Publicly traded energy master limited partnership, NuStar Energy L.P. ( NS - Analyst Report ) recently declared the start of a binding open season by its subsidiary NuStar Logistics, L.P. for its proposed Niobrara Falls project.

As part of the project, new crude petroleum pipelines would be constructed in the Niobrara Shale. This pipeline will be connected to NuStar’s existing petroleum-products pipeline from Denver to McKee, Texas. The pipeline would then be transformed to a crude oil service, reversed and then attached to the NuStar Wichita Falls 14 Pipeline.

The pipeline will transport crude petroleum from the Niobrara Shale near Platteville and Watkins, Colorado to Wichita Falls, Texas.

The proposed project would transport Permian and Granite Wash crude petroleum to NuStar’s Dixon, Texas Tank Farm so that it can be delivered to other destinations. This system will also carry petroleum goods to refineries in Texas, Colorado and Oklahoma.

It is likely that this upcoming project would also be connected to Sunoco Logistics Partners, L.P.’s ( SXL - Analyst Report ) Permian Express Phase I project at Wichita Falls, Texas. It is expected that this project would be in service from the first quarter of 2014.

The binding open season is scheduled to close on November 15, 2012.

NuStar – which was spun off from the U.S. refiner Valero Energy Corp. ( VLO - Analyst Report ) in 2006 – currently retains a Zacks #3 Rank (short-term Hold rating). We are also maintaining our long-term Neutral recommendation on the unit.

We like NuStar Energy for its diversified asset base and robust distribution-growth prospects. A strong pipeline of organic growth projects and contribution from acquisitions provide the partnership with an above peer-group average distribution coverage ratio.

However, over the last few years, NuStar has consolidated its business through a combination of organic efforts and accretive acquisitions. We believe the higher operating expenses associated with this expanded asset base may lead to reduced returns going forward.