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Hilcorp Energy, the nation’s third-largest private oil and gas exploration and production company, is looking for a financial partner or buyer for roughly $2 billion of oil and gas pipeline assets in south Texas, Dow Jones has learned.Only last year, Houston-based Hilcorp, along with its financial partner KKR, sold 141,000 acres they had acquired in the Eagle Ford region of Texas in a $3.5 billion deal with Marathon Oil.

Now, the company appears to be looking for someone to take on a piece of its system of gathering, processing and distributing assets in the region and has hired Bank of Montreal as the sole financial adviser on the sale, according to people with knowledge of the company’s plans.

Hilcorp didn’t respond to a request for comment.

On Monday, EPL Oil and Gas Inc . said that it had agreed to buy certain shallow-water Gulf of Mexico properties from Hilcorp in a $550 million deal. With that sale, Hilcorp is exiting the Gulf of Mexico shelf.

Even as Hilcorp looks to shed its assets in Texas and the Gulf of Mexico, the company is building up its presence in another resource-rich corner of the country — Alaska.

“Hilcorp is in the midst of a reset of various assets,” said one private equity investor familiar with the company’s plans. “[The company] has been involved in a large acquisition and is trying to redeploy capital in that direction.”

In April, Marathon Oil said that it had sold its natural gas production, pipeline and storage assets to Hilcorp. The terms of that transaction, currently under review by the U.S. Federal Trade Commission, were undisclosed.

The sale includes 17 million barrels of oil equivalent of net proved reserves across 10 fields in Alaska’s Cook Inlet, on the state’s southern coast, as well as natural gas storage and stakes in natural gas pipelines. At the beginning of the year, Hilcorp closed a deal with Chevron Corp . to buy its oil-and-gas-producing fields in the same region. Those assets were producing 3,900 barrels of oil and 85 million cubic feet of natural gas at the time the deal closed.

In recent months, producers including Hilcorp have made new investments into Alaska. If the Marathon deal is approved, Hilcorp would account for between 60% and 80% of the Alaskan gas market, depending on the season.

As Hilcorp turns its attention northward, there are plenty of investors that could bid on its South Texas assets. In the past few months private equity firms have committed at least $5.1 billion to oil and gas gathering, distributing and processing companies, according to data collected from LBO Wire, a Dow Jones publication.

For investors, the move marks a natural progression for firms which poured billions into oil and gas exploration and production companies over the past five years.

Several firms have built up war chests to make midstream investments. NGP Energy Capital Management was able to raise $3.59 billion for its latest energy fund, while Blackstone banked $2.5 billion in commitments for its first energy-focused vehicle.

Over the same period Apollo Global Management closed on $950 million for its natural resources fund, which could invest in midstream assets, while Riverstone Holdings was approaching a $4.5 billion close on its $6 billion energy investment fund as of June.

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The company planning a 141-mile pipeline from Norco to Mississippi hopes to begin work in Lake Pontchartrain — the first stage of the year-long construction process — in the coming weeks. The underground 16-inch pipeline, which will carry gasoline and diesel, will run from the Valero St. Charles Refinery to Collins, Miss., where it will tie into other distribution pipelines. Valero and Kinder Morgan Energy Partners have formed a company called Parkway Pipeline to build and operate the pipeline.

Company spokesman Allen Fore said the project has received the needed permits from state agencies, but is awaiting a permit from the Army Corps of Engineers before it can begin construction. He said he understood the corps permit could be granted as early as next week.

“We’d like to begin by Aug. 13,” Fore said of the construction along the bottom of Lake Pontchartrain. But that date may be optimistic: The corps likely won’t rule on the permit for another four to six weeks, corps spokesman Ken Holder said.

“There had to be an environmental assessment,” Holder said of the agency’s vetting of the permit application.

In the lake, a jetting process will be used to create a trench and the pipeline will be placed in the trench. The pipeline will be a minimum four feet beneath the lake bottom. Workers will be housed on barges and will work 12-hour shifts. There will be no work at night, Fore said.

Fore said the company expects the work in Lake Pontchartrain to take two to three months.

The pipeline will begin at Valero and follow the guide levee along the Bonnet Carre Spillway into the lake, where it will follow an existing pipeline corridor that essentially runs from the southwest side of the lake diagonally toward the northeast side of the lake, running beneath the Lake Pontchartrain Causeway several miles from the north end of the bridge.

Causeway General Manager Carlton Dufrechou has not expressed significant concerns regarding the pipeline. And John Lopez, executive director of the Lake Pontchartrain Basin Foundation, said the company has been responsive to concerns voiced by his agency.

Lopez said he was pleased the pipeline would follow the spillway guide levee in St. Charles Parish rather than go through the environmentally sensitive Labranche Wetlands and that he has spoken with pipeline officials about building shutoff “redundancies” and developing an effective response plan in the event of leaks or spills.

“We did learn from BP,” Lopez said, referring to the malfunctioning blowout preventer that allowed millions of gallons of crude to flow into the Gulf of Mexico for 87 days after a massive oil well explosion in 2010.

Lopez said the lake is also a habitat for Gulf sturgeon and manatees, both protected species. A permit the state Department of Natural Resources issued to the pipeline company also notes that it runs through potential habitat for the endangered red-cockaded woodpecker.

Lopez said the refined gasoline and diesel flowing through the pipeline – it will have an initial capacity of 110,000 barrels per day – is actually more toxic to the lake than crude, but that it would evaporate more quickly in the event of a leak or spill.

Nonetheless, he said, “We think there is an acceptable level of risk here.”

The $220 million pipeline will emerge from Lake Pontchartrain near Fontainebleau State Park, and head north through St. Tammany and Washington parishes and Walthall, Marion, Jefferson Davis and Covington counties in Mississippi.

The permit from the state Department of Natural Resources says the company’s required mitigation for impacts to marsh habitat will be determined after one full growing season; that it must purchase 1.8 acres of cypress swamp habitat from the Timberton Wetlands Mitigation Bank to offset the 1.21 acres of bottomland hardwoods habitat that will be lost in construction; and that it must pay the state Office of Coastal Management $800 for the loss of 0.02 acres of fresh marsh habitat.

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Long-term strategic interests of the U.S. and Canadian governments are at risk because of the politics surrounding the Keystone XL pipeline, an analyst said.

Canadian pipeline company TransCanada aims to build the Keystone XL pipeline to carry oil from Canada to refineries along the southern U.S. coast. It needs White House approval because the pipeline would cross the U.S.-Canadian border.

Lawmakers backing the project say it’s needed for U.S. energy security and will provide jobs in a stagnant economy. Opponents say about the threat posed by heavy Canadian oil and say pipelines like Keystone XL should be abandoned in favor of a stronger renewable energy policy.

David Burwell, director of the Energy and Climate Program at the Carnegie Endowment for International Peace in Washington, writes for CNN that there’s little to be gained by making turning the project into a political debate.

“Congress should resist the temptation to use Keystone XL as an opportunity for political brinkmanship,” he writes. “Both Democrats and Republicans need to make sure that the real issues aren’t lost in the partisan noise of Washington and that we do our best to avoid all the collateral damage.”

Burwell said a transportation bill that contains a rider on Keystone XL is at risk of failure because of the pipeline. U.S. and Canadian relations, meanwhile, could be damaged as a result of the political debate.

TransCanada is working on an alternative route through Nebraska to avoid the environmentally sensitive Sand Hills.

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For years, Cushing, Okla., has been on the receiving end of a 500-mile pipeline funneling oil from the Gulf of Mexico to the American heartland.

Starting this weekend, that pipeline will start moving crude in the other direction. That flow reversal could soon have implications at gas pumps around the country.

“For 40 years, crude oil flowed north,” says Philip Verleger, a visiting fellow at the Peterson Institute for International Economics. “Today, oil flows south. It’s as if we turned the world upside down.”

Until recently, it was assumed the days of oil-drilling booms in the middle of North America were over. But controversial practices, like mining the oil sands of Alberta and hydraulic fracturing, are changing that.

Today, oil drilling booms are producing huge quantities of crude in places like North Dakota.

Increasing production in the middle of the country has oil gushing into huge tanks in Cushing, Verleger says. All that surplus means a barrel of oil in Cushing sells for $15 to $20 less than on the coasts — and that means there’s a lot of money to be made by transporting that cheaper oil to refineries in Texas.

The two companies that own the Seaway Pipeline — Enterprise Products Partners and Enbridge Inc. — will move 150,000 barrels a day out of Cushing to Texas to start. Next year, the companies will boost that to 400,000 barrels a day.

Other energy companies have other pipelines planned, including TransCanada’s controversial Keystone XL pipeline.

A year ago, Verleger says, “there was no capacity to move oil from Cushing down to the Gulf Coast.” Now, Verleger expects to see “up to a million barrels a day of capacity” flowing within the next 18 months.

That should bring Cushing’s relatively low oil prices more in line with world prices.

Higher prices will help small oil producers in places like Oklahoma, who will earn more money for each barrel they sell.

But big changes in the oil business often lead to losers as well as winners. Tom Kloza, an analyst with the Oil Price Information Service, says the oil reversal out of the middle U.S. will drive gasoline prices higher in some parts of the country.

“Drivers in the Midwest, Upper Midwest and the West — like Colorado and perhaps parts of Texas — may see a slight increase, relative to the rest of the country,” Kloza says.

Drivers along the Gulf Coast and in the Southeast will end up on the winner’s side, he says. All that cheap oil from Cushing moving to the Gulf will mean lower gasoline prices there.

Kloza predicts that some places with low gas taxes — like South Carolina — could see fuel as cheap as $3 a gallon in the coming months.

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Senior Democrats backing the Keystone XL pipeline and some of its labor allies really want to see the pipeline built, but they appear to want a surface transportation bill more.

Senate Finance Committee Chairman Max Baucus (D-Mont.) and House Transportation and Infrastructure Committee ranking member Nick Rahall (D-W.Va.), who are avowed supporters of the pipeline, have signaled that they aren’t interested in seeing Keystone language included if its means the death of a multiyear transportation bill.

Keystone will not weigh much on conference proceedings, “because I think this conference should move ahead, pro- or anti-Keystone,” Rahall told POLITICO. “It should not be the stumbling block that stops this conference from acting, because we have to act so quickly.”

And, he said, most fellow transportation conferees feel the same way.

“My discussions, without naming names, is that nobody wants this to stop the transportation conference report from going forward as quickly as possible — pro or con,” Rahall said.

Baucus has also hinted several times that he isn’t interested in killing the transportation bill over Keystone.

“Nothing’s more important than jobs,” Baucus said last month when reporters asked him whether Keystone belongs in the final transportation conference bill. “There’s all kinds of ways to get jobs. And the highway bill is critical. Passage is critical. And I think the Keystone pipeline also would help create more jobs. But frankly, I’m going to make sure we get a net jobs increase.”

It’s a sentiment that extends to even some of the most fervent union backers of the pipeline.

“Of course, we want to see Keystone be built,” Laborers’ International Union of North America spokeswoman Jaclyn Houser said. “But we also want to pass a highway bill, and Keystone should not be a roadblock or impediment.”

“We wouldn’t want to jeopardize either measure politically,” she added.

House Republicans voted to authorize Keystone XL as part of a 90-day transportation extension that led to the conference talks.

“Keystone XL has undergone extensive environmental review,” House Energy and Commerce Committee Chairman Fred Upton (R-Mich.) said at Tuesday’s meeting, the first public gathering of the conference. “The time for delay is over.”

But Upton and other House Republicans didn’t appear to hold the Democrats’ feet to the fire at the meeting and did not explicitly demand that the pipeline language be included.

The meeting “set a good tone for the conference,” a House GOP aide said of the overall talks. “If both sides had come in and started to argue over scope, or if the Senate had harassed the House over H.R. 7 or the House had read the Senate a laundry list of concerns with [the transportation bill], the conference would have started with tension and negativity.”

Instead, the aide said, “we saw members express commitment to their principles and set out their priorities but with a recognition that it was important to get something done and that getting a conference report was achievable.”

And the political heat on conference members like Baucus and Rahall may not be as strong anymore given the support major unions are giving President Barack Obama, even if they are peeved at his rejection of the pipeline project.

Just as the desire to get an overall transportation bill legislatively trumps congressional authorization of Keystone XL, pipeline-backing unions that had once threatened to keep boots off the ground for Obama are now rallying hard to keep Mitt Romney out of the White House thanks to the Republican’s views on Davis-Bacon prevailing wage requirements and other top union issues.

“There’s a clear choice. And it’s not Romney,” Houser said. “We’ll be out there, fighting like we have been in the past.”

In any case, Rep. Peter DeFazio (D-Ore.) said trying to predict the Keystone outcome through vote-counting is a fruitless quest.

“This will be decided at the leadership level, not by individual votes in the conference. It’s something Reid and Boehner have to work out,” DeFazio said.

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Sen. David Vitter, R-La., and a large conference committee of House and Senate members began meeting Tuesday to sculpt a compromise to transportation legislation containing the RESTORE Act language that directs BP fine money to Louisiana and other Gulf Coast states.

Vitter, who is the only member of the Louisiana delegation on the committee, said his three priorities in the process are, in the order he stated them: the authorization for the controversial Keystone XL pipeline, the RESTORE Act, and the RAMP Act, which sets aside more dollars for dredging and harbor projects, including for Louisiana waterways.

“I know it’s a heavy lift politically,” Vitter said of the Keystone XL pipeline that is proposed to run from Canada to Texas.

President Barack Obama has threatened a veto of any legislation that mandates moving forward with the pipeline, because he has expressed a desire to complete environmental impact studies first.

But Vitter also urged bipartisan cooperation in the committee and, in a later interview, he said the prickly pipeline debate should not be allowed to kill a much larger transportation bill that creates private-sector jobs, builds infrastructure and funnels Gulf Coast restoration dollars to Louisiana.

“I’m pretty optimistic,” Vitter said in a phone interview. “There’s a lot of momentum to get a bill done.”

The RESTORE Act provisions guarantee that 80 percent of the fines collected from the April 2010 BP oil leak — an amount that could reach $20 billion — would be distributed for coastal restoration to the five states along the Gulf: Louisiana, Mississippi, Florida, Texas and Alabama.

Gulf state lawmakers have wanted Congress to adopt the RESTORE Act before a settlement is reached with the Department of Justice and BP.

In an online show of bipartisan support, Sen. Mary Landrieu, D-La., even noted on her Twitter account that Vitter was working in support of the RESTORE Act, which they collaborated on.

But not all lawmakers outside of the South support the RESTORE Act.

House Natural Resources Committee Chairman Doc Hastings, R-Wash., released a statement Tuesday that, in part, criticized the Gulf Coast legislation for creating more bureaucracy.

“I am certainly sympathetic to the impacts the spill had on Gulf states, but I’m not sympathetic to the notion that an effort to provide support directly to Gulf states requires ballooning the federal bureaucracy with permanent new federal spending programs,” Hastings stated.

“I don’t think that’s the House majority view,” Vitter said in response.

The House version of the transportation bills is a 90-day extension to transportation spending while the Senate has a more comprehensive two-year plan. But only the House bill contains Keystone XL pipeline provision.

As for the RAMP Act, Rep. Charles Boustany, R-Lafayette, co-authored a new letter to the U.S. House members on the conference committee urging that his legislation be included in the final transportation bill.

The provision is intended to ensure the funds for the federal Harbor Maintenance Trust Fund are used for dredging and port projects and not raided for other uses as has been occurring.

“As the economy struggles to recover, we cannot afford to threaten commerce and trade by failing to maintain our harbor infrastructure,” Boustany stated.

“It plays an integral role in supporting jobs, growing our economy, and competing successfully in this global economy.”

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Energy companies will need to keep up-to-date records to prove they are running the nation’s aging pipelines at safe pressures under a new set of guidelines the federal government announced Monday in response to a deadly natural gas explosion in a San Francisco suburb.

If pipeline operators can’t ensure their oil and gas lines are running at safe pressures by next year, the Pipeline and Hazardous Materials Safety Administration underscored they could face penalties or some other type of sanction.

The advisory bulletin the administration issued Monday mentioned the September 2010 gas pipeline explosion in San Bruno that killed eight people, injured many more and left 38 homes in smoking ruins.

The National Transportation Safety Board blamed the accident on multiple failures by one of the nation’s largest natural gas companies, Pacific Gas & Electric Co., including shoddy records based on incomplete and inaccurate pipeline information.

PG&E spokesman David Eisenhauer said Monday the company has undertaken a vigorous records review and verified that its transmission lines in urban areas are running at the right pressures.

“We continue to gather, scan and verify millions of records,” he said.

Federal and state officials will be responsible for enforcing the new guidelines, pipeline safety agency spokeswoman Jeannie Layson said Monday. All companies will be required to keep traceable, verifiable and complete records about pipelines that ferry hazardous fuels through the nation’s most populated areas.

In a later phase, PHMSA also will direct energy companies on what to do if they can’t find records for all their pipelines, she added.

In the wake of the San Bruno explosion, California regulators ordered PG&E and other state utilities to drop the pressure on their pipelines and produce any records of pressure tests done to ensure pipelines did not threaten surrounding communities.

PG&E’s computer records originally showed that the decades-old, high-pressure transmission line that blew was seamless. But company officials later acknowledged problems when the old paper records were incorporated into the utility’s computer system.

PG&E ultimately rented a hulking concert venue where dozens of employees sorted through more than 1.25 million individual gas transmission records hauled out from branch offices and storage facilities to find the required records.

The California Public Utilities Commission is currently weighing whether the record-keeping lapses violated state and federal laws and contributed to the pipeline rupture.

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TransCanada, the company behind the disputed Keystone XL pipeline, submitted a new application for the project to the State Department on Friday, as expected. The company will route the pipeline around the environmentally sensitive Sand Hills region of Nebraska, and the revised proposal starts a fresh clock on the environmental review process.

The State Department, which reviews pipeline projects that cross national borders, will probably need at least until the first quarter of 2013 to finish reviewing the new application — pushing a final decision on the project beyond the presidential election.

Keystone XL, designed to carry oil sands crude from Alberta, Canada, to the refineries of the Gulf of Mexico, became a political flash point late last year. Seeking to force its approval, Congress mandated that President Obama make a decision by mid-February, but he chose to reject the project in January, citing the lack of time to complete an environmental review. At the time, Mr. Obama said his decision was not a final judgment on the pipeline.

The company’s revised application includes a number of possible routes that would run about 850 miles from the Canadian border to Steele City, Neb., and TransCanada officials have said they will avoid the Sand Hills region of the state, which was the focus of passionate political and environmental opposition. TransCanada is already in the process of seeking permits from the Army Corps of Engineers for a southern leg of the pipeline — from Cushing, Okla., through Texas — which does not require State Department approval.

“The department is committed to conducting a rigorous, transparent and thorough review,” Mark Toner, a State Department spokesman, said in a statement. “We will cooperate with the State of Nebraska, as well as other relevant state and federal agencies, throughout the process. Nebraska has stated that their own review of the new route will take six to nine months.”

According to department estimates, the $7 billion project could generate 6,000 jobs.

The State Department also said it planned to take a more prominent role in overseeing the project’s environmental assessment, something its inspector general had cited as a departmental weakness in a recent report. That report said the State Department had not sufficiently considered concerns about Keystone XL’s original route and needed to strengthen its oversight of independent contractors, who typically conduct environmental impact reviews for major federal projects.

Russell K. Girling, TransCanada’s president and chief executive, said Friday in a statement that three years of environmental review already conducted on the project should allow “our cross-border permit to be processed expeditiously and a decision made once a new route in Nebraska is determined.”

Mr. Girling also said the project would “reduce the United States’ dependence on foreign oil and support job growth by putting thousands of Americans to work.”

Some of those opposed to the project have not been swayed by the route adjustment and are concerned that it may still cross a portion of the Sand Hills.

“Landowners and all the citizens that we are working with still have fundamental concerns about this pipeline,” said Jane Kleeb, executive director of Bold Nebraska, which opposes Keystone XL. “The new route is no better than the old route. The new route is going through different watersheds. It is still crossing major rivers. There is no safer route when it comes to tar sands.”

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