Saddlehorn, Grand Mesa combine DJ-basin crude pipelines

Saddlehorn Pipeline Co. LLC is combining projects with Grand Mesa Pipeline LLC for construction of a 20-in. OD undivided joint interest pipeline beginning about 20 miles north of Saddlehorn’s Platteville, Colo., origin at a junction near Grand Mesa's Lucerne, Colo., starting point. The pipeline will deliver various grades of crude oil from the DJ basin to storage in Cushing, Okla.

Saddlehorn and Grand Mesa, previously competing projects, will share costs for the 340,000-b/d pipeline, currently under construction. Saddlehorn will own 190,000 b/d of capacity and Grand Mesa, 150,000 b/d. The two companies will be responsible for their own commercial activities, including customer relationships, contract terms, and tariff structure.

Saddlehorn has the option to expand capacity of the pipeline to more than 450,000 b/d in the future at its sole discretion and cost. Saddlehorn would own all incremental capacity from any expansion.

Grand Mesa will retain ownership of previously acquired pipeline easements from Lucerne to Cushing for potential future development of transportation projects involving petroleum commodities other than crude and condensate. Crude or condensate transportation using these easements would require Saddlehorn’s consent and participation.

Saddlehorn will own origin points at Platteville, including 1 million bbl of storage, and Carr, Colo., as well as the pipeline segment from Carr to the Lucerne junction. Grand Mesa will own origin points both at Lucerne and Riverside, Colo., as well as the pipeline segment between Lucerne and Riverside.

Saddlehorn is owned 40% by Magellan Midstream Partners LP, 40% by Plains All American Pipeline LP, and 20% by Anadarko Petroleum Corp. Grand Mesa is owned 100% by NGL Energy Partners LP.

Magellan is serving as construction manager and operator of the pipeline system. Saddlehorn expects to spend about $650 million for its share of the undivided joint interest pipeline and the additional assets it will own, compared with previous spending estimates of as much as $950 million for a comparable project scope. Once in service, pipeline operating costs will be allocated to Saddlehorn and Grand Mesa based on their proportionate ownership interests and throughput.

Pipeline installation began in early October for the Platteville-to-Cushing segment of the pipeline, expected to be operational mid-2016. Right-of-way acquisition is currently in progress for the Carr-to-Platteville segment, expected to be operational fourth-quarter 2016.

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