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Enbridge to Rely on Rail While Expanding Bakken Pipes

Enbridge Energy Partners LP (EEP) said Tuesday that for at least the next three years, it plans to rely on rail facilities to transport crude oil from the Bakken Shale and Three Forks formations while it launches long-term plans to expand pipelines in the region.

Stephen Wuori, Enbridge Inc.'s president for liquid pipelines, told financial analysts during a conference call that the use of rail is a short-term fix for easing a bottleneck along its mainline between Berthold, ND, and Clearbrook, MN.

"We saw an opportunity to offer shippers the ability to get on our system, move as far as Berthold and then move off onto the rail," Wuori said. He added that the rail alternative would "probably [be done] for an interim period, maybe as long as three years, while we prepare for our next phase of expansion in pipe.

"The intent is [to provide] a bridging solution to make sure the volumes flow [and] access the pipe capacity that we have, then get onto the rail where don't have the pipe capacity for the time that bottleneck continues. It plays a vital function."

Last December EEP said it would invest $145 million to build crude oil storage tanks, a double-loop unit-train and other facilities at Berthold, eventually staging three unit-trains there at a time. In July an initial start-up phase of 10,000 b/d of export capacity is expected, which would ramp up by early 2013 to a full export capacity of 80,000 b/d.

EEP plans to have the Berthold rail facility completed before the Bakken Expansion Program is completed. That $560 million project -- a collaboration between EEP's Enbridge North Dakota System and Enbridge Income Holdings Inc.'s (EIF) Enbridge Saskatchewan System -- is expected to add 145,000 b/d of takeaway capacity (see Shale Daily, Feb. 15, 2011).

"It's an interesting world with everything that's moving with rail, and now you're seeing rail car companies demanding long-term contracts to secure new rail cars," Wuori said. "But our view is that long-term, long-distance, long-haul pipe is the way to go, and that's what we'll be focused on in our next expansion -- getting more capacity from North Dakota over to our mainline system, where it can get to the markets."

Although conceding that rail is generally more expensive than pipe for shippers, Wuori said EEP is "not involved in the railing operation beyond the loading facility. Our advantage will come from the utilization of the North Dakota pipeline system up to Berthold, and then the fees that we will charge for the loading of the rail cars at this new facility."

He added that some shippers may ultimately decide to stick with rail transport because it goes to places where pipelines don't go, and used St. James, LA, as an example.

"That's an expensive movement, but to some shippers it's a way of getting at a better pricing in the eastern Gulf market," Wuori said.

Late last year Canadian regulators approved another project designed to relieve bottlenecks in the region. Enbridge Bakken Pipeline Co. Inc. plans to build a 77-mile, 16-inch diameter pipeline -- also known as Bakken Pipeline Project Canada -- from Steelman, SK, to Enbridge Pipeline Inc.'s Mainline in Cromer, MB (see Shale Daily, Dec. 27, 2011). Construction of the C$180 million project is scheduled to begin in 2Q2012 and be in service in early 2013.

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