Enbridge delays two pipelines, cuts 2016 CapEx

HOUSTON — Regulatory delays of two of Enbridge Energy Partners pipelines will help the company cut its 2016 capital budget by about 20 percent, executives said Wednesday.

The Houston-based pipeline company, whose parent Enbridge is based in Alberta, said the Sandpiper Pipeline and Line 3 Replacement project will likely be pushed back until 2019. The later in-service date means Enbridge can defer some of costs required to build the lines.

Several other midstream companies have also trimmed their 2016 spending. Cheap oil helped make accessing capital markets more difficult, and pipeline companies have had to carefully balance spending on new pipelines, dividends and maintaining healthy debt levels.

Enbridge said it expects to spend about $900 million on new pipelines, expansion projects and maintenance in 2016, down about 20 percent from the $1.14 billion spent in 2015.

The Sandpiper and Line 3 Replacement projects are still a significant portion of that investment. Both are projected to cost a total of $2.6 billion over several years.

In 2015, Enbridge budgeted a $195 million investment in the Sandpiper and $65 million for the Line 3 Replacement. In 2016, Enbridge said it expects to hold the respective costs to $85 million and $185 million, with some of the investment shifted into later years.

Enbridge Energy Partners also said it was willing to allow Alberta-based parent company Enbridge Inc. to fund a larger share of the Line 3 Replacement Project in exchange for a greater interest in the completed pipeline. In the $900 million 2016 budget that Enbridge showed investors Wednesday, Enbridge Inc. had taken on an additional $350 million of the project, though executives stressed that number was preliminary.

The Sandpiper Pipeline is a joint venture between Enbridge Energy Partners and Marathon Petroleum that would carry light oil from North Dakota’s Bakken to an existing Wisconsin pipeline hub, where the crude could connect to other markets. The Line 3 Replacement project will re-lay a 1960s pipeline running from Edmonton, Alberta to Superior, Wisconsin, allowing Enbridge to boost its capacity to nearly double capacity to 760,000 barrels per day.

The Sandpiper Pipeline was originally expected to be up and running by 2017, and the Line 3 Replacement was originally slated for 2018. Both lines are now expected to be operating in 2019.

In an announcement accompanying their 2015 fourth-quarter earnings, Enbridge executives said the delays were due to decisions by the Minnesota Public Utilities Commission, which regulates pipelines.

“The process set out in the orders is likely to delay the planned start of construction, which would cause a shift in the in-service dates to early 2019 and increase costs for the [Line 3 Replacement] and Sandpiper projects,” executives said in a statement.