South Bow, the Canadian operator of the Keystone pipeline system, has agreed to pay a $26,867,789 civil penalty and spend roughly $40 million more on accident-prevention measures under a proposed consent decree filed Friday in US district court in Kansas, resolving federal and state clean water allegations tied to the December 2022 rupture near Washington County The Guardian. The EPA values the combined settlement at $69 million EPA. The civil penalty will flow into the Oil Spill Liability Trust Fund, the federal reserve used to fund cleanup and response to oil discharges nationwide EPA.

The agreement, reached jointly by the EPA and the Department of Justice, addresses claims that South Bow and its predecessor violated the Clean Water Act and Kansas state environmental law DOJ. It now enters a 30-day public comment period before a federal judge can approve it — a standard step for consent decrees of this scale, but one that leaves room for third-party objections before the terms become binding The Guardian.

The rupture at the center of the case occurred in a creek roughly 150 miles northwest of Kansas City, releasing nearly 13,000 barrels of heavy Canadian crude. It was the largest onshore crude pipeline spill in the US in nine years and, on its own, exceeded the combined volume of all 22 prior spills recorded on the Keystone system, according to a 2021 Government Accountability Office report The Guardian. EPA assistant administrator Jeffrey Hall said the discharge "blanketed land and water," leaving the affected waterway "lifeless and useless" The Guardian.

The government's complaint, filed alongside the settlement, states that more than 2,700 animals were harmed or killed by the spill, in habitat that includes the endangered long-eared bat The Guardian. No pipeline workers or nearby residents were injured, and public water supplies were not compromised — a distinction that has shaped how regulators framed the case as primarily an ecological and infrastructural failure rather than a public-health emergency.

What caused the failure

A May 2023 report by an engineering consulting firm retained by the federal government found that the pipe bend where the rupture occurred had been overstressed since its installation in December 2010, most likely because of construction activity that altered the surrounding soil The Guardian. The government's complaint goes further, alleging that soil beneath the pipe was improperly compacted during construction, and that the company re-excavated the site in 2013 without replacing the affected section of pipe The Guardian. That detail — a known vulnerability revisited nearly a decade before it failed catastrophically — is likely to draw scrutiny during the comment period, particularly from environmental groups assessing whether the settlement's prevention requirements adequately address root-cause engineering risk rather than just surface-level compliance.

South Bow spokesperson Sara Hunter said the company began its spill response before receiving formal directives from regulators, and that comprehensive environmental remediation was completed by February 2024 The Guardian. Since the rupture, the company says it has conducted more than 12,000 miles of pipeline inspections and 400 excavations to examine and repair pipe along the system The Guardian. Under the proposed decree, South Bow would also pay Kansas more than $3 million for environmental restoration projects in the state The Guardian.

Corporate structure and timing

South Bow did not exist when the spill occurred. TC Energy built and operated the Keystone system at the time of the rupture and spun off South Bow as an independent company in 2024, after the Kansas cleanup was already complete The Guardian. That corporate separation means South Bow inherits liability for an incident that predates its formal existence — a structure common in pipeline divestitures but one that regulators evidently did not treat as grounds for narrowing the settlement's scope.

The Keystone system itself spans 2,689 miles and carries Canadian tar sands crude to refineries in Illinois, Oklahoma and Texas The Guardian. The settlement arrives as South Bow's cross-border footprint is expanding rather than contracting: in April 2026, the Trump administration approved South Bow and a partner company to build a second, smaller pipeline from Canada into Wyoming, effectively reviving a scaled-down version of the Keystone XL project that the Biden administration blocked in 2021 over environmental objections tied to an $8 billion investment The Guardian.

That juxtaposition — a nine-figure penalty for a construction-linked failure on the existing system, alongside federal approval for new pipeline capacity on the same corridor — is likely to feature in how both supporters and critics of Canadian crude infrastructure characterize this settlement going forward. Regulators framed the penalty and prevention spending as proportionate to the scale of the 2022 failure and the ongoing operational risk it revealed. Whether the $40 million earmarked for accident prevention meaningfully addresses the soil-compaction and pipe-stress issues identified in the 2023 engineering report, as opposed to satisfying a compliance checklist, will likely only become clear once inspection results from the newly required program are made public.

The case was handled by DOJ's Environmental Enforcement Section within the Environment and Natural Resources Division DOJ ENRD. Public comments on the consent decree are due within 30 days of its filing, after which a federal judge in Kansas will decide whether to approve the terms as negotiated.