Houston-based Enbridge Energy Partners, L.P. (EEP) announced plans to spend $286 million to replace a portion of its disturbed Line 6B pipeline system, which ruptured last year. The venture, comprising the replacement of 75 miles of the pipeline in areas of Indiana and Michigan, is subject to regulatory approval.
Last July, Line 6B burst near Marshall, Michigan, spilling gallons of heavy crude oil into the Kalamazoo River. In the aftermath of the incident, Enbridge has already replaced 14 segments of pipeline covering nearly 1.7 miles in southeastern Michigan. Additionally, the partnership has set up a new line under the St. Clair River.
The latest capital investment will add to the previously announced $210 million for the pipeline recovery project this year. The partnership also aims to recover the restoration costs through Facilities Surcharge Mechanism from customers and stated that the work will be staged to curtail the adverse effect on shippers and refiners.
The project, which is slated to commence next year, includes 5 miles of pipeline downstream from each of the two pump stations in Indiana and three in Michigan, as well as 50 miles of pipeline downstream of the Stockbridge station and terminal, northwest of the Detroit metro area.
The Line 6B pipeline system, running from Griffith, Indiana, through Michigan to the international border at the St. Clair River, is a part of Enbridge’s Lakehead system, which distributes 670,000 barrels of oil from western Canadian oilfields to the U.S. Midwest and southwestern Ontario refineries on a daily basis.
Enbridge Energy Partners is engaged in the gathering, processing and transmission of natural gas and crude oil. The partnership is best known for its ownership of the Lakehead System, one of the world’s longest petroleum pipeline systems. This system is the U.S. portion of the main artery for the delivery of crude oil supply from Western Canada to refining centers in the Upper Midwest of the U.S. and Ontario in Canada.
However, we expect near-term results to be irregular owing to the spill costs and consequent regulatory penalties allied with last year’s oil spill episodes in pipeline 6B and 6A that are part of the company’s major Lakehead system.
Intense competition from MLPs such as Kinder Morgan Energy Partners L.P. (KMP) and Enterprise Products Partners L.P. (EPD) is an added cause for concern.
Our long-term Neutral recommendation remains unchanged and the company holds a Zacks #3 Rank, which is equivalent to a short-term Hold rating.
ENBRIDGE EGY PT (EEP): Free Stock Analysis Report
ENTERPRISE PROD (EPD): Free Stock Analysis Report
Be the first to comment