Canada regulator approves Enbridge diluent line

(In U.S. dollars unless noted.)

CALGARY, Alberta, Feb 19 (Reuters) - Canada's national energy regulator cleared construction on Tuesday of the Canadian portion of Enbridge Inc's (ENB.TO) $2.2 billion Southern Lights pipeline, which will carry ultralight oils from the U.S. Midwest to Canada's oil sands region.

The National Energy Board approved the Canadian portion of the line, which will carry 180,000 barrels a day of so-called diluent from the Chicago region to Edmonton, Alberta.

Diluent is mixed with the tar-like bitumen produced in the oil sands of northern Alberta so that it can be shipped to refineries on pipelines.

The regulator called the project an "innovative and cost-effective solution" for diluent supplies. The need for the product is rising as production in the oil sands region grows. Output from the region is expected to nearly triple to 3 million barrels a day by 2015.

While some of that production will be upgraded into synthetic crude in Canada, demand for the raw product from U.S. refiners is also rising, with new lines to carry the bitumen to the Midwest and Gulf Coast being planned.

The NEB approved modifications to Enbridge's existing Canadian lines to carry the diluent, as well as some new construction. The value of the Canadian portion of the project is pegged at C$247.5 million.

The pipeline is expected to be in service in late 2010.

($1=$1.01 Canadian) (Reporting by Scott Haggett; Editing by Peter Galloway)