ExxonMobil Corporation’s (XOM) plan to restart its Silvertip oil pipeline has received approval from the US Department of Transportation (DoT). Operations in the Silvertip pipeline running between Laurel and Billings, Montana were closed after it spilled about 1,000 barrels of crude oil into the Yellowstone River near Billings.
A new channel has been drilled to substitute a quarter of a mile segment of the 12 inch pipeline about 60 feet to 70 feet below the riverbed. Various precautions have been taken to avoid any accident in the future.
The regulators had also asked the company to replace two more of the pipeline’s river crossings at Rock Creek and Clarks Fork in the Yellowstone belt. The replacement is expected to be completed by March 2012.
The Silvertip restart will be done under strict vigilance of authorities overlooking pipelines such as the Pipeline and Hazardous Materials Safety Administration (PHMSA) and the DoT. The overseers have also appointed an inspector on site to ensure that all operational integrity checks are done before resuming flow in the pipeline.
A widespread appraisal of information has been carried out by PHMSA to make sure that services are recommenced in a safe and secure environment. ExxonMobil also lent full support by closely monitoring of the repair work.
The July 1 spill from the Silvertip pipeline cost approximately $40 million for emergency response work and $2.5 million for damage to public and private property. Oil loss because of the spill is estimated at $100,000.
ExxonMobil’s Silvertip pipeline was a vital source of crude for the company’s 60,000 barrel a day refinery in Billings and since its closure the company had to face a number of problems that included scaling back operations. Now, with its restart the company should be able to focus on other expansion and growth projects.
We maintain a Neutral rating on the company over the long term. ConocoPhillips (COP) and Devon Energy Corporation (DVN) are major competitors of the company.
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