(Adds Sunoco project details, decline to comment)
WASHINGTON, March 31 (Reuters) - A U.S. regulator on Monday allowed Exxon Mobil Corp to restart operations on the Texas leg of its Pegasus pipeline, which spilled thousands of barrels of oil into a residential area in Arkansas last year.
The Pipeline and Hazardous Materials Safety Administration (PHMSA) approved Exxon's restart plan for a 210-mile (338-km) stretch of the pipeline from Corsicana to Nederland at 80 percent of the operating pressure in place before the March 29, 2013 incident in the small town of Mayflower, Arkansas.
"This margin of safety should allow for the safe operation of the pipeline until the Remedial Work Plan can be approved and implemented," PHMSA said in a letter to Exxon dated and made public on March 31.
The northern portion of the pipeline, which includes Mayflower, will remain shut down under the terms of a corrective action order, a PHMSA spokesman said.
Pegasus, built in the late 1940s, ruptured near a housing development in Mayflower and spewed around 5,000 barrels of crude. The 95,000 barrel-per-day (bpd) pipeline runs from Patoka, Illinois, to Nederland.
It is unusual for pipelines to leak near or in towns and the incident led to the evacuation of residents, as Exxon launched a huge cleanup operation and paid residents' expenses.
It also fueled the debate over the safety of transporting Canadian oil, as this pipeline did, from tar sands, with critics claiming this type of crude was more corrosive to pipelines.
In November, the U.S. regulator accused Exxon of failure to account for risks in the pipeline and said the oil major could face nearly $2.7 million in fines.
The restart of the southern portion of the pipeline will allow Exxon to carry out inspections in the summer, as expected in Exxon's remedial plan, according to PHMSA. The regulator said it will not extend a deadline to submit the plan beyond April 7, 2014.
The shutdown of the Pegasus line led to a delay late last year of a 40,000-bpd Sunoco Logistics pipeline project that would carry crude from Midland, Texas, to Nederland, a crossroads for several pipelines and home to oil terminals.
Sunoco declined to comment on the project, saying it usually gives updates during earnings calls.
(Reporting by Timothy Gardner in Washington and Selam Gebrekidan and Sabina Zawadzki in New York; Editing by Franklin Paul, Meredith Mazzilli and Paul Simao)