North Dakota Governor Jack Dalrymple had words of thanks and praise for the oil and gas pipeline industry during the recent Governor's Pipeline Summit, according to a report by OilOnline Press. At the summit, representatives of Enterprise Products Partners (EPD 0.56%) announced a proposal to build a new 200,000 barrel per day pipeline from western North Dakota to the oil trading hub near Cushing, Oklahoma, prompting a commendation from the Governor. He went on to praise several other projects as well, including the Sandpiper oil pipeline planned by Enbridge Inc (ENB 1.41%).
North Dakota is booming
The report quoted the Governor as saying, "Pipelines are essential to the safe and efficient shipment of North Dakota's oil and gas resources," in a possible reference to growing concerns regarding oil shipments via rail.
North Dakota is a growth center for the pipeline industry. The energy industry has invested more than $9.5 billion in infrastructure in North Dakota since 2007. This year, the state's crude oil pipeline capacity could reach 738,000 barrels per day from only 286,000 five years ago. And by late 2016, proposed projects could increase the oil takeaway capacity to about 1.4 million barrels per day.
Enterprise steals the show
A large portion of that takeaway could come from Enterprise Products Partners, which has grown its asset base from $715 million to $41 billion since its IPO in 1998.Enterprise boasts 51,000 miles of pipeline, storage capacity for 200 million barrels of liquid, and up to 14 billion cubic feet of natural gas storage. It operates 24 natural gas processing plants, 22 fractionators, several offshore platforms, and numerous boats and barges.
Courtesy Enterprise Products Partners
The proposed 200,000 barrel per day pipeline that the company announced during the summit is a logical next step in the growth of its pipeline network. As the map shows, the network does not yet extend into North Dakota and its massive Bakken shale region.
More good news for Enbridge
Enbridge, another major attendee of the summit, is the general partner of Enbridge Energy Partners (EEP), a master limited partnership, or MLP. According to company materials, Enbridge Energy Partners is currently the largest pipeline transporter of oil from western Canada and North Dakota's Bakken formation. It transports about 17% of total U.S. oil imports while its natural gas assets deliver approximately 2.5 billion cubic feet per day.
A day after the North Dakota summit, Enbridge Energy Partners announced that the state's Public Service Commission had issued a permit approving its Sandpiper Project.
Courtesy Enbridge
The permit represents a key milestone in the project, allowing construction to begin as early as July 1, 2014. A subsidiary of Marathon Petroleum Corporation provided partial funding for the project, and will hold a 27% interest in the pipeline upon completion in 2016.
The 616-mile pipeline project will carry 225,000 barrels of oil per day from Beaver Lodge Station, located south of Tioga, North Dakota, to Clearbrook, Minnesota. From there, the pipeline will transport 375,000 barrels per day to an affiliated Enbridge terminal in Superior, Wisconsin for transfer to other pipelines leading to refineries in the U.S. and eastern Canada.
"Enbridge and Marathon Petroleum are making a $2.6 billion investment in energy infrastructure with this project alone, meaning good-paying jobs, an economic boost for local communities during construction and significant, long-term tax contributions. In addition, Sandpiper will help alleviate rail congestion and reduce strain on roads and highways by carrying the equivalent of more than 4,000 trucks or 2,000 rail cars every day," said Mark Maki, president of Enbridge Energy Partners.
This news comes on top of a recent conditional approval of Enbridge's Northern Gateway Project by the Canadian federal government. This project, which extends the Enbridge pipeline network west to Canada's Pacific coast, would transport 525,000 barrels per day of oil for export, while importing 193,000 barrels per day of condensate.
Should Fools rush in?
Enterprise has solid financials, with growing revenues, steady margins, and a reasonable debt load. Both Enbridge and Enbridge Energy Partners have seen strong revenue and earnings growth over the past year, although margins are a bit thin. Investors seeking tax-advantaged current yield can hold the MLPs, while others may find the corporate GP more suitable.
Either way, one thing these companies have going for them is a growing presence in North Dakota. Keep an eye out for midstream energy companies announcing projects in this dynamic, industry-friendly state.North Dakota has more to offer than just the Bakken shale region. It has the right attitude.
