Deadly Blast on Major Natural Gas Pipeline Spurs U.S. Probe

(Bloomberg) -- A deadly explosion on an Enbridge Inc. natural gas pipeline killed one woman and burned several structures in central Kentucky, including nearby homes.

The U.S. Transportation Department sent a Pipeline and Hazardous Materials Safety Administration investigator to the site and officials from the office of pipeline safety are on their way, spokesman Darius Kirkwood said in an email.

The blast early Thursday prompted an evacuation in Lincoln County. Flames shot 300 feet to 400 feet (91 to 122 meters) up in the air and were visible from up to 70 miles away, Lincoln County Emergency Management Director Don Gilliam said over the phone. Emergency responders are checking on two nearby pipelines to make sure they are secure after the fire.

Six people were sent to a nearby hospital for non-life-threatening injuries, including a law enforcement deputy who suffered burns from rescuing residents from a burning house, said Robert Purdy, the public affairs officer at Kentucky State Police Post 7 in Richmond. All missing people have been accounted for.

Enbridge has isolated a section of the 30-inch pipeline, part of the Texas Eastern system, near Danville and is working with authorities to secure the site, Michael Barnes, a company spokesman, said in an interview. Texas Eastern is one of the largest pipeline systems in the U.S., stretching almost 9,000 miles from the Northeast to the Gulf Coast.

Senate Majority Leader Mitch McConnell, who represents Kentucky, said in a statement that his office is “closely monitoring” the explosion.

Natural gas futures for Sept. delivery rose as much as 4.5% Thursday on the New York Mercantile Exchange to $2.333, the highest since July 18. They declined 0.7% to $2.217 per million British thermal units at 1:17 p.m. Enbridge shares were up 1.4%.

Supply for next-day delivery at hubs serving Appalachia, the largest U.S. producing region, fell as the blast left output stranded in the area. Tetco M3 for delivery Friday fell to $1.96 per million British thermal units from $2.04, while Dominion South traded at $1.85 after settling at $1.94 Wednesday, according to David Hoy, a trader at Dynasty Power Inc. in Calgary.

The explosion comes as gas suppliers face increased scrutiny about safety following a number of recent blasts. In September, a series of explosions on a systems operated by NiSource Inc.'s Columbia Gas of Massachusetts erupted in the towns of Lawrence, Andover and North Andover, killing one person and injuring more than two dozen. And in October, a rupture on Enbridge's Westcoast Mainline gas system caused fuel shortages in the Pacific Northwest.

This was the third significant incident on the line in four years, and it's cutting southbound flows to zero from 1.7 billion cubic feet per day on Wednesday, according to BloombergNEF analysts.

What BloombergNEF says
The explosion in Kentucky, which killed one person, will create a major supply shortfall for the South Central region. Spot and prompt futures on the Nymex September contract are bid as a result this morning, while Appalachian basis is getting offered violently.
--Jennifer Cogburn and Laurent Key, analysts
Click here to read the research

--With assistance from Naureen S. Malik.

To contact the reporters on this story: Christopher Martin in New York at cmartin11@bloomberg.net;Andres Guerra Luz in Houston at aluz8@bloomberg.net

To contact the editors responsible for this story: Lynn Doan at ldoan6@bloomberg.net, Christine Buurma