Two Minnesota refineries resist pipeline charge

A Canadian pipeline company's plan to add a surcharge to all North Dakota oil piped into Minnesota has drawn objections from key energy interests.

Two Twin Cities oil refineries and others are protesting Enbridge Energy's plan to add the surcharge, which would pay for an additional $2.5 billion pipeline to carry even more oil.

Calgary, Alberta-based Enbridge this month proposed the commercial terms for the 618-mile "Sandpiper" pipeline to bring more oil from western North Dakota, across Minnesota to a terminal in Superior, Wis.

But the owners of refineries in Rosemount and St. Paul Park that rely partly on North Dakota crude oil have told federal regulators that they oppose the deal. The deadline for comments to the Federal Energy Regulatory Commission was Tuesday.

The major complaint: All oil shipped from the Bakken fields into Minnesota would pay a $1.45 per barrel surcharge, even if it didn't travel on the new line to Superior. Another concern is that the new pipeline -- designed to eliminate a bottleneck in northern Minnesota -- may be not be fully utilized if other rail and pipeline projects are built in North Dakota.

"Flint Hills has never opposed paying for its fair share of the cost of expansion," the owner of the Rosemount refinery said in its filing. "But Flint Hills does oppose being forced to insulate the pipeline from the risk of underutilization of new capacity designed largely ... to serve new markets connected to other pipelines."

The St. Paul Park Refinery, owned by Northern Tier Energy, alleged that Enbridge's existing North Dakota pipeline already is making too much money -- 18 percent over the cost of service. It also said Enbridge's surcharge is based on an "unjustified" 15-year accelerated depreciation and would "aggravate the harm" to interests such as the refinery.

Northern Tier also has 166 company-operated and 67 franchised SuperAmerica stores, which it acquired with the refinery from Marathon Oil Corp. in 2010. Northern Tier and Flint Hills jointly own a pipeline from Clearbrook to the Twin Cities that is the major source of their crude oil.

Enbridge officials were not immediately available to comment Wednesday. The company has argued that all oil shippers stand to gain from the project because it will end the bottleneck on an existing North Dakota-Minnesota pipeline. Earlier, 15 shippers signed letters in support of the project.

North Dakota officials, including the governor, also have supported the Sandpiper line, which would carry 225,000 barrels per day by 2016. The state, now the No. 2 oil producing state behind Texas, pumped a record 728,494 barrels of crude in September.

"Pipeline capacity has been unable to keep up with the rapid pace of North Dakota crude oil production," Gov. Jack Dalrymple, Attorney General Wayne Stenehjem and Agriculture Commissioner Doug Goehring said in letter to regulators last week. "North Dakota has experienced significant price differentials for Bakken crude oil thus resulting in lower payment to royalty owners, producers and to our state."

Three other companies also filed protests with the Federal Energy Regulatory Commission this week, including High Prairie Pipeline, which is proposing a separate pipeline across North Dakota to Clearbrook, Minn., a terminal and distribution point for Bakken and Canadian crude.

High Prairie has a claim pending before federal regulators alleging that Enbridge discriminated against the company by not granting it an interconnection to the Clearbrook terminal. Enbridge has denied it has treated High Prairie unfairly.

In its plan for the Sandpiper line, Enbridge would bypass Clearbrook's massive tank farm and send oil straight to Superior, where it could be shipped east or south via other Enbridge pipelines.

High Prairie, in its protest this week, said that would limit access in and out of Clearbrook, resulting in "balkanization" of the pipeline system. Five other Enbridge pipelines run from Clearbrook to Superior.

"It is further example of Enbridge flexing its monopoly power and controlling the market," Greg Ward, general counsel for High Prairie, said in an interview.

As those two companies battle over pipelines to Minnesota, another crude oil pipeline proposed by ONEOK Partners of Tulsa, Okla., has been dropped. The 1,300-mile Bakken Crude Express Pipeline aimed to carry 200,000 barrels per day from North Dakota and Montana to a terminal in Cushing, Okla.

On Tuesday, the company said that it didn't get enough commitments from shippers to use the proposed pipeline.

David Shaffer • 612-673-7090 @ShafferStrib