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Enbridge mulls Midwest rail terminal to ease pipeline congestion

CALGARY, Alberta, July 22 (Reuters) - Canada's largest pipeline company Enbridge Inc may build a 140,000 barrel per day unit train unloading terminal in Pontiac, Illinois, to relieve congestion on its crude oil export network.

The terminal would be able to handle two unit trains a day and could be in service by the first quarter of 2016, according to a filing with the Federal Energy Regulatory Commission.

Pontiac is the origin of Enbridge's new 600,000 bpd Flanagan South pipeline to Cushing, Oklahoma, and the rail terminal would allow shippers to bypass congestion on pipelines in the Canadian portion of Enbridge's export network.

Enbridge Energy Partners LP, the company's U.S. arm, is also petitioning to build a new receipt point on the network, known as the Lakehead system, at Flanagan Illinois, which would allow crude to be loaded from rail cars onto Flanagan South.

Enbridge spokesman Graham White confirmed an affiliate of Enbridge is exploring the potential to establish a rail unloading facility near Pontiac. He added the project is still in development.

"It is expected to provide regional refineries access to growing supplies of crude oil from North American producers and to also provide relief during periods when upstream apportionment prevents those barrels from moving via an all-pipeline route," he said.

Apportionment, when the amount of crude shippers can transport on a pipeline is rationed, is a regular source of frustration for Canadian crude traders, who are often left scrambling to sell barrels in Alberta as a result.

Enbridge has been rushing to expand its 2.5 million bpd export network as surging production from the oil sands outpaces pipeline capacity, creating crude bottlenecks in Alberta and trading at a discount to U.S. grades.

But construction schedules and unexpected delays in securing a presidential permit for the expansion of the cross-border Alberta Clipper pipeline means once Flanagan South starts up later this year, there will be mismatched capacity between the southern and northern parts of the network.

Traders in Calgary have warned that choke points could emerge upstream in Canada, potentially leaving unused capacity on the downstream part of the system.

Enbridge said the proposed rail terminal would help bridge that temporary gap.

"Enbridge now foresees the possibility that there will be a temporary period during which the downstream pipelines will have somewhat greater take-away capacity at Flanagan than the upstream delivery capacity available to serve Flanagan," the company said in its FERC filing.

(Additional reporting by Catherine Ngai in New York and Kristen Hays in Houston. Editing by Andre Grenon)