Enbridge plans pipeline to U.S. east coast; Part of effort to prevent oil sands output from flooding any single market

David Ebner, The Globe and Mail, January 17, 2007 - Enbridge Inc. wants to move Canadian oil sands output all the way to the Philadelphia region, and is working on early plans for a $1.4-billion (U.S.) pipeline that would carry domestic crude to the east coast of the United States for the first time.
The plan is part of a larger effort by Enbridge to build a network of new oil pipeline connections in the United States so that expected increases in oil sands production do not flood any single market.
The pipeline to Philadelphia or nearby New Jersey is to be quietly unveiled at an oil sands conference today in Calgary in a presentation by Enbridge titled, “Access to markets — progress and plans.”
The connection could be in service as early as 2010, the presentation states, with the pipeline carrying 300,000 barrels a day. The link would begin in the Chicago region, which is now the main destination for Canadian oil.
Enbridge considers the project a “potential initiative,” describing it as “very preliminary,” according to company spokesman Glenn Herchak.
“Because of the increasing growth of the oil sands, we've seen some market interest [from oil producers] in the potential for new pipeline capacity into the [eastern U.S.] region,” Mr. Herchak said.
The company has also had initial discussions with refiners to handle the oil, but Mr. Herchak wouldn't identify them.
One potential customer would be Sunoco Inc., which owns the largest refinery in the region, a facility in Philadelphia that can process 330,000 barrels a day.
ConocoPhillips Co. has a 230,000-barrel-a-day refinery in New Jersey near New York and a 185,000-barrel-a-day operation near Philadelphia.
The Philadelphia connection is one of two big new pipeline concepts Enbridge is pursuing. Last July, it said it was looking at a $3.6-billion, 400,000-barrel-a-day line to connect Alberta with Texas. The idea remains in the early stages, Mr. Herchak said.
The new ideas to move Canadian oil to different areas of the United States follow the stall that hit the proposed $4-billion (Canadian) Gateway pipeline, which would move oil sands crude from Edmonton to the west coast of British Columbia for export to Asia. After significant opposition from aboriginal groups along the route, as well as slow talks between refiners in China and Canadian producers, Enbridge was unable to get long-term shipping contracts signed.
The company has pushed back its in-service goal for Gateway to the 2012-2014 time frame from 2010.
To support what Enbridge is calling “a period of unprecedented organic growth,” the company yesterday announced a deal with underwriters to sell $523.1-million of new equity, pricing 13.5 million shares at $38.75.
The offering was announced after the market closed yesterday, with Enbridge shares ending the day at $39.14 on the Toronto Stock Exchange, near an all-time high of $41.48 reached in December.
Enbridge, led by chief executive officer Patrick Daniel, said it wants to finance its projects “in a prudent manner,” adding that selling assets to income trusts to raise funds “is [not] realistic in the near term due to market uncertainty.”
Among Enbridge's list of plans are a $1.8-billion (U.S.) line called Alberta Clipper to add oil export capacity from Alberta to Wisconsin, and a $1.3-billion project called Southern Lights to carry a very light oil called diluent to Alberta from Chicago. Southern Lights is under construction. Diluent is mixed with raw bitumen from the oil sands so it can move through a pipeline to a refinery for processing.
Enbridge yesterday also said its board of directors has decided to increase the quarterly dividend by 7 per cent, making the annual rate $1.23 (Canadian), up from $1.15.