A unit of ExxonMobil Corporation (XOM), ExxonMobil Pipeline Company, has received approval from the U.S. Department of Transportation's Pipeline and Hazardous Materials Safety Administration to restart a 20-mile (32-kilometer) stretch of the Silvertip pipeline running between Laurel and Billings, Montana.
The U.S. regulators have given their permission to the company to restart operations of the portion of the pipeline that does not include the section which experienced a malfunction on July 1, 2011.
The 40,000 barrel per day (bpd) pipeline stopped operating on July 1 when there was a leakage of about 1,200 barrels of crude oil into the Yellowstone River near Billings, Montana. This pipeline supplies crude to ExxonMobil’s 60,000 bpd Billings refinery as well as to CHS Inc.’s 58,000 bpd refinery in Laurel, Montana.
ExxonMobil’s pipeline failure did not affect operations of CHS Inc.’s Laurel, Montana refinery as the crude was provided by the Front Line pipeline from the north. ConocoPhillip’s (COP) 58,000 bpd refinery, the third in Billings, was unscathed by the Silvertip leakage as it is not supplied by the line. Operations at ExxonMobil’s Billings plant were only partly affected as CHS was its major supplier of crude. The refinery was running at about 30%.
A temporary construction license for ExxonMobil outlines a new part of the pipeline set up at least 42 feet below the riverbed, as per Montana Department of Natural Resources and Conservation. ExxonMobil has finished the preparation work preceding the drilling and is waiting for a few final nods before starting on the same. According to the Montana Department of Environmental Quality, the new part of the pipeline will be operational in about a month.
ExxonMobil has a Zacks #3 Rank, which translates into a Hold rating for a period of one to three months. We maintain a Neutral rating on the company over the long term.
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