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In addition, a $90 million pump station expansion of the Cold Lake system is currently underway that will increase system capacity on the west mainline segment from 535,000 b/d to approximately 650,000 b/d by mid 2013 to accommodate near term production forecasts.

NGL Extraction

The NGL extraction business segment generated very strong results in 2012, with funds from operations totaling $194.6 million. Results were $7.9 million lower than in 2011 primarily due to a one-time $20.5 million positive revenue adjustment related to the historical pricing of NGL sales from a counterparty.

Natural gas volumes processed at Inter Pipeline's NGL extraction facilities at Cochrane and Empress, Alberta remained strong in 2012, averaging roughly 2.7 billion cubic feet of natural gas per day (bcf/d), similar to levels processed in 2011. Higher throughput volumes at the Cochrane extraction plant were offset by lower volumes at Inter Pipeline's Empress facilities. Total liquid extraction volumes, including ethane and propane-plus products, averaged 107,600 b/d, consistent with levels extracted in 2011.

Margins on the sale of propane-plus products from the Cochrane extraction facility moderated relative to 2011, but remained strong compared to historical averages. Realized frac-spread prices averaged $1.00 US per US gallon in 2012, higher than the 5-year average of $0.91 US per US gallon.

In the fourth quarter, Inter Pipeline's three NGL extraction facilities processed 2.6 bcf/d, up from 2.3 bcf/d processed in Q4 of 2011 as throughput levels increased at Empress facilities. Fourth quarter extracted liquid volumes were up correspondingly, totaling 105,900 b/d in the fourth quarter of 2012 compared to 99,200 b/d extracted in the fourth quarter of 2011.

Conventional Oil Pipelines

The conventional oil pipeline segment had a very strong year, generating record funds from operations of $153.4 million. This represents an increase of $20.2 million or 15% over 2011 levels. Strong results were driven by higher throughput levels and increased transportation tolls. Average revenue per barrel on Inter Pipeline's conventional oil pipeline systems averaged $2.91 in 2012 compared to $2.68 per barrel realized in 2011.

For the year, Inter Pipeline's conventional oil pipeline systems maintained strong throughput levels, recording volume gains that more than offset natural decline rates. The Bow River, Central Alberta, and Mid Saskatchewan systems together transported an average of 175,500 b/d in 2012, an increase of 5,500 b/d over 2011 levels. In the fourth quarter, conventional oil transportation volumes averaged 176,700 b/d, similar to fourth quarter 2011 levels. Inter Pipeline continues to benefit from substantial oil drilling activity in certain service areas as producers aggressively deploy new drilling and well completion technologies.

Bulk Liquid Storage

Inter Pipeline's European bulk liquid storage business generated significantly higher results in 2012 than in the year prior. Funds from operations were $80.2 million, more than double the $37.2 million generated in 2011. The increase was primarily due to the inclusion of results from a Danish petroleum storage business which Inter Pipeline acquired in January 2012.

Tank utilization rates for the year averaged 90.0% compared to 97.0% in 2011. Fourth quarter 2012 utilization rates reflected similar trends, with Q4 2012 averaging 88.3% compared to 94.9% in the fourth quarter of 2011. Utilization rates have remained strong despite a weak European economic climate and the lack of contango in forward oil commodity markets. In 2012, 75,000 barrels of new storage capacity was added at the Immingham terminal in the United Kingdom, and multiple tanks were refurbished to meet requirements of new customer storage contracts.