Business

(NEW YORK) —  The largest bank failure since the 2008 crisis has triggered a major U.S. government intervention to protect the financial system.

Silicon Valley Bank, the nation’s 16th largest bank, collapsed on Friday, forcing a government takeover and calling into question the fate of almost $175 billion in customer deposits.

On Sunday, Signature Bank, the 29th-largest bank in the U.S., closed its doors, suggesting the financial panic had spread.

Many bank stocks plummeted in early trading on Monday. First Republic Bank dropped 65% before trading was halted; Western Alliance Bancorp fell almost 60%. Charles Schwab, the eight-largest U.S. bank, dropped nearly 10%.

“This has been riding on a roller coaster the last couple of days,” Joe Lynyak, a partner at the international law firm Dorsey & Whitney and an expert on bank failures, told ABC News. “Suddenly, we’re in a crisis.”

Here’s what you need to know about what caused the Silicon Valley Bank failure, how far it has spread and what it means for you.

Why did Silicon Valley Bank collapse?

The failure of Silicon Valley Bank resembles an “old-fashioned bank run,” William Chittenden, a professor of finance at Texas State University, told ABC News.

The bank’s deposit base, which draws heavily from startup firms in the tech industry, tripled in size during the pandemic-era tech boom between 2020 and 2022. Rather than invest all of the deposits into other startups or venture firms, the bank placed a sizable share of the funds into long-term Treasury bonds and mortgage bonds, which typically deliver small but reliable returns amid low interest rates.

In short order, however, the low-interest rate environment evaporated. Over the last year, the Federal Reserve raised its benchmark interest rate 4.5%, the fastest pace since the 1980s. The sudden spike in interest rates dropped the value of Silicon Valley Bank’s Treasury bonds and mortgage bonds, punching a hole in its balance sheet.

Facing a difficult business environment for tech companies, some large clients pulled money from the bank last week and it was forced to sell some of the distressed securities in order to provide the cash.

“When the bank started selling the assets, it became more evidence of the value that they’d lost,” Anat Admati, a professor at Stanford’s Graduate School of Business, told ABC News.

“Imagine that your entire assets are your house and you bought the house with very little down payment and housing prices go down,” Admati added. “You’re basically under water, meaning if you sell the assets, you can’t pay your debt.”

The vulnerable condition of the bank’s balance sheet scared other major depositors, who in turn pulled their funds from the bank, prompting a bank run that gained momentum quickly since the bank depended on a relatively small number of large depositors. It collapsed within days.

“The bank simply didn’t have enough cash on hand to meet all of their depositor needs,” Chittenden said.

Escalating the financial risk, New York-based Signature Bank shuttered on Sunday at the order of state officials. The bank, which had recently welcomed cryptocurrency deposits, fell prey to fears of a bank run among those who held risky assets, Chittenden said.

“The run on Silicon Valley Bank kind of spooked those customers,” Chittenden added. “So Signature Bank went under.”

What did the government do in response to the collapse of Silicon Valley Bank?

The U.S government has taken speedy and extraordinary steps to limit the risk posed to the financial system.

“The government was caught unawares and had to take extreme emergency action,” said Lynyak of Dorsey & Whitney.

Almost immediately, the Federal Deposit Insurance Corporation, which protects the stability of the financial system, took over Silicon Valley Bank on Friday in an effort to protect depositors.

Since the bank is FDIC-insured, depositors are guaranteed protection of up to $250,000 in funds for each different type of account held.

The group of depositors in Silicon Valley Bank is made up of a relatively small set of venture capital firms, startups and other large investors, many of whom held deposits that far exceeded $250,000. In turn, those depositors risked losing a portion of or all of their money that exceeded that threshold.

“Everybody panicked,” Admati said. “They were anxious all weekend long about whether they could make payroll and pull money out because it’s stuck there.”

In response to the outcry and fearing wider spread of the crisis, the FDIC, the Treasury Department and the Fed took further action on Sunday, telling depositors in Silicon Valley Bank and Signature Bank that the FDIC would protect all of their funds, including those that exceed the $250,000 limit.

Later on Sunday, the Fed announced an emergency lending program to cover the deposits at issue and restore wider confidence in the financial system.

Under the program, the Federal Reserve will allow distressed banks to borrow funds on favorable terms directly from the Fed, instead of generating cash by selling underwater securities, as Silicon Valley Bank had done. Those funds will equip banks to pay depositors who may want to quickly pull out funds amid the turmoil.

Now, the banks can use distressed securities as collateral to borrow from the emergency lending program as if the securities had retained their full value, allowing the banks to raise cash and ensuring the Fed will take on much of the risk tied to the banks’ declining assets.

Returning to the analogy of a home mortgage in a declining housing market, Admati said the program resembles a homeowner getting a loan against their mortgage as if conditions had remained as strong as they were when the house was purchased rather than taking into account the new, worse market.

“They’re lending to the bank more than the assets are worth,” Admati said.

The federal agencies behind the emergency response refuted notions that the moves amount to a taxpayer bailout. “No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer,” said the official statement from Treasury, the Fed, and the FDIC.

Prominent critics have asserted instead that the government response should be considered a bailout, including the editorial board at The Wall Street Journal.

Has the Silicon Valley Bank collapse triggered a banking crisis?

The collapse of Silicon Valley Bank and Signature Bank has prompted fears of a wider contagion throughout the financial industry.

However, the spread of financial distress remains limited, in part because Silicon Valley Bank served a narrow swathe of the economy concentrated in startup tech firms, some experts told ABC News. Other experts cautioned that the situation continues to be in flux and could escalate significantly.
Chittenden, who downplayed the risk of a wider financial crisis, said Silicon Valley Bank serves a niche market set apart from the economy as a whole.

“It really is relatively isolated,” he said. “It doesn’t have all those interchangeable relationships.”

“It’s not a systemic problem that lots and lots of banks are going to be facing,” he added.

Darrell Duffie, a professor at Stanford’s Graduate School of Business, echoed the sentiment, citing the relatively small size of the failed banks compared to the largest in the sector.

“At this point, it doesn’t look like a broadspread crisis,” Duffie said. “The affected banks have taken more risks than most others and they are not among the very biggest banks, which are more heavily regulated and have a lot more small depositors.”

Admati disagreed, saying recent events should be considered a financial crisis and the outcome remains uncertain.

In rescuing depositors in Silicon Valley Bank, federal agencies invoked the “systemic risk exception,” a stipulation that allows the government to intervene on behalf of depositors.

“It’s certainly a crisis because the bank wasn’t considered systemic and all of a sudden it is considered systemic,” Admati said. “They themselves defined it as bigger than just one failed bank.”

“These things are very hard to predict,” she added, noting that the outcome depends in part on the emotional response and behavior of depositors, which stands apart from the underlying financial damage.

What does the current banking emergency mean for you?

The vast majority of banking customers hold deposits below the FDIC insurance threshold of $250,000, ensuring the protection of funds, regardless of a potential bank collapse, Lynyak said.

The recent bank collapses offer an important reminder that customers should scrutinize the banks that hold their money.

“People should probably be careful about looking at the capital levels and the business plan of their particular bank,” Lynyak said. “Some small inquiry is always very useful.”

As depositors big and small monitor a financial emergency, their assessment ultimately determines the outcome for the wider economy, he added.

“As long as the public believes their deposits are safe, our system is safe,” Lynyak said.

Copyright © 2023, ABC Audio. All rights reserved.

(WASHINGTON) — Americans lost $10.3 billion to a wide variety of internet scams last year, according to an FBI report released this month.

The losses were the highest in five years, according to the annual report from the FBI. The bureau’s Internet Crime Complaint Center (IC3) lodged more than 2,000 complaints per day.

The most highly reported crimes were phishing expeditions, with 300,497 victims reporting over $52 million in losses in 2022, according to the bureau. Phishing, defined as “the use of unsolicited email, text messages, and telephone calls purportedly from a legitimate company requesting personal, financial, and/or login credentials,” is frequently successful because phishing emails will often resemble those from people victims know personally, prompting them to click on unsecured links.

Data breaches and non-payment scams were the next most common internet scams in 2022, claiming 58,859 and 51,679 victims, respectively, per the report.

Ransomware, a type of cyber intrusion which locks up a device’s data until a ransom is paid, is of particular concern for cybersecurity professionals due to the underreporting of ransomware attacks by victims. In 2022, the FBI “received 2,385 complaints identified as ransomware with adjusted losses of more than $34.3 million,” according to the report.

“The IC3 has seen an increase in an additional extortion tactic used to facilitate ransomware. The threat actors pressure victims to pay by threatening to publish the stolen data if they do not pay the ransom,” the IC3 warns.

By far, the most heavily targeted industry for ransomware attacks was the healthcare industry, followed by critical manufacturing’ and government.

“The FBI does not encourage paying a ransom to criminal actors,” the report says. “Paying a ransom may embolden adversaries to target additional organizations, encourage other criminal actors to engage in the distribution of ransomware, and/or fund illicit activities. Paying the ransom also does not guarantee that a victim’s files will be recovered.”

Earlier this year, the Justice Department disrupted a ransomware gang called HIVE, which was responsible for 87 incidents targeting critical infrastructure, the report says.

Call center scams, which emanate from India primarily, are responsible for over $1 billion in losses to victims.

“Call centers overwhelmingly target the elderly, with devastating effects,” the report says. “Almost half the victims report to be over 60 (46%), and experience 69% of the losses (over $724 million).”

In total, the elderly lost $3.1 billion to internet scams in 2022, the most of any age group.

The FBI has a 73% success rate in getting victims their funds back, according to the report.

Copyright © 2023, ABC Audio. All rights reserved.

(WASHINGTON) — The Federal Reserve, Treasury Department and Federal Deposit Insurance Corporation announced Sunday that they will make additional funding available to ensure all Silicon Valley Bank deposits, both insured and uninsured, will be paid in full.

“After receiving a recommendation from the boards of the FDIC and the Federal Reserve, and consulting with the President, Secretary [Janet] Yellen approved actions enabling the FDIC to complete its resolution of Silicon Valley Bank, Santa Clara, California, in a manner that fully protects all depositors,” the said in a joint statement. “Depositors will have access to all of their money starting Monday, March 13. No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer.”

The Fed also announced it will make additional funding available to “to eligible depository institutions to help assure banks have the ability to meet the needs of all their depositors.”

Silicon Valley Bank, the 16th largest bank in the country, failed on Friday and was taken over by the FDIC, after a run on the bank Wednesday and customers withdrew $42 billion of deposits by the end of Thursday. SVB mostly served technology workers and startups, including some of Silicon Valley’s biggest names, such as Roku.

The trio also announced Sunday a “similar systemic risk exception” for New York-based Signature Bank, “which was closed today by its state chartering authority,” according to the joint statement. “All depositors of this institution will be made whole. As with the resolution of Silicon Valley Bank, no losses will be borne by the taxpayer.”

“Shareholders and certain unsecured debtholders will not be protected,” the statement read. “Senior management has also been removed. Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law.”

President Joe Biden issued a statement Sunday on his administration’s action to protect depositors at both banks, expressing his approval for the actions but stressing he will hold those responsible for “this mess” accountable for their actions.

“Over the weekend, and at my direction, the Treasury Secretary and my National Economic Council Director worked diligently with the banking regulators to address problems at Silicon Valley Bank and Signature Bank,” Biden said. “I am pleased that they reached a prompt solution that protects American workers and small businesses, and keeps our financial system safe. The solution also ensures that taxpayer dollars are not put at risk.”

“The American people and American businesses can have confidence that their bank deposits will be there when they need them,” the president added. “I am firmly committed to holding those responsible for this mess fully accountable and to continuing our efforts to strengthen oversight and regulation of larger banks so that we are not in this position again.”

A senior Treasury official and Federal Reserve officials on calls with reporters Sunday night insisted these moves to pay the deposits of Silicon Valley Bank are not a bailout.

The officials stressed that the funds used to pay depositors of Silicon Valley Bank and Signature Bank will come from the FDIC’s Deposit Insurance Fund (DIF). The DIF is funded by fees on banks, and then from earnings on their investments such as Treasury securities, and currently has more than $100 billion in it, according to officials.

“The Deposit Insurance Fund is bearing the risk. This is not funds from the taxpayer,” a senior Treasury official said.

The senior Treasury official also stressed that taxpayers are not paying for these moves — the banks’ shareholders are.

“The bank’s equity and bondholders are being wiped out. They took a risk as owners of the securities, they will take the losses,” the senior Treasury official said.

Officials were repeatedly pressed by reporters on if these moves on Silicon Valley Bank and Signature Bank would establish a precedent to cover uninsured funds and leave taxpayers vulnerable in the future if FDIC funds were not sufficient.

“Right now, we are very focused on addressing the current issue and taking care of the current system and stabilizing the banking systems — or the uninsured, and assuring uninsured depositors that they will be made whole. But I do think we will be looking back with time and reassess and assess whether any changes should be made,” the senior Treasury official said.

Regulators took the unusual step of designating both Silicon Valley Bank and Signature Bank as “systemic risks” to the financial system, a designation that has not been used since 2008.

“I’m grateful that the Federal regulators have taken steps to do just that, and I hope that these actions will provide increased confidence in the stability of our banking system,” New York Gov. Kathy Hochul said in a statement. “Many depositors at these banks are small businesses, including those driving the innovation economy, and their success is key to New York’s robust economy.”

Sen. Mark Warner, D-Va., told told ABC News’ This Week co-anchor Martha Raddatz earlier Sunday, “Let’s see what happens today,” pumping the breaks on a potential SVB bailout.

“I know I’ve been in conversations with the regulators, the administration, the Fed; the best outcome will be can they find a buyer for this SVB bank today before the markets open in Asia later in the day. That would be the best making sure that depositors — remember that shareholders in the bank are going to lose their money, let’s be clear about that — but the depositors can be taken care of. And the best outcome will be an acquisition of SVB,” he said.

“Let me be clear that during the financial crisis, there were investors and owners of systemic large banks that were bailed out, and we’re certainly not looking. And the reforms that have been put in place mean that we’re not going to do that again. But we are concerned about depositors and are focused on trying to meet their needs,” Treasury Secretary Janet Yellen said on CBS’ Face the Nation Sunday.

Copyright © 2023, ABC Audio. All rights reserved.

(WASHINGTON) — The Department of Transportation will send proposed legislation to Congress Monday asking legislators to ban so-called family seating fees on flights.

The proposal follows calls from President Joe Biden to get rid of “junk fees” — including extra costs on airline tickets so families can sit together. The proposal would prohibit airlines from charging a fee or additional costs on kid’s seats in the same service class as an accompanying adult.

DOT officials conducted a review last year of airline seating policies, encouraging carriers to “review and improved” their policies to ensure kids can sit near parents at no additional cost.

“Upon review of the airlines’ seating policies, DOT remains concerned that airlines’ policies do not guarantee adjacent seats for young children traveling with a family member and that airlines do not guarantee the adjacent seating at no additional cost,” Transportation Secretary Pete Buttigieg said in a letter to House Speaker Kevin McCarthy.

The proposed legislation also follows DOT’s recently released a family seating dashboard, which outlines which airlines will allow parents to sit with their kids at no extra cost.

To receive a “green check” on DOT’s dashboard, an airline must guarantee that parents can sit next to children aged 13 and younger at no additional cost if adjacent seats are available when they book. Airlines must include that guarantee as part of their customer service plan so that it is backstopped by USDOT enforcement if they fail to deliver, DOT said.

Alaska Airlines, American Airlines and Frontier Airlines have the green light from DOT on their family seating policies.

Copyright © 2023, ABC Audio. All rights reserved.

(LONDON) — Silicon Valley Bank UK is being acquired by HSBC in a £1 deal that will protect deposits, the United Kingdom’s chancellor and HSBC said on Monday.

“This morning, the Government and the Bank of England facilitated a private sale of Silicon Valley Bank UK to HSBC,” Chancellor of the Exchequer Jeremy Hunt said on Twitter. “Deposits will be protected, with no taxpayer support.”

The deal for the United Kingdom branch of the collapsed Silicon Valley Bank comes as Washington considers how much help to extend to the U.S. institution, the 16th largest in the country.

After the bank failed on Friday, the U.S. Treasury Department, The Federal Reserve and the Federal Deposit Insurance Corporation said they would make sure U.S. deposits were paid in full.

HSBC, which is headquartered in London, said in a statement that SVB UK had deposits totalling about £6.7 billion, or about $8 billion. The bank has loans totalling about £5.5 billion and had a pre-tax profit of about £88 billion in 2022.

HSBC Group CEO Noel Quinn said in a statement that the acquisition “makes excellent strategic sense.”

“It strengthens our commercial banking franchise and enhances our ability to serve innovative and fast-growing firms, including in the technology and life-science sectors, in the UK and internationally,” Quinn said.

Hunt, the U.K. finance minister, said, “I said yesterday that we would look after our tech sector, and we have worked urgently to deliver that promise.”

HSBC said it would update shareholders on the status of the acquisition in May.

Copyright © 2023, ABC Audio. All rights reserved.

(NEW YORK) — You could say the Internal Revenue Service is undergoing a Renaissance. After years of criticism for being inefficient and antiquated, the IRS has spent nearly $1 billion to improve its service.

“So far, so good,” Ted Rossman, senior industry analyst at Bankrate.com, told ABC News about the current tax-filing season.

As of the end of February, the IRS had processed 1.9 million more returns and issued 5.4 million more refunds than the same time last year.

“That suggests to me that the gains are coming from faster turnarounds, not more filers,” said Rossman.

The IRS is also answering 90% of calls to its customer service line this year compared to just 13% a year ago, according to the agency. Tax pros say the IRS is on track for its first “normal” tax season in years after the COVID-19 pandemic upended the agency’s efforts to process returns and disburse refunds in an orderly and timely manner.

The IRS has spent nearly $848 million of the $80 billion granted to the agency over the next decade through the Inflation Reduction Act, according to Treasury Department data. The money is meant to give the agency the resources its needs to improve customer service and technology systems and to finally become a 21st century tax service.

Among the upgrades so far are new online tax-filing tools that include allowing filers to upload follow-up documents online, making the IRS more competitive with private-sector tax prep software. The agency also debuted a program that lets businesses file information reports for independent contractors through a secure portal on its website and it rolled out updated software that let’s taxpayers who filed amended returns receive refunds via direct deposit.

“It seems that most refunds are being delivered in a timely fashion this year. There’s still a paper backlog at the IRS. Even though it’s not nearly as bad as last year,” said Rossman.

Tax experts still recommend filing and requesting your refund electronically, if possible, to give yourself the best odds of getting your refund quickly. Barring any special exceptions, you should get your refund in two to three weeks in most cases. Sending a paper return or requesting a paper check could take much longer.

So far, the IRS has hired more than 5,000 employees to ramp up its customer service division and is looking to hire another 5,300 this year, according to agency officials.

The massive federal funding allocated to the IRS over the next 10 years is also meant to tighten tax enforcement on high-income earners and major corporations, something Republicans have argued would “supersize” the agency and lead IRS agents to harass taxpayers.

Treasury Secretary Janet Yellen has instructed the agency not to use any of the money to increase audits of taxpayers earning less than $400,000 a year and incoming IRS chief Daniel Werfel has promised to abide by that order.

Rossman said it is important for the IRS to “get this filing season right” after years of disarray and poor customer service.

“I think it’s important for consumer confidence and for avoiding additional regulatory scrutiny,” Rossman said. “The IRS has a monopoly on America’s taxes – it’s not like we can choose to do business with one of their competitors instead – but I still think it’s important for the IRS to start turning its reputation around.”

Copyright © 2023, ABC Audio. All rights reserved.

(NEW YORK) — The U.S. Consumer Product Safety Commission on Thursday announced a recall of 1.9 million YETI cooler products.

The recall impacts four of YETI’s products: the Hopper M20 backpack cooler, the Hopper M30 1.0 and 2.0 soft coolers, and the SideKick Dry gear case.

According to the CPSC, the magnet-lined closures on the products “can fail and result in detached magnets, posing a risk of serious injury or death if ingested.”

“When two or more high-powered magnets are swallowed, the ingested magnets can attract to each other, or to another metal object, and become lodged in the digestive system,” the agency said in a recall statement. “This can result in perforations, twisting and/or blockage of the intestines, infection, blood poisoning and death.”

The Austin, Texas-based cooler company issued the voluntary recall in cooperation with the CPSC.

“We are voluntarily recalling the Hopper M20, Hopper M30 1.0 and 2.0, and SideKick Dry products sold between March 2018 and January 2023,” YETI said in a statement on its website. “We ask all customers currently in possession of the Hopper M20, Hopper M30 and SideKick Dry to immediately stop use of these products.”

According to Thursday’s CPSC announcement, there have so far been “1,399 reports of the magnet-lined closures degrading or failing, including reports of missing or detached magnets.”

“No magnet ingestions or injuries have been reported,” the CPSC added.

Both YETI and the CPSC have urged consumers in possession of any of the affected products to immediately stop using them and contact YETI for a “full refund in the form of a YETI gift card with an additional $25 value.”

YETI customers can also visit the brand’s site directly for more information on “returning the product free of charge for the choice of a suggested replacement product of equal or greater value,” according to the company.

The four products in the recall were sold nationwide at Dick’s Sporting Goods, ACE Hardware, Academy Sports + Outdoors, YETI and other retailers, as well as online and on Amazon from March 2018 to January 2023.

Copyright © 2023, ABC Audio. All rights reserved.

(NEW YORK) — Dorel Juvenile Group announced a voluntary recall of 59,450 rear-facing infant car seats due to concerns over the seat anchoring system that “fails to conform” to safety standards for some models, according to a release from Maxi-Cosi on Mar. 3.

The recalls include certain Safety 1st onBoard 35 Secure Tech, Maxi-Cosi Coral XP, Maxi-Cosi Mico XP Max, Maxi-Cosi Mico XP, Maxi-Cosi Mico Luxe+, and Maxi-Cosi Infant Base child car seats, according to the release.

The recall was also reported by the National Highway Traffic Safety Administration (NHSA.)

Well? Have you? https://t.co/bQRLdOwf5S. #CheckForRecalls pic.twitter.com/1OYYRhMCr3

— nhtsagov (@NHTSAgov) March 8, 2023

“A detached child seat may not properly restrain the occupant, increasing the risk of injury in a crash,” the NHSA said in part of a statement, adding that “the lower seat anchors used to secure the child seat base may fail, allowing the child seat to detach” in the recalled units.

The NHSA, as well as Dorel, advise consumers to “only secure their child seat with the vehicle belt restraint system” until a free replacement base is sent to owners.

Consumers who own an affected product are urged to contact Dorel customer service or email retractablelatchrecall@djgusa.com to be sent a free replacement.

Copyright © 2023, ABC Audio. All rights reserved.

(NEW YORK) — The maker behind the popular Calico Critter toys said Thursday that it is recalling millions of toys with parts that may pose a choking hazard for children.

Epoch Everlasting Play LLC made the announcement in cooperation with the Consumer Product Safety Commision.

The recall impacts more than 3.2 million units of the company’s Calico Critters flocked animal figures and sets that include bottle and pacifier accessories.

The Pine Brook, New Jersey-based company said it knew of three reported incidents involving the pacifier accessories specifically, two of which resulted in fatalities, including a 2-year-old in New Mexico in 2018 and a 9-month-old in Japan in 2015.

The impacted bottle and pacifier accessories were manufactured in China, imported by Epoch Everlasting Play LLC and sold between January 2000 and December 2021 at major retailers such as Meijer and Walmart and online on the Calico Critters website and on Amazon, according to a CPSC recall announcement. They were sold in multiple colors, according to the company.

“The bottle accessories were sold in yellow, pink, blue and orange colors. One style of the bottle has two yellow handles. The pacifier accessories were sold in yellow, orange, pink, dark pink, blue and teal colors,” Epoch said on its official recall website.

Epoch and the CPSC have advised anyone in possession of a recalled accessory to “please immediately take them away from children” and destroy them.

In order to properly destroy the accessories, the company stated, adults should use scissors to “cut the top off of the bottle and cut the handle [off] the pacifier.”

The toy company has a full list of recalled products and associated item numbers on its recall website and has created a request form for impacted individuals to register, submit a photo of the destroyed recalled item and request a free replacement accessory.

Consumers who wish to contact Epoch can also call (800) 631-1272 Mondays through Fridays between the hours of 9 a.m. and 5 p.m. ET, or email productsafety@epocheverlastingplay.com.

Copyright © 2023, ABC Audio. All rights reserved.

(WASHINGTON) — Oil spills along the Keystone pipeline that runs from Canada to Texas have become more frequent and severe, prompting stricter regulations for a 1,200-mile stretch of the pipeline, a federal agency said on Tuesday.

TC Energy, the company that operates the Keystone pipeline, must lower the operating pressure for crude oil on the targeted stretch, which makes up nearly half of the pipeline, the agency said.

“We are currently reviewing the Amended Corrective Action Order (ACAO) issued by the Pipeline and Hazardous Materials Safety Administration,” TC Energy said in a statement to ABC News. “Our commitment to the safe operations of our system is unwavering, and we will comply with the ACAO. The Keystone Pipeline System has been operating under operational mitigations, within the pressure restrictions applied in the PHMSA ACAO, since it was returned to service.”

The federal order follows a major pipeline rupture on Dec. 7 near Washington, Kansas, a town at the state’s northern border with Nebraska, where about 13,000 barrels or 550,000 gallons of crude oil spilled from the Keystone pipeline, the Pipeline and Hazardous Materials Safety Administration said.

The pipeline failure occurred at a girth weld, a point that adjoins two pipes, the agency said.

Since 2009, the Keystone pipeline has experienced three failures at girth welds and at least three additional accidents that occurred for other reasons, the agency said. In all, those accidents resulted in spills totaling about 25,200 barrels of crude oil, the agency said.

Operation of the pipeline under current procedures “is or would be hazardous to life, property, or the environment,” the agency said.

In a statement to ABC News, TC Energy said it is investigating and addressing the issues with the pipeline following the accident in December.

“We continue to progress our remediation and the root cause investigation at our Keystone Milepost-14 incident site in Washington County, Kansas,” the company said. “Our commitment to the safe operations of our system is unwavering.”

The Keystone pipeline runs from oil sand fields in Alberta, Canada through the midwestern U.S. to oil refineries in Texas.

The Keystone XL pipeline, a proposed 1,179-mile pipeline mirroring the Keystone pipeline, shuttered after President Joe Biden canceled the pipeline’s border crossing permit in January 2021, days after taking office.

The move was applauded by environmental groups but drew sharp criticism from some Republican lawmakers, who decried the move for placing an unnecessary restriction on the U.S. oil supply.

Oil production in the U.S. in 2021 was nearly identical to that seen over the final year of the Trump administration, in 2020, and greater than the amount produced in 2017 or 2018, according to data from the Energy Information Administration, a federal agency.

Copyright © 2023, ABC Audio. All rights reserved.