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Enbridge suspends pursuit of Sandpiper Pipeline approval

An Enbridge tank rests July 7, 2014, near Berthold, N.D. Michael Vosburg / Forum News Service

SUPERIOR, Wis.—Enbridge announced late Thursday it plans to suspend the Sandpiper Pipeline, citing changes in market conditions and Minnesota regulatory delays that prompted customers to invest in a different pipeline.

Enbridge Energy Partners will withdraw applications pending with the Minnesota Public Utilities Commission and shelve the Sandpiper until North Dakota oil production recovers from the recent slowdown.

The news comes about a month after Enbridge Energy Partners and Marathon Petroleum Corp. announced plans to invest in the Dakota Access Pipeline, a deal that left the Sandpiper without an anchor customer.

The Sandpiper was expected to be in service this year, but regulatory delays in Minnesota have prevented construction from starting. Environmental groups and pipeline opponents pushed for an environmental impact statement, which led the Minnesota Court of Appeals to overturn the Minnesota Public Utilities Commission's permit for the Sandpiper.

"I don't think they ever thought that (environmental groups) would end up having the influence we have," said Richard Smith, president of opposition group Friends of the Headwaters. "And I don't think they ever thought Friends of the Headwaters, along with the Minnesota Center for Environmental Advocacy, would win the ruling to have a full EIS."

Enbridge Energy Partners President Mark Maki said he was hesitant to assign blame for delays in the Minnesota permitting process, saying instead the decision to suspend Sandpiper efforts was evidence of "market forces at work."

"Extensive and unprecedented regulatory delays and procedural irregularities have plagued the Sandpiper project since applications were filed nearly three years ago," he said.

The Sandpiper or another pipeline expansion out of the Bakken could be proposed again in the future, but Enbridge officials said they don't project a need for additional pipeline capacity for at least five years.

"The business, competitive and market environment is very different now than it was at the time when we applied for regulatory approval of the Sandpiper project back in 2013," Maki said.

The Sandpiper would have transported 225,000 barrels per day from North Dakota to an existing terminal in Clearbrook, Minn., then proceeding to Enbridge facilities in Superior, Wis.

Marathon had committed to fund 37.5 percent of the construction of the $2.6 billion Sandpiper project.

But due to project delays, Marathon announced plans to terminate its agreement for Sandpiper and invest in the Dakota Access Pipeline and the Energy Transfer Crude Oil Pipeline, jointly known as the Bakken Pipeline system, which will transport oil from North Dakota to Patoka, Ill., and on to the Gulf Coast.

"They were just so adamant, for two years, that they had to go to Clearbrook, and had to go to Superior," Smith said. "It really blows up that argument about Superior being a critical part of the route."

Enbridge and Marathon invested about $800 million in the development of Sandpiper, including purchasing pipe, right-of-way acquisition and costs associated with the regulatory process, said Paul Eberth, Sandpiper project director.

Julie Fedorchak, chairwoman of the North Dakota Public Service Commission, which approved the project, said it's discouraging to see the project not proceed after the companies made that investment.

"That's stranded investment at this point. That's really hard for companies to weather and that creates a really difficult business environment in this country for these kind of infrastructure projects that are really vital to our economy," Fedorchak said, adding that pipelines are the safest way to transport crude oil.

Pipe that is currently stored along the route in North Dakota and Minnesota may be used for other projects or potentially sold, Eberth said.

The Dakota Access Pipeline, currently under construction in four states and projected to be in service by the end of the year, will transport 450,000 barrels per day.

Hundreds continue to protest the Dakota Access PIpeline north of the Standing Rock Sioux reservation in North Dakota, where the opposition has halted construction on the Missouri River crossing. The company has not indicated that the protests will affect the project timeline.

North Dakota's total pipeline capacity is now about 850,000 barrels per day and will expand to 1.3 million barrels per day in 2017 after the Dakota Access Pipeline is online, according to the North Dakota Pipeline Authority.

North Dakota oil production was recently less than 1.03 million barrels per day and is expected to plateau around 900,000 barrels per day in the coming months as a result of low oil prices.

Over the long term, however, Enbridge expects the Bakken will again have a need for additional pipeline capacity, Maki said.

"We're definitely a believer in the long run that you're going to see continued production growth in the Bakken," Maki said.

Attempts to reach members of the Minnesota Public Utilities Commission, the state body that regulates oil pipelines, were unsuccessful Thursday night.

Enbridge officials said their attention would now shift to working with Minnesota regulators on its proposed Line 3 replacement project "in a timely manner."

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