Houston company proposes $250M connector from ND to Keystone pipeline that moves crude to GulfBy James Macpherson, AP
Monday, June 21, 2010
Bakken connector to Keystone pipeline proposed
BISMARCK, N.D. — A Houston company wants to ship North Dakota oil through a proposed pipeline that would carry Canadian crude to the Gulf of Mexico.
Quintana Capital Group Ltd. said it wants to build a $250 million, 300-mile-long pipeline system from western North Dakota to eastern Montana, where it would meet TransCanada Corp.’s proposed Keystone XL pipeline.
Terry Cunha, a TransCanada spokesman at the company’s headquarters in Calgary, Alberta, said no agreement has been reached with Quintana or any other company wanting to ship domestic crude in its pipeline.
“There are some discussions taking place,” Cunha said. “We’re looking at all options being proposed.”
Quintana notified North Dakota regulators earlier this month of its proposal to build a spur to the Canadian company’s pipeline, state Public Service Commissioner Tony Clark said. Quintana wants to start construction in one year and have it competed by early 2013, the company’s letter to North Dakota regulators said.
Quintana’s pipeline would initially carry 100,000 barrels of crude from the Watford City area to Montana’s Fallon County, where it also could be linked with pipelines that carry Montana crude, the company’s proposal said.
Full exploitation of the oil-rich Bakken shale and Three Forks formations in western North Dakota has been stunted — along with prices — by the lack of refineries, pipelines and rail facilities to move the crude to market, government and oil industry officials say.
TransCanada wants to start construction next year on its 1,980-mile pipeline to move 700,000 barrels of crude daily from the tar sands in Alberta to oil refineries in Oklahoma and Texas. The company hopes to have the pipeline completed in early 2013, Cunha said.
The pipeline’s route would go through Montana, South Dakota and Nebraska in the upper Great Plains.
Montana regulators have warned TransCanada that the project would be delayed in that state if the company refused to allow Montana and North Dakota oil producers a so-called on-ramp to the pipeline.
Gov. John Hoeven, Montana Gov. Brian Schweitzer and oil industry leaders in the two states met with TransCanada officials in March to press the company into allowing U.S. crude in the pipeline.
The company has said for nearly two years that it would consider so-called interconnections to North Dakota’s oil patch with that pipeline.
“We have solicited Bakken producers before and no parties were interested in interconnections until this year,” Cunha said.
TransCanada separately plans to transport oil from Canada through several states, including North Dakota, to Illinois and Oklahoma. The company’s Keystone pipeline will extend through eight counties in eastern North Dakota, far from the oil patch in the western part of the state.
North Dakota, the No. 4 oil-producing state in the nation, reached its pipeline, rail and refining capacity of about 189,000 barrels a day in October 2008, slowing rig activity and forcing producers to take steep discounts. Since then, infrastructure work including new rail shipping facilities and pipeline expansions has increased North Dakota’s shipping capacity to about 400,000 barrels a day.
Because of the increased distances to market, North Dakota sweet crude generally fetches about 10 percent less than a barrel produced elsewhere and sold on the New York Mercantile Exchange.
Clark, North Dakota’s Public Service Commissioner, said moving North Dakota oil on TransCanada’s pipeline would boost prices for producers.
“Access to the new Keystone line is critical to the Bakken,” Clark said. “More marketing options means more market power and greater pricing.”
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