Largest pipeline yet in North Dakota delayed a year, Enbridge cites Minnesota permit issues

A Canadian company that wants to build the largest oil pipeline yet from western North Dakota's booming oil patch is delaying the project for at least a year due to permitting problems in Minnesota.

Calgary, Alberta-based Enbridge Energy Partners LP disclosed the delay of the $2.6 billion Sandpiper pipeline in a filing Tuesday with the U.S. Securities and Exchange Commission.

Enbridge is trying to build the 612-mile pipeline to carry 225,000 barrels of oil a day through northern Minnesota to a hub in Wisconsin. The pipeline was expected to be ready in early 2016, but because of a "longer than expected permitting process" in Minnesota, it likely won't be in service until 2017, Enbridge spokeswoman Katie Haarsager said.

She said the company wasn't sure about the financial repercussions, and that Enbridge secured shipping contracts for the pipeline last spring.

Minnesota regulators have requested an expanded study of the environmental impacts of six possible routes of the pipeline that were suggested by critics of Enbridge's planned route, which crosses many rivers, lakes and wetlands. Enbridge says the alternative routes would be longer and more costly, and most don't end in its intended destination of Superior, Wisconsin.

The delay also will affect North Dakota oil producers, though it shouldn't have an immediate impact on production, according to North Dakota Pipeline Authority Director Justin Kringstad.

"Projects like this are vital to move our crude safely to markets throughout the U.S.," Kringstad said.

North Dakota — the nation's second-leading producer of oil behind Texas — has more than doubled its oil production in the last two years, to more than 1 million barrels a day. A barrel is equivalent to 42 gallons.

But due to the lack of pipeline capacity, about 70 percent of the state's daily oil production is being shipped by rail.

Oil trains carrying North Dakota crude have been involved in several major accidents during the last 18 months, including an explosion in Lac-Megantic, Quebec, that killed 47 people. Other trains carrying North Dakota crude have since derailed and caught fire in Alabama, Virginia and North Dakota.

The pipeline — with an expected capacity equal to about four oil trains daily — is the biggest project yet to come before state regulators to move oil from the rich Bakken and Three Forks formations in western North Dakota. State regulators approved the construction of North Dakota's portion of the pipeline in June.

"Obviously, we've done our part," said Brian Kalk, who heads the North Dakota Public Service Commission. "Now it's up to Minnesota."

Last week, Minnesota Gov. Mark Dayton sent a letter to North Dakota Gov. Jack Dalrymple asking for additional safety measures for oil trains leaving North Dakota.

"Everybody is complaining about train safety, and now we've lost a year," said Ron Ness, president of the North Dakota Petroleum Council, a group that represents more than 500 companies working in the state's oil patch.

"This is a great project and we're ready to go. This comes at the same time the Minnesota governor is complaining about trains."