* PHMSA says allows gradual restart of Line 6B
* Restart will be monitored by regulator, 3rd party
* Was first of three Enbridge pipeline outages (Repeating story from Wednesday)
By Jeffrey Jones
CALGARY, Alberta, Sept 22 (Reuters) - U.S. regulators on Wednesday approved a gradual restart of an Enbridge Inc <ENB.TO> oil pipeline that ruptured more than eight weeks ago, fouling a Michigan river system and squeezing oil supplies for U.S. and Canadian refiners.
The U.S. Pipeline and Hazardous Materials Safety Administration said Enbridge, which ships the bulk of Canadian crude exports to the United States, could resume flows on Line 6B in a process that will be tightly controlled and monitored by the regulator and a third party.
PHMSA did not immediately say exactly when operations could resume on the 290,000 barrel per day line and an Enbridge spokesman said the company still requires another written approval from the PHMSA before going ahead.
The regulator has said that pressure would be restricted by 20 percent when flows resumed.
The approval caps a summer in which Enbridge was forced to deal with three outages, creating headaches for Canada's oil producers and refiners on both sides of the border.
Coming on the heels of the BP Plc <BP.L> oil spill in the Gulf of Mexico, the leaks raised questions about the company's ability to operate its huge transport network reliably and safely and sullied Canada's reputation as a secure supplier. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Factbox on Line 6B spill [ID:nN22271591]
Factbox on Ebridge's history of spills [ID:nN22273200]
Graphic on location of leak and refineries affected:
http://link.reuters.com/vug73n ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
PHMSA, an agency of the U.S. Department of Transportation, said Enbridge had agreed to new demand last week that it submit plans within a year to replace a section under the St. Clair River between Michigan and Ontario that was found dented.
The company must also perform tests along the entire length of the pipeline.
Line 6B, which runs to Sarnia, Ontario from Griffith, Indiana, broke open near Marshall, Michigan, on July 26, spilling an estimated 19,500 barrels of heavy crude into the Kalamazoo River system.
That forced the shutdown of line and a cleanup effort involving more than 1,000 workers. The U.S. National Transportation Safety Board is investigating the incident.
As it worked to get the line ready for restart, Enbridge had to test it at several locations to ensure it could withstand normal operating pressure.
SQUEEZED OIL SUPPLIES
Refineries in Ohio, Michigan, Pennsylvania and Ontario processing more than 700,000 bpd were forced to seek alternative supplies. Some had to cut fuel production.
Meanwhile, discounts on Canadian oil compared with benchmark U.S. light crude ballooned due to the outage and Enbridge's need to ration space on other lines as shippers scrambled to reroute volumes.
The situation worsened two weeks ago when a leak on Enbridge's Line 6A near Romeoville, Illinois, forced it to shut that 670,000 bpd conduit. That pushed up crude futures as it normally carries about 5 percent of total U.S. oil imports.
The company shut its 70,000 bpd a day Line 10 early September as well when a small volume of crude was found on its casing. It was quickly restarted when it was determined to be leak-free.
Enbridge resumed shipments on Line 6A last week.
Crude futures fell 26 cents to $74.71 a barrel Wednesday after U.S. government data showed a rise in crude oil inventories and imports last week, despite Enbridge's outages.
Enbridge shares closed up 6 Canadian cents at C$51.68 on the Toronto Stock Exchange. Its U.S. affiliate, Enbridge Energy Partners <EEP.N>, rose 61 cents to $53.98 in New York. ($1=$1.03 Canadian) (Additional reporting by Scott Haggett; Graphic by Steven Culp; Editing by Marguerita Choy)
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