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2016 U.S. Oil Pipeline Report: Downturn Leads to Delay

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Canada Looks to Export Gas to Asia, EuropeIn our 2016 U.S. Oil Pipeline Report, TransCanada is looking to appeal the Obama administration’s rejection of the Keystone XL pipeline, and low oil prices have led to cutbacks and delays in the pipeline industry. While companies have dialed back expansion plans, there are still a number of pipeline projects in development and will continue on despite the market downturn.

The summer construction season is starting to heat up, and there are some key projects already under way to expand capacity for the U.S. oil transportation infrastructure. What follows is an overview of many of the oil related projects currently in development.

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Cactus Pipeline
Location: Texas
Stakeholder(s): Plains All American Pipeline LP
Overview: The Cactus Pipeline is a 310-mile, 20-in. crude oil pipeline with an initial capacity of 250,000 barrels per day (bpd) from McCamey to Gardendale, Texas. The pipeline is expected to transport both sweet and sour crude oil from the Permian Basin to the U.S. Gulf Coast. Crude oil delivered on Cactus will have access to rail loading capacity at the company’s Gardendale station and access to barge dock facilities in the Corpus Christi area. The company expects to expand capacity to 330,000 bpd by the fourth quarter this year.
Progress: The pipeline began operations in April.

Caddo Pipeline
Location: Texas, Louisiana
Stakeholder(s): Plains All American Pipeline LP and Delek Logistics Partners LP
Overview: Caddo Pipeline LLC is a 50/50 joint venture between Plains All American Pipeline and Delek Logistics Partners LP, which is developing the 80-mile, 12-in. pipeline between Longview, Texas, and Shreveport, Louisiana. The pipeline will originate at the Plains Atlas Terminal in Longview and will have the capacity to move up to 80,000 bpd of domestic crude oil to supply refineries in the Shreveport area and Delek Logistics’ pipeline system supplying Delek US Holdings’ El Dorado, Arkansas, refinery. Under the agreement, Plains All American will construct and operate the Caddo Pipeline. The total project investment is expected to be approximately $100 million.
Progress: The pipeline is supported by long-term shipper commitments and is expected to be completed in mid-2016.

Keystone XL Pipeline
Location: Alberta to U.S. Midwest and Southeast
Stakeholder(s): TransCanada
Overview: Keystone XL is a proposed 1,179-mile, 36-in. diameter crude oil pipeline from Hardisty, Alberta, to Steele City, Nebraska. 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: In November, President Obama denied granting a permit to the project. TransCanada announced legal actions in January to appeal the decision. The project remains on hold.

Palmetto Pipeline
Location: Louisiana, Mississippi, South Carolina, Georgia and Florida
Stakeholder(s): Kinder Morgan
Overview: Kinder Morgan’s proposed Palmetto Pipeline would have allowed the company to transport refined petroleum products from Baton Rouge, Louisiana, Collins and Pascagoula, Mississippi, and Belton, South Carolina, to North Augusta, South Carolina, Savannah, Georgia, and Jacksonville, Florida. The project was expected to cost approximately $1 billion, with a designed capacity of up to 167,000 bpd. A new 360-mile pipeline from Belton to Jacksonville would have also been constructed as part of the system.
Progress: Kinder Morgan canceled the project after the Georgia state government issued a moratorium on the use of eminent domain.

Saddlehorn Pipeline
Location: Colorado, Oklahoma
Stakeholder(s): Magellan Midstream Partners, Plains All American Pipeline LP and Anadarko Petroleum Corp.
Overview: The Saddlehorn Pipeline is an approximately 550-mile pipeline that will be capable of transporting at least 190,000 bpd of crude oil from the DJ Basin, and potentially the broader Rocky Mountain area resource plays, to storage facilities in Cushing, Oklahoma, owned by Magellan and Plains. The pipeline’s Platteville, Colorado, origin and Cushing destination will each include 1 million barrels of storage. The pipeline is also being extended from Platteville to Carr, Colorado. The project is currently estimated to cost between $800 million and $850 million.
Progress: The project is currently under construction. The project owners announced a supplemental open season in December. Saddlehorn has already received binding commitments from a subsidiary of Anadarko and from Noble Energy Inc. The Platteville-to-Cushing segment of the pipeline is expected to be operational during mid-2016, and the Carr-to-Platteville segment is expected to be operational in the fourth quarter of 2016.

Sandpiper Pipeline
Location: North Dakota, Minnesotaand Wisconsin
Stakeholder(s): North Dakota Pipeline Co., a joint venture between Enbridge Energy Partners LP and Williston Basin Pipe Line LLC (a subsidiary of Marathon Petroleum Corp.)
Overview: The Sandpiper Pipeline will connect the Enbridge’s Beaver Lodge Station, south of Tioga, North Dakota, and a new terminal in Clearbrook, Minnesota, with 24-in. diameter pipeline. A 30-in. diameter pipeline will connect Clearbrook to the company’s terminal in Superior, Wisconsin. In total, the project will be approximately 616 miles long. With the existing Line 81 terminating in Clearbrook, Sandpiper will carry additional volumes to Superior, Wisconsin, hence the need for increased pipe diameter. The project is a nearly $2.6 billion, privately funded investment in new energy infrastructure. Generally, the new pipeline will follow Enbridge’s existing pipelines and/or other infrastructure rights of way. In Minnesota, more than 75 percent of the route will follow pipelines and other infrastructure already in operation.
Progress: In September 2014, the Minnesota Public Utilities Commission (MPUC) took the unprecedented action of separating the Certificate of Need and Route Permit dockets and halting action on the Route Permit until completion of the Certificate of Need process. On Jan. 11, after more than a year of legal process, the MPUC rejoined the dockets and directed that an environmental impact statement (EIS) is to be completed before commencing the permitting process. On Feb. 1, Enbridge filed petition for reconsideration asking MPUC to allow the regulatory review to proceed concurrently with the EIS process. The expected in-service date is unknown.

Upland Pipeline Project
Location: North Dakota, Saskatchewan
Stakeholder(s): TransCanada
Overview: The proposed Upland Pipeline would provide crude oil transportation from multiple points in North Dakota and interconnect with the Energy East Pipeline System. The project consists of a 240-mile, 20-in. pipeline that would transport up to 300,000 bpd of crude oil across the U.S.-Canadian border. The project is expected to cost $600 million.
Progress: TransCanada conducted a successful open season that concluded in September 2014. The company is now seeking a presidential permit to approve the cross-border project, which is expected to begin construction in 2019 and be in service by 2020.
Utica Marcellus Texas

Pipeline Project
Location: Pennsylvania, Ohio, West Virginia, Louisiana and Texas
Stakeholder(s): Kinder Morgan
Overview: Kinder Morgan continues to develop its Utica Marcellus Texas Pipeline (UMTP) project and has filed for abandonment and conversion of 964 miles of natural gas service on the existing Tennessee Gas Pipeline (TGP), the construction of approximately 200 miles of new pipeline from Louisiana to Texas, new storage in Ohio and 120 miles of new laterals to provide basin connectivity. The approximately $4 billion UMTP project will be designed to transport propane, butanes, natural gasoline, Y-grade and condensate in batches along the system, with a maximum design capacity of 430,000 bpd.
Progress: In June 2015, Kinder Morgan launched a binding open season to secure shipper contracts. The open season was extended and closed Dec. 15, 2015. Subject to shipper commitments and timely regulatory approvals, the pipeline will be in service by the fourth quarter of 2018.
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 14 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 in the February issue, and upcoming reports on Canadian and U.S. gas pipeline projects will appear the August and November issues, respectively.

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