Saddle Butte Pipeline LLC, a Durango, Colorado-based pipeline company, recently announced plans to build a pipeline connecting North Dakota's Bakken oil fields with a hub in Minnesota. Saddle Butte was formed in 2008 to develop greenfield gathering, processing and transportation infrastructure through the Midcontinent and Rocky Mountain regions.

High Prairie Pipeline LLC, a wholly owned subsidiary of Saddle Butte, announced its open season for the High Prairie Pipeline project on February 14, 2012.

"While oil production in the Bakken is currently averaging more than 500,000 barrels (bbl.) per day and is forecasted to exceed 1 million bbl. per day, North Dakota's pipe capacity has not kept pace," says John Early, president and chief executive of Saddle Butte.

In 2011 alone, oil production in the Bakken grew 66%. Bakken oil production could reach 750,000 bbl. per day in 2013 and reach 1 million in 2015. In fact, some Wall Street insiders see an eventual oil potential of some 3 to 4 million bbl. per day.

State and industry officials predict North Dakota's daily production rate is expected to surpass those of California and Alaska within a year, trailing only Texas. Yet, North Dakota has only one oil refinery, the Tesoro Corp. plant near Mandan. The Tesoro Mandan refinery began operations in 1954 and today has a capacity of 58,000 bbl. per day, and processes primarily sweet domestic crude oil from North Dakota.

The facility manufactures gasoline, diesel fuel, jet fuel, heavy fuel oils and liquefied petroleum gas. Refined products are trucked and railed from Mandan, and also shipped east via pipeline to supply the Jamestown area, eastern North Dakota and Minnesota.

"The High Prairie Pipeline is part of the solution to this problem and would provide much needed take-away capacity for the producers and shippers in the states' most productive counties," says Early.

Once operational, the new pipeline will provide an additional 150,000 bbl. per day of capacity to the key market hub at Clearbrook. The High Prairie Pipeline will complement the existing and recently announced expansions of export capacity from Clearbrook to refineries in the Midwest and the Gulf Coast.

Currently, several 110-oil tank cars trains transport oil from three Burlington Northern Santa Fe LLC terminals, but these trains alone cannot carry sufficient quantities to meet refining demand. A new pipeline system will move larger quantities and reduce transportation costs.

Project stats

Saddle Butte's plans for the pipeline call for a 16-inch diameter pipeline that will stretch 450 miles from its origination point near Alexander, North Dakota, in McKenzie County, go past Devils Lake and Grand, to end in a termination point near Clearbrook, Minnesota, in Clearwater County. The pipeline's origination point is in McKenzie County, which is the second highest oil producing county in the state.

High Prairie is also proposing to construct two lateral pipelines—a 17-mile lateral originating at Johnsons Corner, North Dakota, in McKenzie County and an 8-mile lateral beginning near Robinson Lake, North Dakota, in Mountrail County. Altogether, the proposed system could carry more than one-fourth of the current crude production in the state.

Greg Ward, vice president and general counsel for Saddle Butte, says, "The current plan is for the pipeline to carry 150,000 bbl. per day. That is the target capacity. If bids come in requesting more capacity, the pipeline size could increase. We would consider a 20-inch diameter pipeline as appropriate."

Meanwhile, the company has not fully started in the permitting process. "We have made preliminary contacts with several of the regulatory agencies at this time," explains Ward. "We have spoken with several of the regulators both in North Dakota and in Minnesota. We also spoke with the Federal Energy Regulatory Commission to provide advance notice of the project. We won't start the actual permitting process until after the open season." (At press time, the open season was expected close on March 16.)

Overall, the pipeline is a straight-line shot, with about 90% of the pipeline following existing utility and roadway corridors to minimize the pipeline's footprint. The project will employ about 2,500 people during its six-month construction phase.

The High Prairie Pipeline will enhance Saddle Butte's existing energy infrastructure in North Dakota which includes over 200 miles of gas and crude oil pipelines, a gas processing plant and crude oil terminals.

Comments