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The U.S. Justice Department has reached a settlement agreement with pipeline company South Bow Corp. over a 2022 rupture of the Keystone pipeline that spilled nearly 13,000 barrels of oil in northern Kansas.
Under the deal, the Calgary-based company will pay a civil penalty of US$26.9 million related to allegations it violated the Clean Water Act. South Bow has also agreed to spend about US$40 million to complete work to prevent similar problems in the future and pay US$3 million to the state for natural resource restoration projects.
In a news release Friday, the Justice Department said it was one of the largest inland oil spills in recent history and the largest from the Keystone pipeline system, which runs from Hardisty, Alta., to Port Arthur, Texas.
“However rare, when a pipeline leaks, it can quickly escalate," said Adam Gustafson, deputy assistant attorney general.
"That’s why an important part of this proposed settlement is the work the company has committed to do to help prevent future leaks.”
Jeffrey Hall, assistant administrator at the U.S. Environmental Protection Agency, said the case underscores the importance of maintaining pipelines properly.
"The oil spill blanketed land and water, rendering the waterway lifeless and useless and requiring extensive cleanup and remediation," Hall said.
The Justice Department said crude oil more than two centimetres thick covered Mill Creek bank-to-bank for 5.6 kilometres from the rupture site. More than 2,700 animals were killed or harmed.
The company said in a written statement Friday that it "proactively initiated corrective actions" before it received formal directives from U.S. authorities. That included site cleanup, which was completed in February 2024.
South Bow spokeswoman Sara Hunter said the company has inspected almost 3,400 kilometres of the Keystone system and completed more than 70 digs to verify the line's integrity.
"We continue to carry out additional remedial and mitigative work to further strengthen the system," Hunter said in the statement.
She added that, more broadly, the company has done in-line inspections using advanced technologies on more than 19,000 kilometres of pipe. There have also been 400 field excavations to assess pipeline conditions and make repairs where needed.
"This work reflects our ongoing commitment to the safe, reliable operation of our pipeline system and to continuously strengthening pipeline integrity."
At the time of the spill, the pipeline belonged to TC Energy Corp., which spun off its oil pipeline business into South Bow in late 2024.
The Keystone system has had a history of spills. In April 2025, an estimated 3,500 barrels spilled from the pipeline onto agricultural land in North Dakota.
South Bow has plans to expand is cross-border crude pipeline system. This spring, it gathered bids for space on its Prairie Connector project, which would make use of unused pipe in the ground meant for the defunct Keystone XL expansion project. Prairie Connector would link up to another pipeline proposed by Bridger Pipeline LLC from the Canada-U.S. border to Wyoming.
This report by The Canadian Press was first published July 10, 2026.
Companies in this story: (TSX:SOBO)
Lauren Krugel, The Canadian Press
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