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Cleanup of oil spill in Saskatchewan cost $107 million, Husky Energy says

February 24, 2017   by Dan Healing - THE CANADIAN PRESS

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CALGARY – A major oil pipeline spill last year in Saskatchewan cost $107 million to clean up, a $17-million increase from a September estimate of $90 million, according to pipeline operator Husky Energy (TSX:HSE) of Calgary.

Saskatchewan Energy Minister Dustin Duncan says the government will need time to review Husky Energy’s report submitted Thursday on an oil spill in Saskatchewan. Husky Energy says shifting ground is the reason a section of its pipeline burst in July, leaking an estimated 225,000 litres of crude and condensate into the North Saskatchewan River. Crews work to clean up an oil spill on the North Saskatchewan river near Maidstone, Sask., in a July 22, 2016, file photo. THE CANADIAN PRESS/Jason Franson

The pipeline rupture last July allowed 225,000 litres of heavy oil mixed with diluent to spill onto the bank of the North Saskatchewan River, with about 40 per cent or 90,000 litres reaching the river.

“We haven’t put the pipeline back in service because we want to have all of the investigations finished, particularly at the provincial level,” said CEO Rob Peabody on a conference call Friday.

“They want to make sure they’ve actually got to the root cause so we are absolutely sure that any revised installation fully is engineered to avoid any future incident like this.”

Related: Prince Albert, Sask. shuts off water intake following oil spill

Husky blamed ground movement for the pipeline rupture in a report issued last year.

The Saskatchewan government is continuing with a separate investigation and expects to issue a report by the end of March.

Peabody said the increase in cost isn’t related to any single factor but rather reflects actual bills from the cleanup effort. He said he doesn’t think the company will face greatly increased future compliance costs because of the incident.

The spill costs are to be borne by Husky Midstream Limited Partnership, a consortium in which Husky holds a 35 per cent interest.

Related: Pipeline ‘anomalies’ detected night before leak into North Saskatchewan River

Husky said about $88 million has been recovered through insurance.

The spill forced North Battleford, Prince Albert and Melfort to shut their intakes from the river and find other water sources for almost two months, resulting in costs that Husky pledged to cover.

Husky reported net earnings of $186 million in the fourth quarter of 2016, compared to a loss of $69 million in the same period of 2015, meeting or slightly beating analyst expectations.

Related: Saskatchewan to inspect all oil pipelines that cross provincial rivers following Husky Energy spill

It posted a $6-million loss in the quarter after earnings were adjusted to remove the influence of asset sales and other one-time items, versus a $100-million adjusted loss in the same period last year.

On the conference call, Peabody said Husky is advancing development options for its proposed West White Rose project offshore Newfoundland and Labrador but he wouldn’t give details. He reiterated that a decision on proceeding with the project will likely be made in the first half of the year.

Peabody said Husky’s board is considering reinstating a “sustainable cash dividend” as oil prices rebound. The company switched to paying dividends in shares in late 2015 to conserve cash.

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