Enbridge, Marathon Agree to Buy $2 Billion Bakken Pipe Stake

Updated on
  • Link to eastern Gulf Coast strategic for customers: Enbridge
  • Sandpiper probably won’t advance now: Bloomberg Intelligence

Enbridge Inc. and Marathon Petroleum Corp. agreed to pay $2 billion for a minority stake in the Bakken Pipeline system, securing a way to transport crude from North Dakota to the eastern Gulf Coast sooner than planned.

Enbridge Energy Partners LP, a unit of Enbridge, and Marathon will acquire 49 percent of the holding company that owns 75 percent of the system from an affiliate of Energy Transfer Partners LP and Sunoco Logistics Partners LP, the companies said in statements on Tuesday. Enbridge will pay $1.5 billion for its 27.6 percent share of the network while Marathon will put up $500 million for its 9.2 percent.

The deal helps bridge a growth gap for Enbridge left by delays in its Sandpiper and Line 3 Replacement projects, which have been pushed back to 2019, according to Bloomberg Intelligence analyst Michael Kay. Sandpiper, another line out of North Dakota proposed by Enbridge and Marathon, probably won’t move ahead now, Kay said. The Bakken Pipeline System is under construction and expected online by the end of 2016.

“Sandpiper is probably now off the table,” Kay said. “They’re getting the growth from that area that they wanted through this.”

Bakken System

The Bakken system includes the Dakota Access Pipeline and Energy Transfer Crude Oil Pipeline. Dakota Access will run 1,172 miles (1,886 kilometers) from western North Dakota to Patoka, Illinois, and the Energy Transfer line 744 miles from Patoka to Nederland, Texas.

Costs are likely to rise for Sandpiper and the Line 3 Replacement projects, previously scheduled online in 2017 and 2018 respectively, amid delays caused by regulatory hurdles in Minnesota, Enbridge said earlier this year. Sandpiper, at an official cost of C$2.6 billion ($2 billion) would carry crude 616 miles from western North Dakota through Minnesota to northwestern Wisconsin. Through the C$7.5 billion Line 3 Replacement, Enbridge would replace all 1,031 miles of the system from Hardisty, Alberta, to Superior, Wisconsin.

Enbridge and Marathon are ending their transportation and joint venture agreements regarding Sandpiper and will evaluate the scope and timing of the project, Enbridge said in the statement on Tuesday. Graham White, an Enbridge spokesman, said in a phone interview that there may be demand for Sandpiper in the future, as production grows.

New Path

The Bakken line purchase will allow Enbridge to extend the reach of its existing liquids pipeline system for customers, by establishing joint tolls and a new path to the eastern Gulf Coast through its existing system, “a strategic priority,” the company said. It follows the startup of Enbridge’s Southern Access Extension, which was in service as of January, linking the company’s mainline terminals near Chicago to the storage hub in Patoka, Illinois.

While Marathon will be the primary shipper on the Bakken Pipeline System, the network may enable crude from as far away as Alberta to move to the Gulf Coast, White said.

Eastern Gulf

“They’ve been trying to get to the eastern Gulf for years. There’s far more refining there,” Steven Paget, an analyst at FirstEnergy Capital Corp. in Calgary, said in a phone interview. The deal may help improve the sustainability of Enbridge Energy Partners by allowing it to raise money cheaper in the future, Paget said.

Energy Transfer Partners jumped as much as 10 percent to $42.25, the highest since November. Sunoco Logistics gained as much as 7 percent.