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U.S. Oil Shippers Want in on Keystone XL Pipeline

By Associated Press - Feb 4, 2014 at 3:07PM

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Northern producers have increasingly turned to shipping oil by train as the Keystone is debated.

BISMARCK, N.D. (AP) -- TransCanada Corp. says it has a growing list of U.S. oil shippers signing up to use a proposed connector to the proposed Keystone XL pipeline that would run from Canada to the Gulf of Mexico.

The Calgary-based company announced in 2011 that it secured five-year contracts to move crude from the oilfields of North Dakota and Montana via a proposed five-mile-long pipeline known as the Bakken Marketlink. The $140 million project, designed to carry 100,000 barrels of crude daily from the rich Bakken and Three Forks formations, would meet with the Keystone XL in Baker, Mont.

TransCanada spokesman Shawn Howard said Monday that the contracts, which are confidential, have since been renegotiated in anticipation of U.S approval of the long-delayed Keystone XL, which would be primarily used to transport crude from Alberta's oil sands to refineries in Oklahoma and Texas. It cleared a big hurdle last week when the State Department raised no major environmental objections to its construction.

"We have not lost customers," Howard said. "In fact, we have a waiting list."

TransCanada initially balked at allowing U.S. oil companies to tap into the Keystone XL but reversed its stance in 2010 after political pressure from officials in Montana and North Dakota, which has seen soaring oil production in the past few years and is now the nation's No. 2 oil producer behind Texas.

Howard said TransCanada now views the link to the states' oil fields "as a very important underpinning for the whole (Keystone XL) project."

When TransCanada first sought shipping commitments for the pipeline spur in 2010, North Dakota was producing about 342,000 barrels of oil daily. The state now puts out nearly 1 million barrels daily.

Northern producers have increasingly turned to shipping oil by train as the Keystone is debated. North Dakota oil began being shipped by trains in 2008, when the state reached its then-capacity for pipeline shipments of 189,000 barrels per day, said Justin Kringstad, director of the North Dakota Pipeline Authority. About 60% of the state's crude is currently being moved by rail.

Kringstad said TransCanada's Bakken Marketlink project remains a critical part of the state's ability to move crude to market.

"It's still important, no doubt," he said. "It improves long-term access to large refining markets," he said.

Howard said that producers using trains are expected to return to pipelines when they become available. They are "fully committed to moving that volume with us," he said.

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