2009 Keystone XL Pipeline Explosion Unreported Due to "Administrative Error"

Michael Teague |

With a market-cap just shy of $31 billion, TransCanada Corp. (TRP) is the number two publicly-traded gas equity on US exchanges. In recent years, however, most Americans have come to know the company as a result of its highly controversial and as yet incomplete Keystone XL pipeline project that would carry crude oil from the Western Canadian Sedimentary Basin in Alberta all the way to refineries on the US Gulf Coast.

By now, the broad contours of the debate over Keystone XL should be more or less familiar. TransCanada has consistently stated that the project is a carefully planned one that, when fully constructed, would significantly lower the cost of energy in the regions of the US through which it would pass, and create numerous good-paying jobs in the process. It would also benefit the Canadian oil and gas industry by providing the US' northern neighbor with a conduit through which to export its vast reserves of tar sands crude to the rest of the world.

"The fact is, Fort McMurray looks like Hiroshima"

Detractors have starkly different view, objecting first and foremost on the grounds that the pipeline is simply far too much of an environmental risk to even consider finishing. Western Canada’s tar sands oil is a uniquely heavy and sour variety of crude that is more expensive to pull out of the ground, more difficult to transport via pipeline because of the corrosive properties of the oil, and requires more work and emissions to refine.

Canadian rock ‘n roll archangel Neil Young, for instance, made quite a stir in late 2013 during an appearance at a National Farmer’s Union event in Washington D.C. He likened Fort McMurray, a major tar-sands oil town in Alberta, to Hiroshima. He was referring both the environmental devastation as well as the health consequences that have been suffered by already vulnerable First Nations communities residing in the area.

A Five Year Battle to Approve US Keystone

TransCanada applied for a permit to proceed with the construction of Keystone’s US route over five years ago, and has been met with stiff resistance from activists and opponents, as well as a number of politicians. And it now appears as though the latter have been given what coud turn out to be a substantial helping hand, in the form of a report just released from the Canadian Broadcasting Corporation detailing a July 20, 2009 incident in which Northern Alberta’s Peace River Mainline apparently exploded, with flames reaching over 160 feet into the air and scorching over 200,000 square feet of forest.

The Peace River Mainline is no stranger to ruptures and explosions. Indeed, this particular section of the pipeline has a rupture rate five times higher than the national average. But it is not so much the explosion itself that is damning as the manner in which the 2009 incident went virtually unreported until just last month, and then only as a result of an access-to-information request from the CBC, part of its ongoing investigation of Canada’s oil and gas pipelines.

According to a 2011 draft of the incident report, Canada’s National Energy Board came down in no uncertain terms on TransCanada, the operator of the line through its NOVA Gas Transmission subsidiary, citing inadequate field inspections and poor managemivent.

"Administrative Error" or Collusion Between Government and Industry?

To make matters worse, the report was never released, according to the NEB, as a result of an “administrative error” that occurred when an employee forgot to the transfer the file along the chain of custody.

Suspicions have immediately surfaced however,  because of the timing of the alleged “administrative error”. To be sure, 2011 was a year that found TransCanada in the thick of negotiations over multiple US safety requests for information on Keystone’s construction, operation, and design, requests that were followed up with ample time for public comment.

The Peace River Mainline explosion was one of the most severe in recent history, and could have provided significant complications to the approval process, from undermining TransCanada’s perpetual assurances that the Keystone project is indeed safe.

On Friday, TransCanada’s shares were trading up by two-thirds of a percentage point to $44 apiece shortly before the closing bell.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer


Symbol Name Price Change % Volume
NYOM NYC on the Move Inc 0.00 0.00 0.00 0
TRP TransCanada Corporation 47.13 0.00 0.00 0


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