Bow River Pipeline Expansion

June 2009 Vol. 236 No. 6

The Inter Pipeline Fund plans to invest approximately $72 million to expand oil delivery capabilities on the Bow River Pipeline system.

The project will allow customers, for the first time, to ship segregated crude oil streams south from Hardisty, Alberta to refining markets in Montana. In support of its investment, Inter Pipeline has received shipping commitments to transport 30,000 bpd of segregated crude from Hardisty under a seven-year take-or-pay contract.

The Bow River Pipeline system gathers oil production in southern Alberta for delivery north to the oil storage and marketing hub at Hardisty and south to interconnecting export pipelines near the Montana border. The existence of multiple mainline transmission pipelines and flexible pumping configurations allow oil to flow in both directions.

In 2008, the Bow River system delivered 26,000 bpd north to Hardisty and 89,500 bpd south to the Montana border. Southbound shipments consisted of 62,000 b/d of locally gathered Bow River crude oil and an additional 27,500 b/d of oil sourced from the Hardisty oil storage hub. Southbound deliveries on the Bow River system are currently shipped as a single, commingled blend of oils.

The Bow River expansion will allow crude oil grades sourced at the Hardisty storage hub to be shipped south as a distinct, segregated stream. This will give refining customers access to multiple grades of oil available at Hardisty without product commingling with the locally gathered Bow River oil stream.

Revenue is expected to commence upon completion of construction and commissioning activities in the first quarter of 2010.

The expansion of southbound delivery capabilities will involve the construction of 84 miles of new pipeline and related facility modifications at an estimated capital cost of approximately $72 million. This investment is expected to generate $16.5 million per year in incremental cash flow, or approximately $0.04 per unit annually.

Funding for the project will come from Inter Pipeline’s existing committed credit facility. At year-end 2008, this facility had $325 million of credit capacity available with a renewal term that extends through 2012.