Enbridge still needs final 'Alberta Clipper' permits on U.S. side   5/13/2009 by Beth Bily

The construction industry is hurting as a whole, but Enbridge’s pipeline expansion project is poised with a $1.5 billion infusion for this region. The massive project also would put thousands of construction workers on the job this summer.

Houston-based Enbridge plans to complete the U.S. portion of its “Alberta Clipper” as well as some portions of its “Southern Lights” project this year. The construction is part of a system of three interconnected pipeline systems designed to transport petroleum products from the Alberta Oil Sands to refineries in the Midwest, including Murphy Oil in Superior. The system also will transport diluents (necessary to thin the heavy Canadian oils) from Chicago to Alberta.

Enbridge doesn’t have all its ducks in a row just yet. Some final permitting for 2009 projects is still needed at the federal level and in the state of Wisconsin. The projects also face a challenge in federal court by the Minnesota Center for Environmental Advocacy, which asserts the Minnesota Public Utilities Commission incorrectly approved need for the pipeline expansion last year. The environmental group claims the oil isn’t needed and extensive processing from the Oil Sands produces more pollution than is required in the production of traditional petroleum products.

Despite these hurdles, Enbridge spokeswoman Denise Hamsher predicts a mid-summer construction start.

Project profile

The Alberta Clipper is a 990-mile, 36-inch diameter crude oil pipeline between Hardisty, Alberta and Superior. Minnesota construction on that project in 2009 would span 285 miles across 13 counties. The U.S. portion of the pipeline carries an estimated $1.2 billion price tag.

The summer construction plan also includes $300 million in work in the U.S. on Southern Lights, which will ultimately transport light hydrocarbons, or diluents, which thin the heavy oils found in the Alberta Oil Sands.

Overall costs of Enbridge’s pipeline expansion is estimated at nearly $8 billion. When completed, the expansion project will boost capacity by as much as 1.2 million barrels per day.

If obstacles to the project are cleared, most construction for the U.S. portion of the Alberta Clipper will take place in the 2009 season, with some restoration work next year. The Enbridge schedule anticipates Alberta Clipper in service by mid-2010. The Southern Lights project from Chicago to Clearbrook, MN would be operational by the end of next year.

A major project on this scale would be welcome in much of the region. Hamsher estimates 2,000 on the job at its peak, later this year. In Itasca County, the epicenter of the Minnesota portion of the Alberta Clipper project, the business community views the prospect of incoming workers and dollars as a bright spot.

“It’s certainly going to be a welcome influx. It’s the kind of money we want, it’s new money coming in. This (construction) will have just as much of an economic impact as would a manufacturing facility,” said Diane Weber, interim president of Itasca Economic Development Corp.

The market

If built as scheduled, the project could at least briefly sail into choppy waters. Crude prices are hovering far below year-ago levels. In April, U.S. crude prices were below the $50 per barrel mark. Industry analysts contend oil sands production needs sustained pricing above $50 to $60 per barrel.

Hamsher acknowledged a less than favorable short-term market outlook, but Enbridge appears to be betting on the return of higher oil prices. “With lower oil prices there are new projects that aren’t starting, but we’re not seeing any pull back on projects already underway,” she said.

Even the short-term outlook for oil prices is looking up. In April, the U.S. Energy Information Administration projected oil prices would average $52 per barrel this summer. The expected modest price increase reflects a slight increase in demand, which can be largely attributed to lower prices.

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