The world’s largest oil company by market value, ExxonMobil Corporation (XOM) has projected the expenditure to clean up a July 1 oil spill into the Yellowstone River in Montana at $42.6 million, as per a filing with the federal regulators.
The spill from the Silvertip pipeline will cost $40 million for emergency response work and a putative $2.5 million for damage to public and private property. The pipeline spilled about 42,000 gallons (or 1,000 barrels) of crude oil into the waterway upstream of Billings, the largest city in the state of Montana.
According to documents presented to federal pipeline regulators and acquired after a public information report, ExxonMobil valued the leaked oil at $100,000. The documents also disclosed that the officials from the Pipeline and Hazardous Material Safety Administration depended on the information from ExxonMobil to comfort local officials that the 20-year old pipeline would be able to hold up as the river flooded in late May and early June. It was only a month later that the pipeline broke down during a second round of flooding.
ExxonMobil had initially targeted to complete the cleanup work by September 9 but the company reported last week that the work might extend for several more months. The spill, which polluted dozens of miles of riverbank, has about 1,000 people involved in its cleanup.
Federal officials have already given its nod to the company to restart a 21-mile stretch of the pipeline downstream of where the mishap occurred. The pipeline was the key source of crude oil for an ExxonMobil refinery in Billings. The section of the undamaged pipeline is connected to another line owned by another company. This would be used by ExxonMobil temporarily to restore supplies to its refineries.
The construction of a replacement crossing for the pipeline across the Yellowstone has pending permits. The company received approvals from the Federal pipeline safety officials last week to change the damaged portion of the pipe by drilling a new line exceeding 25 feet deep below the riverbed. The presence of an inspector during the construction of this new pipeline is mandatory.
ExxonMobil has a Zacks #3 Rank which is equivalent to a Hold rating for a period of about one to three months. For the long term, we maintain a Neutral recommendation on the company. Chevron Corp. (CVX) and ConocoPhillips (COP) are the major competitors of ExxonMobil.
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