Schweitzer: Canadian co. to seek US producer interest in oil sands pipeline to Gulf of Mexico

By Matthew Brown, AP
Friday, September 10, 2010

Schweitzer: Canadian pipeline co. to seek US crude

BILLINGS, Mont. — A Canadian company said Friday that it will invite U.S. oil producers to bid on transportation capacity for a proposed pipeline from Canada to the Gulf of Mexico.

TransCanada Corp. and Montana Gov. Brian Schweitzer plan an official announcement Monday to kick off a so-called “open season” to solicit interest in the pipeline from companies in Montana and North Dakota.

Calgary-based TransCanada has faced political pressure to allow U.S. oil on its 1,980-mile Keystone XL pipeline.

The project will carry oil sands crude from Canada to Gulf Coast refineries — following a route that passes through or near several major oil fields along the Montana-North Dakota border.

Industry representatives say interest in developing Montana and North Dakota oil has been hampered in the past by a lack of refineries, pipelines and rail facilities.

“This is an opportunity for producers in the Bakken and the Cedar Creek Anticline in both Montana and North Dakota to get their oil out,” Schweitzer said, referring to major oil formations in the region.

The two states combined produce about 380,000 barrels of oil daily, primarily from North Dakota, said Justin Kringstad, director of the North Dakota Pipeline Authority.

Industry representatives have said that figure could triple over the next several years.

The U.S. Geological Survey in 2008 estimated that up to 4.3 billion barrels of oil could be recovered from the Bakken in North Dakota and Montana, using current technology. The agency called it the largest continuous oil accumulation it had ever assessed.

But getting that oil onto the TransCanada pipeline would require an “onramp” for the crude that was not included in the company’s earlier plans.

Oil producers have accused TransCanada in the past of ignoring their requests to build an entry point where they could tap into Keystone XL.

“From the beginning, TransCanada has opposed allowing any U.S. crude in their pipeline that lays across the U.S.,” said billionaire oilman Harold Hamm, chairman of Continental Resources Inc., an independent oil and gas company based in Enid, Okla. “That went against the grain of everyone here in the U.S., as it should.”

Continental was one of the first to tap the Bakken formation in North Dakota’s oil patch more than 20 years ago.

Schweitzer had threatened to hold up Keystone XL’s 280-mile route through his state if it did not agree to an onramp. North Dakota Gov. John Hoeven also has pushed for U.S. access to the pipeline.

Hamm and Ron Ness, president of the North Dakota Petroleum Council, said a combination of political pressure and prolific oil production likely led TransCanada to open the way for U.S. crude to get on the pipeline.

North Dakota surpassed Louisiana last year as the fourth-largest oil-producing state, behind Texas, Alaska and California.

“Whether they’ve seen the upside of Bakken crude or it was forced up on them, who cares?” Ness said. “This is unbelievably great news for North Dakota and Montana.”

Dave Galt, with the Montana Petroleum Association, said TransCanada’s announcement means the company will be “in the game” for producers from his state.

“An open season is an opportunity for people to make commitments for product capacity to the pipeline, so (TransCanada) can determine whether or not they can make this onramp work,” Galt said.

MacPherson reported from Bismarck, N.D.

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