Northern Minnesota oil pipeline's future unclear after Enbridge deal

Updated: 3:08 p.m. | Posted: 12:14 p.m.

Enbridge Energy says it's buying a stake in the Bakken Pipeline System, leaving unclear the future of the controversial Sandpiper line the company has proposed across northern Minnesota.

The deal announced today includes two pipelines running from the Bakken oil fields to Illinois and Gulf Coast refineries, bypassing Minnesota. Calgary-based Enbridge will spend $1.5 billion on the deal.

A statement says Enbridge and Marathon Petroleum will own 49 percent of the Bakken Pipeline System, which is expected to be operational by the end of the year.

In the statement, the company says once that deal is complete later this year, Enbridge and Marathon Petroleum plan to terminate their joint venture agreements for the Sandpiper Pipeline Project.

"This acquisition is an attractive opportunity to participate in a pipeline system that will transport crude oil from the prolific Bakken formation in North Dakota to markets in eastern PADD II (states) and the U.S. Gulf Coast," said Enbridge Energy President Mark Maki.

Enbridge says it will evaluate the scope and timing of the Sandpiper Pipeline Project.

"My guess, and it's just a guess at this point, is that Sandpiper is not built in the near term while they take a stake in this pipeline," said Steven Paget, an analyst with First Energy Capital in Calgary Alberta.

Paget says the change is driven by the lengthy Minnesota regulatory process, the fact the Bakken line will be open by the end of the year, and the drop in North Dakota oil production.

Sandpiper is one of two proposed pipelines that would each stretch about 300 miles across the state. Sandpiper would carry 225,000 barrels of oil per day from the Bakken region of North Dakota to the company's hub in Clearbrook, Minn. From there it would carry 375,000 barrels per day to Superior, Wis.

Opponents say possible oil spills or leaks along the proposed pipeline routes would threaten the headwaters of the Mississippi River and other sensitive lakes and rivers in north-central Minnesota. Environmental groups had asked the utilities commission and eventually the appeals court for the more detailed environmental study.

Minnesota Center for Environmental Advocacy attorney Kevin Lee says Marathon Petroleum dropping out of the project is a big deal.

"What it changes is the impetus for the project which was primarily for Marathon to ship oil to Superior. Since that main impetus is no longer there, there's very little reason for this project to go forward," Lee said.

Enbridge also plans to replace its existing Line 3, which was built in the 1960s and transports crude from the oil sands region of Alberta, Canada. By replacing the aging pipe, the company plans to boost the line's capacity back up to 760,000 barrels per day. Enbridge says the Bakken Pipeline System purchase will not affect plans to rebuild Line 3.

Together, the Minnesota portions of both projects would cost around $5 billion, create thousands of construction jobs and contribute millions of dollars in local property tax revenue.