Enbridge shuts oil pipeline to U.S. after spill in Canada

Canadian oil supplies to the U.S. Midwest were disrupted after Enbridge Inc. shut a pipeline because of a leak.

The company isolated its Line 4 pipe at the Regina terminal in Saskatchewan yesterday after about 1,350 barrels of oil were released within an on-site pumping station, according to a statement. The company is excavating the line around a pumphouse and hasn’t provided an estimate for how long repairs may take, Gerard Kay, deputy chief of operations at Regina Fire and Protective Services, said by phone.

The 796,000 barrel-a-day pipe carries heavy, medium and light sour crude from Edmonton, Alberta, to Superior, Wisconsin. Enbridge spokesman Graham White didn’t provide an estimate for when the line will return to service and said the company hasn’t declared force majeure, a legal clause excusing a company from meeting its commitments because of events beyond its control.

“If this turns out to be an extended outage, it’s certainly going to impact Canadian oil producers much more than U.S. refiners,” Andy Lipow, president of Lipow Oil Associates LLC in Houston, said by phone. “Refiners in the U.S. Midwest could reach for some of the inventory we’ve been seeing build at Cushing over the last two months.”

The discount of heavy Western Canadian Select crude for February to U.S. benchmark West Texas Intermediate widened 15 cents to $16.15 a barrel today, according to Net Energy Inc., a Calgary-based broker.

Oil Discount

WCS, which sold at an average discount to WTI of $18.72 a barrel over the past year, is typically cheaper than WTI because it has a higher sulfur content and takes more equipment to process into fuels. The crude must be shipped thousands of miles by pipeline or rail to refinery centers in the U.S. Midwest or Gulf Coast.

Enbridge was building a connection between Line 4 and Line 67 so that barrels could be diverted to Line 67 during a prolonged disruption, David Coburn, an attorney for Enbridge, said in a June 16 letter to the U.S. State Department.

White said by e-mail today that he didn’t have details on the connection between the two lines and that the rest of the company’s system is running normally.

Should Line 4 remain down, Midwest refiners may lean on pipelines bringing supply north from the Gulf Coast, including the Capline system operated by a Marathon Petroleum Corp. unit, according to Lipow. The system is running “well under capacity” and carries crude to Patoka, Illinois, from St. James, Louisiana, he said.

A team from Canada’s National Energy Board, a pipeline regulator, will meet with Enbridge officials tomorrow to discuss when the line can resume operations, Darin Barter, an NEB spokesman, said by phone. No cause of the spill has been determined, he said.