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Bakken Sandpiper Oil Pipeline Shelved by Enbridge

Houston-based Enbridge Energy Partners LP (EEP) has pulled the plug for the time being on the Sandpiper Pipeline Project, a long-proposed 612-mile, $2.6 billion oil pipeline to transport light crude oil from the Bakken Shale and Western Canada to Wisconsin.

EEP also has decided to work with an affiliate to take a minority interest in the Dakota Access Pipeline LLC project now under construction in four states but not without its own challenges for its backers at Energy Transfer Partners (ETP) (see Shale DailyAug. 26).

EEP said it plans to "defer implementation of the Sandpiper project" beyond the company's current five-year planning horizon. Separately, an affiliate plans to withdraw regulatory applications pending with the Minnesota Public Utilities Commission tied to the project. EEP also has negotiated a "tentative joint funding arrangement" with its general partner, Enbridge Energy Co. Inc. (EECI) to share the interest in the Bakken Pipeline System on a 25-75% basis with EEP funding the smaller amount.

The EEP-EECI investments essentially buy a 49% interest in ETP's affiliate building the Dakota Access Pipeline for transporting Bakken crude to East and Gulf Coast market hubs in Illinois. EEP's interest will eventually be acquired by the close of the third quarter through what a spokesperson called an indirect investment in a joint venture (MarEn)with Marathon Petroleum.

"EEP has completed a review of Sandpiper and concluded that the project should be delayed until such time as crude oil production in North Dakota recovers sufficiently to support development of new pipeline capacity," an EEP spokesperson said. EEP has determined that the need for additional capacity won't develop until beyond the company's current five-year planning time frame.

The decision effectively defers 225,000 b/d capacity from the Williston Basin transportation outlook for 2019, said Justin Kringstad, head of the North Dakota Pipeline Authority.

Kringstad said there are "many key fundamentals that look quite different today than they did when Sandpiper was originally proposed." His examples include the current production slowdown in the Bakken, and additional pipeline projects planned in the region.

Last month, Marathon Petroleum Corp. (MPC) and EEP said that they planned to end their transportation services and joint venture agreements for the Sandpiper project (see Shale Daily,Aug. 4).

MPC also plans to liquidate its indirect ownership interest in North Dakota Pipeline LLC, which would effectively end its commitment to fund construction costs for Sandpiper. As of June 30, Marathon had contributed $301 million for Sandpiper construction costs.

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