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Tesoro to buy Chevron system for reduced price

SAN ANTONIO (AP) -- Tesoro Logistics LP said Monday that it will acquire Chevron Pipe Line Co.'s northwest products system for less than previously expected, citing a March diesel fuel spill involving the system.

Tesoro said it now plans to pay $355 million, down from its originally planned $400 million. Chevron Pipe Line will retain liabilities and responsibility for the cleanup of the site near Willard, Utah, for two years, Tesoro said.

Tesoro said it plans to invest $15 million to $25 million over the next two years to put in place an inspection program designed to boost the integrity of the pipeline system.

The system consists of the Northwest product pipeline, a federally regulated 760-mile common carrier products pipeline that extends from Salt Lake City to Spokane, Wash., a five-mile jet fuel pipeline to the Salt Lake City International Airport, along with refined products terminals in Idaho and Washington.

The pipeline is the primary source of refined products to southern Idaho and is a major supplier of refined products to eastern Washington. For 2012, throughput volumes on the system averaged about 87,000 barrels per day, Tesoro said.

The terminals have a total storage capacity of 1.3 million barrels and delivered an average of about 56,000 barrels per day.

The partnership said it plans to use the net proceeds from its $392 million equity offering in January to fund the purchase.

Tesoro Logistics, based in San Antonio, is a subsidiary of oil refiner and retailer, Tesoro Corp. The subsidiary owns and operates parts of oil infrastructure like shipping terminals.

Tesoro's units fell 19 cents to $63.08 in midday trading Monday. Its shares ranged from $29.25 to $66.51 over the past year.