A joint venture has been formed by Tallgrass Energy Partners and Silver Creek Midstream to develop the Iron Horse 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.
The transaction gives Silver Creek an immediate presence in the PRB and provides a strategic footprint as it constructs additional gathering to cover the core of the PRB. The acquired gathering system alongside the newly constructed Silver Creek gathering system will deliver into the Silver Creek Midway Terminal, which will deliver barrels to Iron Horse. As a result of the acquisition and announced projects, Silver Creek will be positioned as the preeminent crude oil gathering company in the PRB.
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, LLC, 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.
12th Feb 2018