Keystone Pipeline to Pay $26.9M Penalty for Kansas Oil Spill

The operator of the Keystone Pipeline system has agreed to pay a $26.9 million civil penalty and spend an estimated $40 million on pipeline integrity improvements to resolve allegations stemming from one of the largest onshore crude oil spills in recent U.S. history. The proposed settlement, announced July 10 by the U.S. Environmental Protection Agency, the Department of Justice, and the state of Kansas, addresses the December 2022 rupture that released approximately 13,000 barrels of heavy crude oil into Mill Creek in Washington County, Kansas.

According to AP News, the agreement would resolve allegations that South Bow (USA) LP and South Bow Infrastructure Operations Inc. — the Canadian-based owner and operator of the pipeline — violated the federal Clean Water Act and Kansas state clean water laws. The proposed consent decree is subject to a 30-day public comment period and must be approved by a federal judge.

The Spill and Its Aftermath

On December 7, 2022, a rupture in the Keystone Pipeline sent approximately 543,000 to 588,000 gallons of heavy crude oil pouring into Mill Creek, about 150 miles northwest of Kansas City. The spill was the largest onshore crude pipeline spill in the U.S. in nine years and surpassed all 22 previous spills on the Keystone system combined. The total volume of oil released would have nearly filled an Olympic-sized swimming pool.

Crude oil an inch thick covered Mill Creek bank-to-bank for 3.5 miles downstream, according to the complaint filed alongside the settlement. The discharge covered vegetation and soil across 35 acres, and more than 2,700 animals were harmed or killed. The area is home to an endangered species, the long-eared bat. No pipeline workers or area residents were injured, and public water supplies were not affected.

South Bow completed comprehensive environmental remediation in February 2024, following a 2023 EPA cleanup order. The company also paid Kansas more than $3 million for natural resource restoration projects as part of the settlement.

Root Cause and Systemic Failures

A May 2023 engineering report commissioned by the U.S. government found that a bend in the pipeline at the rupture site had been “overstressed” since its installation in December 2010 — likely because construction activity altered the land around the pipe. The EPA stated that soil under the pipe had been “improperly compacted,” and while the company re-excavated the site in 2013, it did not replace that section of pipe. An independent analysis concluded the failure was due to a combination of bending stress and a weld flaw.

The pipeline was originally built and operated by TC Energy, which spun off its Liquids Pipelines business as South Bow Corporation in October 2024 — after the Kansas cleanup was completed. This means South Bow inherited the liability for the 2022 spill.

Penalties and Preventive Measures

Under the proposed settlement, South Bow must:

• Pay a $26.9 million civil penalty — the largest figure cited in the agreement
• Complete approximately $40 million in pipeline integrity work, including more than 12,000 miles of pipeline inspections and 400 excavations to examine and repair pipe
• Pay Kansas more than $3 million for natural resource restoration projects

Jeffrey A. Hall, EPA Assistant Administrator for Enforcement and Compliance Assurance, said in a statement: “This case demonstrates why the oil pipelines crossing our heartland must be maintained properly. The oil spill blanketed land and water, rendering the waterway lifeless and useless and requiring extensive cleanup and remediation. The substantial penalty reflects the seriousness of the environmental harm.”

Principal Deputy Assistant Attorney General Adam Gustafson of the DOJ’s Energy and Natural Resources Division noted: “Pipelines are the safest means of transporting large quantities of oil and other liquids and gases over long distances. However rare, when a pipeline leaks, it can quickly escalate. That’s why an important part of this proposed settlement is the work the company has committed to do to help prevent future leaks.”

South Bow spokesperson Sara Hunter said in a statement that the company “proactively” launched its response to the spill before receiving formal directives, and that the post-spill inspections and repairs “reflect our ongoing commitment to the safe, reliable operation of our pipeline system and to continuously strengthening pipeline integrity.”

Political Context and the Pipeline Debate

The settlement arrives at a politically charged moment for energy infrastructure in the United States. In April 2026, President Donald Trump gave the go-ahead for South Bow and another company to build a second pipeline from Canada to Wyoming — a smaller version of the massive $8 billion Keystone XL project that former President Joe Biden’s administration blocked in 2021 over environmental concerns.

As CBS News reported, the contrast highlights the deep political divide over energy infrastructure: the government is simultaneously penalizing past pipeline failures and enabling future pipeline development. The Keystone system has experienced 23 oil spills between 2010 and 2025, with the 2022 spill surpassing all previous ones combined — raising systemic integrity concerns that environmental groups and regulators have flagged for years.

What’s Next

The proposed consent decree now enters a 30-day public comment period before a federal judge in the District of Kansas can approve it. The settlement, while substantial, represents a fraction of the estimated $480 million cleanup cost. Questions remain about the long-term ecological impact on Mill Creek and the endangered long-eared bat, as well as whether the lessons from this spill will be applied to new pipeline construction approved by the Trump administration.

The case underscores a central tension in American energy policy: pipelines remain the safest means of transporting large quantities of oil, but when failures occur, the environmental damage can be catastrophic. The $40 million in mandated integrity improvements — including thousands of miles of inspections and hundreds of excavations — represent a significant step toward addressing that risk, but whether they are sufficient to prevent future disasters remains an open question.