Exxon Mobil Corporation (XOM)’s Crude Spill Puts a Bigger Question Mark on Major Pipeline Projects

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Exxon Mobil Corporation (NYSE:XOM)In the same week when Exxon Mobil Corporation (NYSE:XOM) paid a fine of $1.7 million for a spill in the Yellowstone River in 2011, the company has again reported a major oil spill in Mayflower, Arkansas. According to initial estimates, the spill is of more than 10,000 barrels. The spill is expected to play a vital role on the decisions to be taken on the new pipeline projects across the U.S.

Effect on the Environment:

Oil spillage has its own history. Recently, two big spillage incidences have grabbed the attention of the whole world. In 2010, an explosion in the Mocondo well operated by BP plc (NYSE:BP) caused a spillage of around 4 million barrels of oil. The cost of such a spill can never be accounted for. Though BP will be fined a huge amount for the incident, its effect on the environment is hard to measure. BP reported a decline earnings to $1.6 billion from $7.7 billion a year earlier due to declining production.

Another incident that followed was the release of around 150,000 barrels of oil by Chevron Corporation (NYSE:CVX) in the deepwaters of Brazil in November, 2011. Chevron’s license was suspended in Brazil, and recently, the company paid a fine of $17.3 million for the irregularities in operation. Chevron reported earnings of $7.2 billion for the fourth quarter of 2012, in comparison to $5.1 billion for the same period last year.

These two spillage incidents had irreversible environmental effects, and resulted in environmentalists speaking against major pipeline projects carrying crude from oil sands to the Gulf Coast.

Effect on Pipeline Projects:

For Exxon, as an immediate effect of the spill, the Arkansas pipeline has been shut for an indefinite period. In the long-term, the spillage incident has once again brought to the forefront the harmful irreversible threats posed by these pipeline projects. The Exxon-Enbridge Tar Sands pipeline project seeks to reverse two oil sands pipeline in the Alberta tar sand region to the main coast to transport toxic tar sands oil.

The pipelines run through some water bodies, and if these water bodies get contaminated due to spillage, then the effects will be far from our imagination. Any spillage will have harmful effects on the wildlife, along with being the reason for the extinction of some species from the face of the earth and climatic changes in our environment.

The same goes with the other major pipeline projects. TransCanada Corporation (NYSE:TRP) has been planning a project to lay down pipelines carrying 800,000 barrels per day of crude from the Oil Sands of Canada to the Gulf of Mexico refineries. Increasing production in Canada has created a glut of supply. If this oil can be supplied efficiently to the Gulf of Mexico refineries, then the price of oil will come down and operations in Canada will also become profitable.

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