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Why Is Exxon Taking Its Time Restarting Its Ruptured Dilbit Pipeline?

Even though the lengthy outage is costing the company as much as $450,000 a day in lost revenue—about $90 million so far—Exxon is proceeding slowly.

Oct 21, 2013
Officials assess the break in ExxonMobil's 838-mile Pegasus pipeline

In the six months since an ExxonMobil pipeline unleashed Canadian oil in an Arkansas neighborhood, nearby residents have had much to endure—the muck and stench of heavy crude, lengthy evacuations, sickness and economic loss.

They've also been in the national spotlight, as the upheaval in tiny Mayflower, Ark., has come to symbolize the risks of aging and overlooked oil pipelines, especially when they're hundreds of miles long and carrying tar sands crude. From Illinois through Texas, many people who live along the pipeline's route are now worrying about whether or when the ruptured line will resume pumping oil through 858 miles of fields, waterways, cities and suburban backyards.

"I have no say, and I have no idea what's going to happen," said Mayflower resident Ann Jarrell, whose home is not far from where the Pegasus pipeline split open on March 29. "That's the worst part—the not knowing."

That nagging uncertainty, however, is likely to persist for many more months.   

For starters, federal regulators have not finished investigating the spill. And while tests determined that a manufacturing flaw set the stage for the 65-year-old pipeline's rupture, officials have not said what caused the defect to progress to failure and what other factors played a role in the spill. What's more, the recent government shutdown added further delay to the analysis, which is being conducted by the Pipeline and Hazardous Materials Safety Administration (PHMSA).  

Exxon, meanwhile, is not pressing to restart the line. Even though the lengthy outage is costing the company as much as $450,000 a day in lost revenue—totaling as much as $90 million so far—Exxon is proceeding slowly, conducting additional tests and digging down to the pipeline in places to assess its condition.

That caution could reflect fears that the Pegasus problems might be systemic and costly to solve. But analysts say Exxon also is mindful that additional leaks could sink its chances of salvaging the line for good and also undermine public support for new pipeline projects such as the controversial Keystone XL.

Like the Pegasus, the proposed Canada-to-Texas Keystone XL would carry tar sands oil to U.S. refineries. However, the line's critical northern segment (from Canada to Nebraska) has been stalled for five years as builder TransCanada tries to win U.S. State Department approval amid a heated debate over the pipeline's merits and environmental and climate impacts.  

Several other major pipeline projects could be affected by the Pegasus case because they would reverse the flow inside older, existing pipelines to accommodate Canada's surging production of heavy oil—which is what Exxon did with the Pegasus in 2006.

(MORE: Exclusive Map of The Tar Sands Pipeline Boom)

Anthony Swift, an attorney at the advocacy group Natural Resources Defense Council, is one of several Keystone XL opponents who have cited the Mayflower spill as being another example of industry-wide hazards.

"The problems on the Pegasus pipeline have served as a canary in the coal mine for many members of the public looking at similar proposals in their own backyard," Swift said. "It really does show the risks of spills on these major pipelines, and that includes major pipelines like the Keystone XL."

Unusually Long Outage

The Pegasus burst on Good Friday and sent an estimated 200,000 gallons of chemically diluted bitumen, or dilbit, into a Mayflower neighborhood as well as a nearby waterway. The sticky flood of Wabasca Heavy crude sickened residents and forced 22 families to evacuate. Jarrell and others in an adjacent subdivision that was not evacuated left their homes after falling ill.

The cleanup is ongoing, and 19 of the 22 homes subject to mandatory evacuation have been cleared for occupancy. Exxon offered to buy all 22 homes at pre-spill prices and has purchased five of them to date, according to the company. Two of those were recently demolished.

So far, the Pegasus has been shut down for more than 200 days—far longer than what is typical for such incidents.

In 2010, a pipeline owned by Enbridge Inc. was back in service almost two months after it spilled more than a million gallons of dilbit into a Michigan river—making it the largest inland oil spill in North America. Another Enbridge pipeline was restarted less than two weeks after spewing 50,000 gallons of dilbit into a Wisconsin pasture.  

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