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Published May 30, 2012, 04:57 PM

Proposed ND Oil Pipeline Could be Scrapped

BISMARCK, N.D. (AP) — A Colorado company says its proposed $650 million pipeline that would move 150,000 barrels of North Dakota crude daily to a hub in Minnesota is at risk of being scrapped.

By: James MacPherson, Associated Press

BISMARCK, N.D. (AP) — A Colorado company says its proposed $650 million pipeline that would move 150,000 barrels of North Dakota crude daily to a hub in Minnesota is at risk of being scrapped.

High Prairie Pipeline, a subsidiary of Durango, Colo.-based Saddle Butte Pipeline LLC, alleges Enbridge Energy Partners LP has refused to allow a connection to the Canadian company's terminal at Clearbrook, Minn., in favor of tar sands oil from the province of Alberta, where Enbridge is based.

High Prairie wants to force Enbridge to take North Dakota crude shipped by the Colorado company and has taken its complaint to federal regulators.

Depending on the outcome, the 450-mile High Prairie Pipeline that was projected to be running late next year could be at a "minimum delayed, or worst case, terminated all together," said Greg Ward, a company vice president.

Mike Moeller, director of Enbridge's North Dakota operations, said the company's pipeline network in North Dakota has been running at capacity since 2006, coinciding with the start of the state's oil boom and increased shipments from Canada.

"The Enbridge mainline does not have room for all of it," Moeller said.

Enbridge, which operates 50,000 miles of pipelines in North America, currently has the capacity to ship about 210,000 barrels of crude daily from North Dakota and Montana, Moeller said. The company has invested millions of dollars to increase its capacity in North Dakota and is even building two rail terminals in the state to bump shipping capacity by 120,000 barrels daily, he said.

It's "nontypical" for a pipeline company to turn to rail but it "helps with capacity problems," Moeller said.

Earlier this month, the Federal Energy Regulatory Commission dismissed a protest filed by High Prairie against Enbridge. The commission said it did not have the authority to order an oil pipeline carrier to provide a so-called interconnection with another carrier.

High Prairie has elevated its protest to a formal complaint, which is pending before FERC, a Washington agency that oversees the nation's electric transmission network and interstate oil and natural gas pipelines.

FERC spokeswoman Tamara Young-Allen said the agency is taking comments on the complaint until Monday. A hearing, which could come before an administrative law judge, has not been set, she said.

Ward, the High Prairie vice president, said the company has binding shipping commitments from oil producers for the proposed pipeline. High Prairie has asked for oil producers to extend those commitments while the company's complaint is being considered by federal regulators.

The proposed 16-inch diameter pipeline from Alexander, in McKenzine County, would run due east to the pipeline hub in Clearbrook. It also would have a 17-mile spur in McKenzie County and an 8-mile spur in Mountrail County.

The company has said the project would employ about 2,500 people during its six-month construction phase.

The High Prairie Pipeline is one of six projects proposed to help move crude out of the rich Bakken and Three Forks formations in western North Dakota, said Justin Kringstad, director of the North Dakota Pipeline Authority.

The proposed projects have a collective shipping capacity of about 900,000 barrels of oil daily, Kringstad said. The projects include Enbridge's own expansion plans and TransCanada Corp.'s Keystone XL project, a controversial Canada-to-Texas pipeline that would carry Canadian tar sands oil and 100,000 barrels of crude daily from North Dakota and Montana.

North Dakota, the nation's No. 2 oil producer behind Texas, is on pace to double its oil production by 2015 to more than 1 million barrels daily.

About one-quarter of North Dakota's daily oil production is shipped by rail, and some by truck, due to the lack of pipeline capacity in the state, Kringstad said.

"Expansion of the pipeline infrastructure is critical," he said, though the market will determine which pipelines are built. "Pipelines will not move forward without shipper support," Kringstad said.


Copyright 2012 The Associated Press.

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