* Nexen's oil sands spill fuels concerns over pipeline safety

Jeff Lewis, Jeffrey Jones and Renata D'Aliesio

An oil spill in evergreen forest of northern Alberta has ratcheted up concerns over pipeline safety as Canada’s premiers seek consensus on plans to pipe oil-sands crude to eastern ports in massive volumes.

Chinese-owned Nexen Energy ULC late on Thursday said a pipeline ruptured at its Long Lake oil-sands project, spewing about 31,500 barrels of bitumen, produced water and sand across a 16,000-square-metre area roughly 36 kilometres southeast of Fort McMurray. Nexen is owned by state-run CNOOC Ltd.

The spill, which was first reported to provincial regulators on Wednesday, is one of the largest in Alberta’s recent history. It is also nearly 60-per-cent larger than a 2010 break on an Enbridge Inc. pipeline that leaked more than 20,000 barrels of heavy crude into Michigan’s Kalamazoo river, prompting a stinging rebuke from U.S. regulators over safety practices and fixing public attention on the energy sector as it has struggled to build new pipelines.

A big difference in the most recent case is the remoteness of the incident, in a location within the Nexen site at least 15 kilometres away from any homes. Another is that the breach was on a pipeline between a well site and Nexen’s processing plant, rather than a long-distance trunk line to refineries.

The damaged line was relatively new, installed in early 2014, the company said. It is double-walled, so it can be heated to 100 degrees Celsius to prevent the bitumen from hardening up. Nexen and regulators have started an investigation into the cause of the rupture as cleanup proceeds.

“We are disappointed with this result and putting every effort to understand the root cause as a company to address it,” Ron Bailey, Nexen’s senior vice-president of Canadian operations, told reporters in Calgary.

Mr. Bailey said the company shut the pipeline down immediately after discovering the leak, and has also halted the latest phase of its Long Lake project, called Kinosis. That has reduced overall output by 9,000 barrels a day to 41,000.

Spill-detection equipment did not operate properly and the leak was discovered by a crew member walking the site, he said. “Our investigation is looking through exactly why it wasn’t alerting us earlier,” an apologetic Mr. Bailey said.

The incident magnifies sharp disagreements over the scope and direction of a Canadian energy strategy unveiled by Canada’s premiers on Friday.

The framework was hailed by Alberta Premier Rachel Notley as a “meeting of minds” that highlights the energy industry’s importance to the country, including the need to open new markets for oil-sands crude. But critics said the deal does nothing for the environment, pointing to an absence of firm commitments to cut greenhouse-gas emissions as a glaring omission as well as the threat of pipeline ruptures as reminders of the industry’s risks.

“I think this amplifies that Canada still has work to do to ensure best-in-class practices around pipeline safety,” said Erin Flanagan, an analyst at the Pembina Institute, an environmental and advocacy group based in Calgary, referring to the Nexen spill.

“Now, you’ve got these very real questions around how we can move our resources in a way that’s responsible and you’re coupling them with the global and international consensus to de-carbonize and move away from high-carbon resources.”

At Long Lake, Nexen injects steam into the earth to melt and thin seams of bitumen buried too deep to mine. The faulty pipeline was carrying the mixture to a plant that upgrades it into refinery-ready oil.

The company did not grant media access to the oil-spill site Friday. The facility, just off of Highway 881, is surrounded by lush wetlands and thick boreal forest. Cleanup efforts unfolded under a bright sun and slight breeze. The spill was not visible from the private road leading to the Long Lake plant’s main gate.

The gate is about six kilometres from the tiny community of Anzac. The hamlet is nestled along the shores of Willow Lake and is a short drive to a popular provincial park. Many of Anzac’s nearly 800 residents work for Nexen or in other oil-sands-related jobs. Nexen has a community office here.

At a strip of businesses near the recreation centre, no one expressed concern about the oil spill. Workers at the grocery store and a liquor shop said there hasn’t been much talk in the community about the spill. “I’ve only heard what’s been on the news,” one worker said.

Still, the incident threatens to heap more scrutiny on a series of multibillion-dollar export pipelines designed to give oil-sands producers access to richer global markets.

Ms. Notley has pledged to toughen Alberta’s climate regulations to help build support in Ontario and Quebec for projects such as TransCanada Corp.’s $12-billion Energy East pipeline. Saskatchewan Premier Brad Wall has criticized that approach, saying it gives Ontario and Quebec an effective veto over the export project – a charge Ms. Notley has dismissed as “ridiculous.”

On Friday, Ms. Notley said the spill was “very troubling.” However, she said premiers remained supportive of pipeline development. “It didn’t in any way shake the conclusion by all premiers that pipelines remain the safest way to move hydrocarbon products,” Ms. Notley told reporters.

A spokesman for the Alberta Energy Regulator said Friday it was premature to consider enforcement actions against Nexen.

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