2015 U.S. Oil Pipeline Report
Pipeline Activity Continues Despite Setbacks
A Look at U.S. Oil Pipeline Projects This Year and Beyond
The Keystone XL pipeline was dealt yet another blow, as President Obama squashed an attempt by Congress to circumvent the approval process for a cross-border pipeline. Meanwhile, the oil industry has been fretting over low prices, as prices have plummeted to record lows since last summer’s high water mark. While companies appear to dialing back expansion plans, those projects were already in development continue on despite financial setbacks for the industry.
The summer construction season is just around the corner, and a number of projects are 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 under way or in the permitting process.
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 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 Cactus Pipeline began operations in April.
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 Caddo Pipeline, an 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 joint venture was announced in March. The pipeline is supported by long-term shipper commitments and is expected to be completed in mid-2016.
Houston Lateral Project
Overview: The Houston Lateral is a 48-mile crude oil pipeline built to service the Houston marketplace. Upon completion, the project will join 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, and commercial operations are expected to begin in mid-2015.
Keystone XL Pipeline
Location: Alberta to U.S. Midwest and Southeast
Overview: The Keystone XL Pipeline Project 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 March, the U.S. Senate failed to override President Obama’s veto of a bill that would have approved the project, circumventing the need for a Presidential Permit. The project remains on hold as it awaits further action by Congress or the president.
Line 78 Pipeline
Location: Illinois and Indiana
Stakeholder(s): Enbridge Energy LP
Overview: In response to market demand for increased pipeline capacity, Enbridge Energy LP is expanding its pipeline system, generally along the pipeline routes Enbridge already operates 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 project will begin at Enbridge’s Flanagan Terminal near Pontiac, Illinois, and travel northeast to Enbridge’s Terminal near Griffith, Indiana. Line 78 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 from the company’s customers has exceeded the capacity of Enbridge’s Line 62 and other pipelines in the greater Chicago area to transport crude oil to the Griffith terminal. Line 78 will allow the regional refineries more opportunities to process U.S. and western Canadian crude oil and reduce reliance on traditional supplies that are imported from outside of North America. Enbridge’s extensive and expanding network of pipelines east of the greater Chicago area is connected directly or indirectly to refineries in northern Indiana, Michigan, Ohio, eastern Canada, and Pennsylvania.
Progress: The Illinois Commerce Commission (ICC) approved the project in April 2014. Right-of-way clearing for the project has already begun, with construction to begin this spring and an in-service date this fall.
Location: Louisiana, Mississippi, South Carolina, Georgia and Florida
Stakeholder(s): Kinder Morgan
Overview: Kinder Morgan is proposing the Palmetto Pipeline, which will allow the company to offer a new service to move 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 is expected to cost approximately $1 billion. The system will have a design capacity of up to 167,000 bpd and will consist of a segment of expansion capacity that Palmetto will lease from Plantation Pipe Line Co. between Baton Rouge and Belton. A new 360-mile pipeline from Belton to Jacksonville will also be constructed as part of the system.
Progress: The open season closed in October 2014. Pending regulatory approval, the project is expected to be in service in July 2017.
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 transport various grades 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 20-in. pipeline will have an ultimate capacity to transport up to 400,000 bpd, but the initial capacity is expected to be closer to 200,000 bpd. Magellan Midstream Partners and Plains All American Pipeline LP announced in March that a wholly owned subsidiary of Anadarko Petroleum Corp. exercised its option to purchase a 20 percent equity interest in Saddlehorn Pipeline Co., resulting in the equity ownership in Saddlehorn being 40 percent Magellan, 40 percent Plains and 20 percent Anadarko. An extension to Carr, Colorado, is also under consideration for connection to existing crude oil assets owned by Plains in that region. This lateral is being designed to provide additional shippers with flexible options and streamlined access into the Saddlehorn system. The project is currently estimated to cost between $800 million and $850 million. Magellan will serve as construction manager and pipeline operator of the Saddlehorn system.
Progress: The project was announced in February. Subject to receipt of necessary permits and regulatory approvals, the Saddlehorn pipeline is expected to be operational during mid-2016.
Location: North Dakota, Minnesota and 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: Construction was originally expected to begin late last year. However, 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. This decision could delay a final decision on the project by a year. As a result, the new anticipated in-service date is 2017.
Southern Access Extension Pipeline
Stakeholder(s): Enbridge Energy Co. Inc., a subsidiary of Enbridge Energy LP, and Lincoln Pipeline LLC, a subsidiary of Marathon Pipeline Co. Inc.
Overview: Illinois Extension Pipeline Co. LLC (IEPC) has begun to build the Southern Access Extension (SAX) Pipeline Project, a 167-mile long, 24-in. diameter pipeline that will transport crude oil from Enbridge Energy LP’s Flanagan Terminal near Pontiac, Illinois, to an existing crude oil terminal near Patoka, Illinois. IEPC is a joint venture between Enbridge affiliate Enbridge Energy Co. Inc. and Lincoln Pipeline LLC, a subsidiary of Marathon Pipeline Co. Inc. Enbridge Energy Co. will own 65 percent of IEPC, and Lincoln the remaining 35 percent. The $765 million SAX project is one of several projects being undertaken by Enbridge and its affiliates to expand access to refinery markets for growing volumes of primarily North Dakota and western Canada light oil production.
Progress: Pump station construction began late last year, with pipeline construction expected to begin this summer and in-service date later this year.
Upland Pipeline Project
Location: North Dakota, Saskatchewan
Overview: The proposed Upland Pipeline would provide crude oil transportation from multiple points in North Dakota and interconnects with the Energy East Pipeline System at Moosomin, Saskatchewan. The project consists of a 200-mile 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, which concluded in September 2014. The company is now seeking a presidential permit to approve the cross-border project, which is expected to 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 of the TGP line with FERC in February 2015. The project involves the abandonment and conversion of approximately 964 miles of natural gas service on TGP, the construction of approximately 200 miles of new pipeline from Louisiana to Texas and 155 miles of new laterals in Pennsylvania, Ohio and West Virginia. The pipeline, which will provide connectivity to major processing and fractionation hubs in the basin, will terminate in Mont Belvieu, Texas, and have a maximum design capacity of 375,000 bpd for transporting natural gas liquids.
Progress: Discussions remain ongoing with potential shippers, with an anticipated in-service date in the fourth quarter of 2018.
Utopia East Project
Stakeholder(s): Kinder Morgan
Overview: Kinder Morgan Cochin LLC and Kinder Morgan Cochin ULC previously announced a binding open season for the Utopia East project, previously known as UTOPIA. Under the Utopia East project, Kinder Morgan will develop, construct, own and operate a 240-mile, 12-in. diameter pipeline from Harrison County, Ohio, to Kinder Morgan’s existing pipeline and facilities in Fulton County, Ohio, where the company would then move product eastward to Windsor, Ontario. The Utopia East system would transport previously refined or fractionated natural gas liquids, including ethane and ethane-propane mixtures.
Progress: During a binding open season that closed in October 2014, Kinder Morgan received sufficient long-term customer commitments to move forward with the project. The company is considering holding an additional open season for remaining capacity that was not subscribed. The project is expected to be in service in early 2018.
2015 May Issue, pipeline reports
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 & 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.
Bradley Kramer is managing editor of North American Oil & Gas Pipelines. Contact him at email@example.com.