Keystone Pipeline Closes on “Safety Issues”

The 2,100-mile Keystone Pipeline, owned and operated by TransCanada Corp. (NYSE: TRP) was closed Wednesday night after routine integrity tests revealed potential safety issues with the line. The problems have been located in the portion of the pipeline runs between Steele City, Nebraska, and the Wood River refinery at Patoka, Illinois, which is jointly owned by Phillips66 (NYSE: PSX) and Cenovus Energy Inc. (NYSE: CVE). There have been no reported leaks from the pipeline.

The issue appears to be “a small anomaly on the outside of the pipe,” according to an AP report. In pipeline-speak, that probably means a dent. The entire pipeline will be shut down for at least three days, halting the flow of more than 500,000 barrels a day of crude from Alberta into the U.S.

The shutdown should have no impact on U.S. gasoline prices, but that doesn’t mean that crude prices won’t move around somewhat. The price of WTI crude has been falling today as the dollar gains strength, but the impact of the closure of the Keystone pipeline has probably moderated the fall in prices. The dollar index is up about 0.31% today.

The Keystone closure is unlikely to make a major difference either in TransCanada’s fortunes or in U.S. crude supplies unless further examination indicates a major problem with the pipeline. More costly will be the extra ammunition the closure will give to opponents of TransCanada’s Keystone XL pipeline proposal.

Shares of TransCanada are down about 0.4% at $44.77 in a 52-week range of $38.62 to $47.02.

Paul Ausick