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2014 U.S. Oil Pipeline Report

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U.S. Oil Pipeline ProjectsPipeline Activity Ramps Up Despite New Keystone Delays

A Snapshot of the U.S. Oil Pipeline Projects This Year and Beyond

The Keystone XL pipeline has become a perennial entrant to this report, but the long delayed project hasn’t diminished the flurry of activity to move oil products across the United States.

The recent announcement from the U.S. State Department to allow government agencies more time after a Nebraska judge struck down the approved route of the Keystone XL through the state has sparked a new round of industry backlash. TransCanada CEO Russ Girling said he was “extremely disappointed and frustrated” by the decision. While this project languishes, lesser known projects are gaining approval and moving ahead.

The summer construction season is starting to heat up. And while construction and union groups are slamming the State Department’s latest delay, a number of projects are off and running to expand the capacityof the U.S. oil transportation infrastructure. What follows is an overview of many of the oil related projects currently under way or in the permitting process.

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Bakken Marketlink Project
Location: Montana, North Dakota
Stakeholder(s): TransCanada
Overview: In the fall of 2010, TransCanada went to the market with a proposal to move Bakken crude oil production by constructing a receipt facility at Baker, Mont. The open season was successful, allowing the company to sign firm termed contracts for 65,000 barrels per day (bpd) of crude oil transportation from the Bakken to key U.S. refining markets. The Bakken Marketlink project will provide receipt facilities to transport up to 100,000 bpd of crude oil from the Williston Basin producing region in North Dakota and Montana to Cushing, Okla., and the U.S. Gulf Coast using facilities that make up part of the existing Keystone Pipeline System.
Progress: TransCanada expects the Bakken Marketlink Project to be in service by the end of 2014, subject
to the receipt of necessary regulatory approvals.

Cactus Pipeline
Location: Texas
Stakeholder(s): Plains All American Pipeline LP
Overview: A 310-mile, 20-in. crude oil pipeline with an expected capacity of 200,000 bpd from McCamey to Gardendale, Texas, Plains All American Pipeline (PAA) expects to invest $350 million to $375 million in the Cactus Pipeline. The pipeline is expected to transport both sweet and sour crude oil from the Permian Basin to the PAA/Enterprise Products Partners Eagle Ford Joint Venture Pipeline, which serves the Three Rivers and Corpus Christi markets and can supply the Houston-area market through a connection to the Enterprise South Texas Crude Oil Pipeline. Crude oil delivered on Cactus will have access to rail loading capacity at PAA’s Gardendale station and access to barge dock facilities in the Corpus Christi area.
Progress: The Cactus Pipeline is expected to be placed into service in the first quarter of 2015.

Flanagan South Pipeline
Location: Illinois, Missouri, Kansas, Oklahoma
Stakeholder(s): Enbridge Energy Co. Inc.
Overview: Enbridge is proposing to build a nearly 600-mile, 36-in. diameter interstate crude oil pipeline that will originate in Flanagan, Ill., and terminate in Cushing, Okla., crossing Illinois, Missouri, Kansas and Oklahoma. The majority of the pipeline will parallel Enbridge’s existing Spearhead crude oil pipeline right of way. Enbridge has also proposed to install seven pump stations including one at the Flanagan terminal and six along the pipeline route. Initial capacity will be 585,000 bpd. The pipeline will provide the additional capacity needed to bring increased North American crude oil production to refinery hubs in the U.S. Gulf Coast. The project will provide a long-term, stable and reliable source of energy for the United States, and communities located along the pipeline route will benefit from property taxes over the life of the pipeline, as well as from the creation of high-paying construction and manufacturing jobs, and associated economic activity during construction.
Progress: Construction has begun and the company expects an in-service date of mid-2014.

Houston Lateral Project
Location: Texas
Stakeholder(s): TransCanada
Overview: The Houston Lateral is a 48-mile crude oil pipeline built to service the Houston marketplace. Upon completion, the project will join the TransCanada’s Gulf Coast Pipeline as an integrated part of the Keystone Pipeline System. Houston Lateral’s route is expected to go through the counties of Liberty, Chambers and Harris to Houston’s refining center.
Progress: Construction began in 2013, but the company pushed back its in-service date from early 2014 to mid-2015.

Kinder Morgan Crude and Condensate Pipeline — Sweeny Lateral
Location: Texas
Stakeholder(s): Kinder Morgan
Overview: Due to strong interest for transportation of Eagle Ford crude and condensate to the Houston Ship Channel, Kinder Morgan has secured long-term commitments for more than two-thirds of the 300,000 bpd of capacity on the Kinder Morgan Crude and Condensate (KMCC) pipeline, which was placed in service in June 2012. The pipeline transports crude/condensate from the Eagle Ford shale to the Houston Ship Channel through 65 miles of new-build construction and 113 miles of converted natural gas pipeline. Including joint ventures and other projects, the company’s planned investments related to Eagle Ford crude and condensate opportunities currently total approximately $1 billion. The approximately $100 million Sweeny Lateral project involves new 27-mile, 12-in. diameter pipeline from existing KMCC pipe in Wharton County, Texas, to Phillips 66’s Sweeny Refinery in Brazoria County, Texas. Kinder Morgan will provide Phillips 66 with a portion of the lateral pipeline’s initial 65,000 bpd of capacity, which is expandable to 100,000 bpd. In addition, this project proposes to add associated receipt facilities by constructing a five-bay truck offloading facility and three new storage tanks with approximately 360,000 barrels of crude/condensate capacity at Kinder Morgan’s DeWitt Station in DeWitt County, Texas, and Wharton Pump Station in Wharton County, Texas. Kinder Morgan’s KMCC expansion project is expected to generate approximately 500 temporary construction jobs. This includes approximately 325 jobs to construct the Sweeny Lateral pipeline, 100 jobs to construct the DeWitt facilities and 75 jobs to construct the Wharton County facilities. The estimated local property tax impact of these expansions will be $900,000 when completed.
Progress: The Sweeny Lateral was placed into service in January. In addition, Kinder Morgan is investing nearly $300 million in additional supply laterals, connections, tanks and truck racks, supported by long-term contracts with customers. These projects further enhance the connectivity of the KMCC system to additional Eagle Ford supplies and Texas Gulf Coast market outlets. The company has been able to place portions of these facilities in service early to accommodate customer demand and expects to put the balance of these projects in service over the course of 2014 and the first half of 2015.

Keystone XL Pipeline
Location: Alberta to U.S. Midwest and Southeast
Stakeholder(s): TransCanada
Overview: The Keystone XL Pipeline Project is a proposed 1,179-mile, 36-in. diameter crude oil pipeline from Hardisty, Alberta, to Steele City, Neb. At an estimated cost of $5.3 billion (USD), the pipeline will transport crude oil from Canada, as well as the Bakken shale region of Montana and North Dakota. The pipeline will have capacity to transport 830,000 bpd to Gulf Coast and Midwest refineries.
Progress: The U.S. State Department announced an indefinite delay for permit approval on April 18, citing the need for more time following on-going litigation in the Nebraska Supreme Court.

Line 6B Phase 2 Replacement Project
Location: Indiana, Michigan
Stakeholder(s): Enbridge
Overview: Enbridge’s Line 6B suffered a high-profile failure in July 2010. Ever since, the company has been working to replace the pipeline. Enbridge Line 6B Phase 2 Replacement Project consists of replacing approximately 235 miles of its existing Line 6B crude oil pipeline in Indiana and Michigan. The company is replacing certain segments with new pipe, starting in Lake County, Ind., and continuing northeast to Marysville, Mich. Most of the new pipeline segments will be installed adjacent to existing segments. The project is designed to meet both current and future pipeline transportation needs. Line 6B is provides crude oil to numerous regional refineries, helping meet the public’s demand for refined petroleum products such as gasoline, diesel and asphalt. The project is designed to reduce the number of future maintenance activities and restore the ultimate capacity of Line 6B to meet increasing demand along the pipeline route, which is largely driven by current and planned refinery upgrades and expansions in Michigan, Ohio and eastern Canada. Following completion of the project, Enbridge will have replaced the entire length of Line 6B with new pipe from Griffith, Ind., to the St. Clair River in Marysville, Mich. Overall cost of the project, including replacement of 235 miles of pipeline and associated station and terminal facilities, is estimated at $1.3 billion for the Michigan portion and $300 million for the Indiana portion.
Progress: The Line 6B Phase 2 Pipeline Replacement Project is scheduled to be fully in-service this year, with staged completion of segments of the pipeline expected to be completed and operational as follows: Mid-2013 for service from Stockbridge to Ortonville, Mich.; early 2014 for service from Griffith, Ind., to Stockbridge; and mid-2014 for service from Ortonville to Marysville, Mich.

Line 78 Pipeline
Location: Illinois, Indiana
Stakeholder(s): Enbridge Energy LP
Overview: In response to market demand for increased pipeline capacity, Enbridge is proposing to expand its pipeline system, generally along the existing pipeline routes in Illinois and Indiana. The Line 78 Pipeline project involves constructing approximately 79 miles of new 36-in. diameter crude oil pipeline from Illinois to Indiana. The pipeline will begin at Enbridge’s Flanagan Terminal near Pontiac, Ill., and travel northeast to Enbridge’s Terminal near Griffith, Ind. The project will expand Enbridge’s capacity to transport growing supplies of crude oil produced in the Williston Basin region around North Dakota and light and heavy crude production in western Canada. The transportation demand has exceeded the capacity of Enbridge’s existing Line 62 and other pipelines in the greater Chicago area to transport crude oil to the Enbridge terminal near Griffith, Ind. From there, these supplies of crude oil will be further transported to regional refineries.
Progress: Subject to regulatory approvals, right-of-way clearing will begin in the fall of 2014. Construction of the Line 78 Pipeline is set to begin in the spring of 2015, with an in-service date of fall 2015.

Pony Express Pipeline
Location: Wyoming, Colorado, Nebraska, Kansas, Oklahoma
Stakeholder(s): Tallgrass Energy
Overview: The Tallgrass Pony Express Pipeline LLC (PXP) is a growth project that will transport domestic light crude found in the Bakken production area of North Dakota and eastern Montana to Cushing, Okla. The pipeline will be comprised of a converted portion of an existing natural gas pipeline and a newly constructed pipeline. The pipeline will originate at Guernsey, Wyo., go southeast through the corners of Colorado and Nebraska before turning south at Lincoln, Kan., and terminating at an existing petroleum facility in Cushing, Okla. The new pipeline will be an approximately 260-mile, 24-in. diameter extension from Lincoln County,
Kan., to Payne County, Okla., with 80 percent of the route collocated with existing energy infrastructure. Pipeline capacity will range between 230,000 and 320,000 bpd.
Progress: Tallgrass purchased Kinder Morgan’s stake in PXP in 2013. The company has targeted a full in-service date of August 2014.

Sandpiper Pipeline
Location: North Dakota, Minnesota, Wisconsin
Stakeholder(s): North Dakota Pipeline Co., a subsidiary of Enbridge Energy Partners LP
Overview: North Dakota Pipeline Co. is proposing to build a nearly 610-mile interstate pipeline from the company’s Beaver Lodge Station south of Tioga, N.D., to an existing terminal owned by an Enbridge affiliate in Superior, Wis. As part of the Sandpiper Project, there will also be new storage tanks, pumping units and metering facilities constructed at locations to be determined based on route selection and shipper requests. Much of the pipeline will generally follow Enbridge’s existing pipeline or other utility rights of way in North Dakota, Minnesota, and Wisconsin. The project’s initial capacity will be 225,000 bpd to Clearbrook, Minn., and 375,000 bpd to Superior.
Progress: Construction is expected to begin in late 2014, with operations to begin in 2016.

Southern AccessExtension Pipeline
Location: Illinois
Stakeholder(s): Enbridge Pipelines
Overview: The Southern Access Extension Pipeline Project is a 165-mile, 36-in. diameter pipeline that will transport crude oil from the company’s Flanagan Terminal near Pontiac, Ill., to an existing terminal near Patoka, Ill. The project is one of several projects being undertaken by Enbridge to expand access to refinery markets for growing volumes of North Dakota and western Canada light oil production. The project route was reviewed by the Illinois Commerce Commission and will generally parallel other pipeline and electric transmission rights of way, including those of Enbridge. While the route has been determined, the final design and capacity of the project are still to be determined.
Progress: Enbridge anticipates beginning construction in mid-2014, with an in-service date of mid-2015.

This is not a comprehensive list of the pipeline projects for the upcoming construction season. For updates regarding ongoing projects, refer to the Project Roundup on page 16 and published each issue.
North American Oil & Gas Pipelines provides quarterly reports of Canadian and U.S. pipeline projects. A report on Canadian oil pipeline projects appeared on page 26 of the February issue, and upcoming reports on Canadian and U.S. gas pipeline projects will appear the August and November issues, respectively.
Bradley Kramer is managing editor of North American Oil & Gas Pipelines. Contact him at bkramer@benjaminmedia.com.

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