been notified and have taken their own corrective measure to protect their animals, Hubbard added.

CRUDE BOTTLENECK

A lengthy shutdown of the pipeline could lead to Canadian crude getting bottlenecked in Alberta, and drive prices at the Hardisty storage hub lower, although price reaction on Friday was muted.

Western Canada Select (WCS), the benchmark Canadian heavy grade, for December delivery last traded at a discount of $27.70 per barrel to the U.S crude futures benchmark, according to a Calgary-based broker. On Thursday, December WCS traded as low as $33.50 under U.S. crude, before settling at around a $28.45 discount.

Depending on the duration, Keystone's shutdown could squeeze crude inventories at Cushing, the primary U.S. storage hub and in two main refining regions, the Midwest and Gulf Coast, analysts said.

PHMSA has to approve the restart of the line. Even once the pipeline starts operating again, the affected area will have to flow at reduced rates pending PHMSA approval.

"The real impact could come if Keystone faces any pressure restrictions from PHMSA, even after the pipeline is allowed to resume operations," said Ryan Saxton, head of oil data at Wood Mackenzie.

(Additional reporting by Arathy Somasekhar and Rod Nickel; Editing by Marguerita Choy)

By Nia Williams and Brendan O'Brien