Arkansas spill stokes new fears about Keystone XL (video)

Videos and pictures of diluted bitumen spilled from a pipeline in Mayflower, Ark., are providing fresh fodder for critics of the Keystone XL pipeline, who have seized on the images as evidence that the controversial $7 billion project imperils America’s heartland.

Exxon Mobil Corp., shut down its Pegasus pipeline and was cleaning up thousands of barrels of oil in Arkansas on Monday, as some area residents were evacuated from the region. At the time of the spill, Canadian crude was flowing through the pipeline, which can carry more than 90,000 barrels of crude products per day from Illinois to Nederland, Texas.

Online video of black oil oozing down a suburban Arkansas street had drawn nearly 600,000 views by Monday afternoon.

The Pegasus spill is stoking new fears about the potential damage if there were a rupture in the Keystone XL pipeline, which is proposed to transport diluted bitumen and synthetic crude oil from Alberta to the Gulf Coast. The State Department is still considering whether TransCanada Corp.’s proposed Keystone XL is in the national interest and President Barack Obama is set to decide whether to approve the pipeline later this year.

Just last week, a train transporting Canadian crude derailed in western Minnesota, underscoring the risks of all forms of oil transport, after a 2010 spill in Michigan’s Kalamazoo River and a break in Exxon Mobil’s Silvertip pipeline buried under Montana’s Yellowstone River in 2011.

“We’d be wise to think about this as one more sad warning, like the spills in Kalamazoo and the Yellowstone River,” said Keystone XL critic and 350.org founder Bill McKibben. “What the people of Arkansas are enduring today is a reminder of why approving KXL — a pipeline ten times as large and running across the Ogallala Aquifer — defines a bad idea.”

Environmentalists and landowners who oppose Keystone XL say there would be the potential for spills all along the pipeline route and insist that the diluted bitumen it would carry is more corrosive and harder to clean up than alternatives. A group of environmentalists last month asked federal regulators to set minimum standards especially geared toward pipelines carrying Canadian crude.

TransCanada Corp. has countered that dilbit is no more corrosive than conventional crude oil.

The company also has pledged to abide by higher safety standards in building and maintaining Keystone XL, such as by inspecting it more frequently and burying it deeper than might normally be required.

Rep. Ed Markey, D-Mass., said the Arkansas spill underscores the need for a policy change that would ensure companies importing oil sands crude from Canada pay into a U.S. oil spill trust fund.

Energy companies generally pay an 8-cent-per-barrel tax into the oil spill liability trust fund, which can be used to finance clean up operations and assess natural resource damage after a spill.

The excise tax is generally imposed on crude oil received at U.S. refineries and petroleum products entering the U.S. for consumption or warehousing. But under an Internal Revenue Service decision, the bitumen extracted from Canada’s oil sands is not treated as crude and therefore evades the per-barrel tax.

Markey has pushed legislation to rescind the 2011 IRS determination and clearly define diluted bitumen and oil sands crude as subject to the liability trust fund tax.

“This latest pipeline incident is a troubling reminder that oil companies still have not proven that they can safely transport Canadian tar sands oil across the United States without creating risks to our citizens and our environment,” Markey said in a statement. “Americans are realizing that transporting large amounts of this corrosive and polluting fuel is a bad deal for American taxpayers and for our environment.”

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Read ongoing FuelFix coverage of the battle over the Keystone XL pipeline: