... 2013 U.S. OIL PIPELINE REPORT - Pipeline Season Heating Up as Keystone Awaits Approval - North American Energy Pipelines  

2013 U.S. OIL PIPELINE REPORT – Pipeline Season Heating Up as Keystone Awaits Approval

Pipeline ReportA Sneak Peak at U.S. Oil Pipeline Projects in 2013 and Beyond

By Bradley Kramer

A year ago, when North American Oil & Gas Pipelines published this report, all the pipeline talk surrounded the ongoing drama of TransCanada’s Keystone XL Pipeline, which has undergone more than five years of public scrutiny and governmental review. Little has changed.

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A year ago, TransCanada resubmitted its application for a Presidential Permit from the U.S. State Department. In January, Nebraska Gov. Dave Heineman approved the proposed route, which led to the State Department releasing a draft environmental statement that stated that the project would pose “no significant impacts” to the resources in Nebraska.

A year ago, TransCanada expected Keystone XL to be in service by the end of 2013, but as the company awaits approval of the Presidential Permit — perhaps this year? — it has pushed back the projected in-service date to 2015. As the company awaits that decision, it has moved forward with two other pipeline projects that will become part of the Keystone system, the Gulf Coast Pipeline and Houston Lateral projects.

Meanwhile, the summer construction season is starting to heat up, and pipeline contractors aren’t sitting on their hands waiting around for news from the State Department. They’re busy expanding the capacity the U.S. oil transportation infrastructure, increasing access to resources from the Bakken shale formation, as well as reserves in the Permian Basin and other systems that bring Canadian crude into the marketplace. What follows is an overview of many of the oil related projects currently under way or in the permitting process.

Cactus Pipeline
Location: Texas
Stakeholder(s): Plains All American Pipeline LP
Overview: A new 310-mile, 20-in. crude oil pipeline from McCamey to Gardendale, Texas, the Cactus Pipeline is expected to be placed into service in the first quarter of 2015. Plains All American Pipeline (PAA) has entered into a letter of intent with a third party regarding a long-term commitment for a majority of the pipeline’s capacity and is in discussions with several potential shippers for the remaining capacity. The total project investment is expected to range from $350 million to $375 million. 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. The Cactus Pipeline will initially be designed to provide approximately 200,000 barrels per day (bpd) of capacity and can be increased as demand warrants.

Flanagan South Pipeline
Location: Flanagan, Ill., to Cushing, Okla.
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. Construction is expected to begin in summer 2013, with an expected in-service date of summer 2014.

Freedom Pipeline
Location: Texas to California
Stakeholder(s): Kinder Morgan
Overview: Kinder Morgan Freedom Pipeline LLC, a subsidiary of Kinder Morgan Energy Partners, is conducting a binding open season for a project in which the company proposes to convert an existing natural gas pipeline to crude oil service in order to move crude from the Permian Basin of West Texas to refining complexes in northern and southern California. The project also involves Kinder Morgan constructing new crude oil pipeline segments in Texas and California and building operational tank facilities in the receipt area of Wink, Texas, and at the points of delivery in California. Subject to shipper support, regulatory approval and necessary capital improvements, Kinder Morgan could begin moving up to 277,000 bpd of crude oil shipments in the late fourth quarter of 2016.

Gulf Coast Pipeline
Location: Cushing, Okla., to Nederland, Texas
Stakeholder(s): TransCanada
Overview: The Gulf Coast Pipeline project is an approximate 485-mile, 36-in. crude oil pipeline beginning in Cushing and extending south to Nederland to serve the Gulf Coast marketplace. The 48-mile Houston Lateral Project is an additional project under development to transport oil to refineries in the Houston area. The Gulf Coast Project will have the initial capacity to transport 700,000 bpd and can be expanded to transport 830,000 bpd to Gulf Coast refineries. Construction began in August 2012, with an in-service date expected later this year.

Houston Lateral Project
Location: Houston
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. Construction was set to begin in the first quarter of 2013 with operations to commence in early 2014.

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, reducing American dependence on oil from Venezuela and the Middle East by up to 40 percent. In May 2012, TransCanada filed a new application for a Presidential Permit with the U.S. Department of State, a requirement for building any cross-border pipeline, while proceeding with the southern portion of its Keystone expansion as a separate project, the Gulf Coast Pipeline. In January 2013, Nebraska Gov. Dave Heineman approved TransCanada’s proposed route through the Cornhusker state. On March 1, the State Department released a Draft Supplementary Environmental Impact Statement (Draft SEIS) on Keystone XL that reaffirmed “there would be no significant impacts to most resources along the proposed project route.” With an anticipated decision on the Presidential Permit this year, the Keystone XL Pipeline has a projected in-service date of 2015.

Parkway Pipeline
Location: Norco, La., to Collins, Miss.
Stakeholder(s): Kinder Morgan and Valero
Overview: Kinder Morgan and Valero are partnering in the formation of Parkway Pipeline LLC for the purpose of constructing, owning and operating a proposed 141-mile, 16-in. diameter underground pipeline that will originate in Norco and terminate at an interconnect with existing petroleum facilities in Collins. Parkway will enable the transportation of refined liquid petroleum products, including gasoline, diesel fuel and turbine fuel, from existing refineries in the Norco area to existing facilities in Collins, Miss. These products can then be distributed locally or injected into existing pipelines for distribution throughout the southeastern United States. Kinder Morgan will serve as construction manager and operator of the pipeline. Construction began in August 2012, and operations are expected to begin in September.

Pony Express Crude Oil Project
Location: Guernsey, Wyo., to Ponco City and Cushing, Okla.
Stakeholder(s): Kinder Morgan
Overview: The Pony Express Pipeline will convert approximately 500 miles of part of the Kinder Morgan Interstate Gas Pipeline system, plus a 210-mile greenfield extension from central Kansas to Cushing. The 710-mile project will transport light crude that may be received from various sources near Guernsey, including interconnects with the Platte Pipeline and the Bridger-Butte Pipeline, as well as a potential new receipt point in the Denver Julesburg Basin/Niobrara area in northeastern Colorado. The project will offer shippers greater access to Cushing from several different production areas, while providing refiners with a reliable, source of crude oil. Kinder Morgan secured sufficient project support to transport 230,000 bpd. Operations are expected to begin in the third quarter of 2014.

Sandpiper Pipeline
Location: North Dakota, Wisconsin
Stakeholder(s): Enbridge
Overview: The Sandpiper Pipeline project is an approximately 560-mile interstate crude oil pipeline originating at Enbridge’s Beaver Lodge Station south of Tioga, N.D. The project will bring growing supplies of North Dakota crude oil to an existing terminal owned by an Enbridge affiliate in Superior, Wis. The Sandpiper Pipeline will generally follow Enbridge’s existing pipelines and other utilities. From Superior, the oil will be transported by Enbridge and other interconnected pipelines to refinery hubs in the United States and eastern Canada. With planning, design, landowner outreach and permitting expected to take place until next year, construction is expected to begin in late 2014, with operations to begin in 2016.

Southern Access Extension Pipeline
Location: Illinois
Stakeholder(s): Enbridge
Overview: The Southern Access Extension Pipeline Project is a 165-mile pipeline that will transport crude oil from Flanagan, Ill., to a major refinery hub 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, as well as the pipe diameter, are still to be determined. Subject to other pending regulatory approvals, Enbridge anticipates beginning construction in mid-2014, and the project will be in service in early 2015.

Sweeny Lateral Pipeline
Location: Texas
Stakeholder(s): Kinder Morgan Energy Partners LP
Overview: The expansion of the Sweeny Lateral will increase capacity on the 27-mile, 12-in. diameter pipeline from an initial 30,000 bpd up to 100,000 bpd from the Kinder Morgan Crude Condensate (KMCC) pipeline to Phillip 66’s Sweeny Refinery in Brazoria County, Texas. Kinder Morgan will add new pumps and an additional 120,000-barrel storage tank at its Wharton Pump Station in Wharton County, Texas, and increase the truck offload capabilities at its DeWitt Station in DeWitt County, Texas, to facilitate the increase in capacity. Project completion is expected at the end of the year.

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 18 and published each issue.

North American Oil & Pipelines will provide a report on Canadian and U.S. gas pipeline projects in the August and November issues, respectively. For information on oil pipeline projects in Canada, see page 30 of our February 2013 issue.

Bradley Kramer is managing editor of North American Oil & Gas Pipelines. Contact him at bkramer@
benjaminmedia.com.

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