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Kinder Morgan Nears Decision on $3.8 Billion Canadian Pipe

Kinder Morgan Energy Partners LP, the second-biggest U.S. pipeline operator, said it will decide by the end of March whether to move ahead with a $3.8 billion expansion of its Trans Mountain oil-sands pipeline after receiving ample interest from shippers.

Trans Mountain is the only pipeline currently carrying crude and refined products from Alberta’s oil-sands region to Canada’s Pacific Coast. Oil from the pipeline can be shipped to Asia through the port of Vancouver. Kinder Morgan received enough interest from potential shippers to double the line’s capacity to 600,000 barrels of crude a day, Kinder Morgan said today in a statement.

“The final decision on the proposed project will be known by the end of the first quarter,” Kinder Morgan Canada president Ian Anderson said in the statement.

The Trans Mountain line is the most viable option to ship Canadian crude to foreign markets because it would follow existing right-of-way and may encounter less resistance from landowners and environmental groups, Chief Executive Officer Richard Kinder said at a Jan. 25 analyst conference in Houston.

TransCanada Corp.’s proposed Keystone XL Line, which would connect to the U.S. Gulf Coast, was rejected by President Barack Obama earlier this year because of environmental concerns, and TransCanada must reapply for approval of a new route. Enbridge Inc.’s proposed Northern Gateway pipeline, which would extend from the oil-sands region to Kitimat, British Columbia, is facing more than a year of regulatory hearings amid opposition from aboriginal groups.

Trans Mountain Scrutiny

Trans Mountain also faces scrutiny from environmental groups, who’ve said that an expansion would increase the risk of an oil spill along the line’s route and questioned whether Vancouver’s harbor can safely accommodate more tanker traffic.

Opposition to the other pipeline projects may improve Kinder Morgan’s chances when it applies for regulatory approval for Trans Mountain, Bradley Olsen, an analyst with Tudor Pickering Holt & Co. in Houston, said in an interview.

A consensus is forming that, “Canada will at some point have a pipeline outlet to the West Coast,” said Olsen, who rates Kinder Morgan’s units “trim” and doesn’t own any.

“It becomes a question of, do you want a completely new pipeline or do you want to expand an existing pipeline?”

Canadian Prime Minister Stephen Harper has said connecting the oil-sands regions to foreign markets is one of his government’s top priorities. Canada’s oil production is expected to grow to 3.5 million barrels a day in 2015, from 2.9 million a day in 2011, according to the Canadian Association of Petroleum Producers.

Enterprise Products Partners LP is the biggest U.S. pipeline operator.

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