Tallgrass Energy, Silver Creek announce crude transport joint venture
Tallgrass Energy Partners and Silver Creek Midstream announced that they have signed definitive documents to develop the Iron Horse Pipeline, a joint venture pipeline to transport crude oil from the growing Powder River Basin to Guernsey, Wyo. Iron Horse will connect Silver Creek's developing gathering system to the Tallgrass Guernsey Terminal, which is currently under construction, and then to Tallgrass's Pony Express crude pipeline system and other pipelines at Guernsey. Iron Horse and Pony Express intend to create a joint tariff to offer producers and marketers a single rate and direct access to the multiple refineries on Pony Express and to the Cushing, Okla. crude oil hub, from the PRB production zone. In addition to forming the joint venture, Tallgrass has agreed and signed definitive documents to sell its 50-mile PRB crude oil gathering system to Silver Creek. Tallgrass and Silver Creek expect to close the formation of the joint venture and the sale of Tallgrass Crude Gathering, LLC later this month. As part of the joint venture, Tallgrass has agreed to contribute approximately 40 miles of pipe from Labonte, Wyo. to Guernsey, Wyo. This pipe is currently owned by Tallgrass Interstate Gas Transmission and is undergoing abandonment from gas service. Tallgrass will be a 75% owner and will operate the approximately 80-mile, 16" pipeline, which consists of 40 miles of new build and the 40 miles of gas-to-oil conversion pipe. Silver Creek will own the remaining 25%. Iron Horse is anticipated to be in-service Q1 2019 with an expected initial capacity of about 100,000 barrels per day with significant available expansion capacity. After conversations with both producers and marketers in the PRB, the parties anticipate a significant amount of the Iron Horse's initial capacity will be contracted prior to the pipeline being placed into service, and depending on commitments obtained, capacity could be expanded above the 100,000 barrels per day currently planned. Tallgrass anticipates that it will invest approximately $150M into this initiative, including its proportionate share of the cost to construct the Iron Horse Pipeline and the new Tallgrass Guernsey Terminal, but excluding the proceeds from the sale of its PRB gathering system.