Enbridge to Boost Pipeline Capacity

Enbridge Energy Partners LP (EEP - Analyst Report) has filed a plan with the Minnesota Public Utilities Commission to increase capacity at its Alberta Clipper pipeline. The company will spend $40 million to upgrade three pumping stations at Viking, Clearbrook and Deer River to increase its overall capacity by 27%.

In May, the company announced its plans to spend $600 million in pipeline upgrades in the United States and Canada. The project was undertaken to carry more oil from Hardisty, Alberta to terminals in Wisconsin and Illinois.

Following the upgrade, the capacity of the pipeline will increase to 570,000 barrels per day from 450,000 barrels per day. The increased capacity will serve to meet North America’s need for a transportation pipeline to supply crude oil from the production regions in North Dakota and Western Canada.

Through this high capacity pipeline, refineries in Chicago, Detroit and Toledo, and Ohio will get more oil shipments. The upgrade will not require the replacement of an existing buried pipeline. At the time of the construction of the 1,000-mile Alberta Clipper three years before, Enbridge installed a pipe of a bigger diameter for future expansion.

Houston, Texas-based Enbridge Energy Partners LP, a master limited partnership (MLP), is engaged in the gathering, processing and transmission of natural gas and crude oil. The partnership is best known for its ownership of the Lakehead System, one of the world’s longest petroleum pipeline systems.

Enbridge could be affected by a number of global macro issues, which include sovereign debt risks, defaults on sovereign credits, and changes in the U.S. monetary and fiscal as well as tax policies. Additionally, an economic slowdown could impact the demand and price of crude oil that in turn could hurt its margins in its NGL, natural gas and other businesses. Intense competition from MLPs such as Kinder Morgan Energy Partners L.P. (KMP - Analyst Report) and Enterprise Products Partners L.P. (EPD - Analyst Report) is an added cause of concern.

Enbridge Energy has a Zacks #4 Rank (short-term Sell rating), with an unchanged long-term Neutral recommendation.