UPDATE 3-Enbridge CEO says Wrangler line likely to proceed
* Cushing-to-Gulf oil pipeline winning shipper interest
* $2 bln line could be in service by mid-2013
* Enbridge able to handle much of Keystone XL volumes
CALGARY, Alberta, Nov 9 (Reuters) - Enbridge Inc said on Wednesday it will likely proceed with its 800,000 barrel per day Wrangler pipeline from the Cushing storage hub in Oklahoma to Gulf of Mexico refineries as the U.S. State Department raised the threat of a lengthy delay in TransCanada Corp's Keystone XL pipeline.
Pat Daniel, Enbridge's chief executive, said his company and partner Enterprise Product Partners have received strong interest from would-be shippers on the line.
While Enbridge is still discussing terms and conditions with shippers, it said there is enough interest for both Wrangler and an expansion of its line from Flanagan, Illinois, to Cushing, to proceed.
"We expect to conclude those discussions with sufficient volumes to proceed with both segments of the line," Daniel said on a conference call.
The $2 billion Wrangler line could be in service by the middle of 2013, offering relief to bloated storage levels at the Cushing hub, the pricing point for the benchmark West Texas Intermediate crude contract on the New York Mercantile Exchange.
Canada is the largest oil exporter to the United States and rising shipments from the oil sands are a key reason why Cushing is overstocked.
TransCanada's controversial Keystone XL pipeline, which would take some crude from Cushing to Gulf of Mexico refineries, was expected to offer the earliest relief to Cushing and narrow a near $20 per barrel discount between WTI and the European Brent standard.
However, officials at the U.S. State Department, which is overseeing the approval process for the line because it crosses the Canada-U.S. border, said on Wednesday that it was considering making TransCanada examine new routes to avoid environmentally sensitive areas, a move that could delay approvals by 12 to 18 months.
TransCanada has said that delays had the potential to kill the project if U.S. refiners are forced to find more timely alternatives to the Canadian crude Keystone would have supplied.
Daniel said that Enbridge, whose lines already carry the bulk of Canadian crude oil sent to the United States, has enough capacity on its system to handle much of the oil that would have flowed on Keystone XL, though Enbridge's lines between Superior, Wisconsin, and the Chicago region could become a potential bottleneck.
"We do have sufficient capacity available, and/or relatively low-cost expansions, to be able to accommodate most of, at least the early volumes, of what would have moved on Keystone XL," Daniel said.
However, a Canadian oil industry official said Keystone XL remains the best option for moving large volumes of oil sands-derived crude to the Gulf Coast.
Wrangler would help alleviate the Cushing bottleneck for all crude sources, including Canadian oil, said Greg Stringham, vice-president of the Canadian Association of Petroleum Producers.
"But it does not give that direct connection from the Canadian supply to the largest refining center in North America, in the Gulf Coast," Stringham said.
The Keystone XL project has been bitterly opposed by environmentalists concerned about rising greenhouse gas emissions from development of northern Alberta's vast oil sands.
As well, the Nebraska state legislature is holding a special sitting to draft a law that would force TransCanada to move the line's route away from the state's sensitive Sand Hills region and the Ogallala aquifer.
Daniel said Enbridge was unlikely to face similar opposition since the company could expand capacity in existing rights-of-way instead of breaking new ground.
Enbridge shares fell 34 Canadian cents to C$35.01 on the Toronto Stock Exchange, amid a broad selloff on markets.
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