Pipeline Operator Agrees to $69 Million Settlement After Major 2022 Oil Spill

South Bow, the Canadian company that operates the Keystone pipeline system, has agreed to pay $26.9 million in civil penalties and spend roughly $40 million more on safety improvements, according to a settlement filed Friday in federal court in Kansas. The two payments together add up to $69 million, with the civil fine going into the Oil Spill Liability Trust Fund — a federal account that pays for cleanup and response to oil spills across the country EPA.

The settlement resolves charges that South Bow and its predecessor violated the Clean Water Act, along with Kansas state environmental laws. The case centers on a December 2022 rupture that released nearly 13,000 barrels of heavy Canadian crude into a creek about 150 miles northwest of Kansas City The Guardian. Before the court can finalize the deal, there is a 30-day public comment period—a standard requirement for settlements of this size that gives environmental groups, residents, and others a chance to weigh in.

The 2022 spill was the largest onshore crude pipeline failure in the United States in nine years. It was so large that it alone exceeded the combined total of all 22 spills the Keystone system had recorded before it, according to a 2021 Government Accountability Office report. The EPA's assistant administrator Jeffrey Hall said the discharge left the affected waterway "lifeless and useless," coating land and water with oil The Guardian.

More than 2,700 animals were harmed or killed by the spill, in an area that includes habitat for the endangered long-eared bat The Guardian. No pipeline workers, nearby residents, or public water supplies were affected—a fact that has led regulators to treat this as primarily an ecological and infrastructure failure rather than a public health crisis.

What Caused the Rupture

An engineering report commissioned by the federal government in May 2023 found that the section of pipe where the rupture occurred had been under excessive stress since it was installed in December 2010. The likely cause: construction work altered the soil around the pipe, putting pressure on it The Guardian.

The government's complaint goes deeper. It says the soil beneath the pipe was not properly compacted during the original construction, and that in 2013—nearly a decade before the failure—the company dug up the site again without replacing the damaged pipe section. This known vulnerability sat unrepaired for years before it catastrophically failed.

This detail is likely to draw close attention during the public comment period. Environmental advocates will probably question whether the $40 million in safety upgrades truly address the root causes—poor soil compaction and pipe stress—or simply check off regulatory boxes.

South Bow's spokesperson said the company began cleanup immediately after the spill, before even receiving formal orders from regulators, and that full environmental remediation was completed by February 2024. The company also conducted more than 12,000 miles of pipeline inspections and 400 excavations to examine and repair sections of the system in the time since The Guardian. Under the settlement terms, South Bow will also pay Kansas more than $3 million for environmental restoration projects in the state.

The Corporate Structure Behind the Settlement

South Bow did not exist when the spill happened. TC Energy built and operated Keystone at the time of the rupture, then spun off South Bow as a separate company in 2024—after the Kansas cleanup was already finished The Guardian. This corporate separation means South Bow inherits legal responsibility for an incident that occurred before the company was formally created. This kind of arrangement is common in pipeline sales and divestitures, and regulators did not use it as a reason to reduce the settlement's size.

The Keystone system itself stretches 2,689 miles and carries Canadian tar sands crude to refineries in Illinois, Oklahoma, and Texas. The settlement arrives at a particularly complicated moment: in April 2026, the Trump administration approved South Bow and a partner company to build a second, smaller pipeline from Canada into Wyoming—essentially reviving a scaled-down version of the Keystone XL project that the Biden administration blocked in 2021 over environmental concerns tied to an $8 billion investment The Guardian.

This timing creates a contradiction that both supporters and critics of Canadian crude infrastructure will likely use to frame how they talk about the settlement. Regulators say the penalty and prevention spending fit the severity of the 2022 failure and the ongoing risks it revealed. But whether the $40 million in new safety measures truly solves the soil and pipe-stress problems identified in the 2023 engineering study—rather than simply satisfying regulatory requirements on paper—will probably only become clear once results from the new inspection program are made public.

Public comments on the settlement are due within 30 days of the filing. After that, a federal judge in Kansas will decide whether to approve the terms as negotiated DOJ.