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Koch Halts Plans for Pipeline to Illinois From Bakken

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Jan. 22 (Bloomberg) -- Koch Pipeline Co. called off plans to build a 250,000-barrel-a-day crude line to Illinois from North Dakota’s Bakken formation, where a shale boom has helped lift domestic production to the highest in a quarter-century.

The indirect subsidiary of Koch Industries Inc., one of the largest private companies in the U.S., is no longer developing the so-called Dakota Express pipeline, Jake Reint, a Koch spokesman, said by e-mail yesterday. He didn’t provide a reason for the decision. The Wichita, Kansas-based company was scheduled to hold a 45-day open season to gauge interest from potential shippers on the line in July.

“The non-binding open season for the Dakota Express pipeline is no longer being pursued,” Reint, based in Wichita, said in the e-mail.

Hydraulic fracturing and horizontal drilling have helped producers reach shale deposits of oil across the middle of the U.S. from North Dakota to Texas, sending domestic output to the highest level since 1988. Koch proposed the Dakota Express line to help get the growing glut of oil to refiners in the U.S. Midwest. It was considering a extension to the Gulf Coast.

Bakken oil for delivery at Clearbrook, Minnesota, was unchanged relative to the U.S. benchmark crude West Texas Intermediate at a discount of $2.30 a barrel, data compiled by Bloomberg at 1:43 p.m. New York time show. The oil has narrowed the gap against WTI from $7.50 on Dec. 31.

Koch would have used its existing Wood River pipeline, which has delivered crude to refineries in the Minneapolis-St. Paul region, to complete the Dakota Express project, the company said in June. While the Wood River line “remains operable and in good condition,” Koch stopped accepting nominations on it in February 2013, Reint said yesterday.

To contact the reporter on this story: Lynn Doan in San Francisco at ldoan6@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net