Magellan Midstream Partners LP (NYSE: MMP) and Plains All American Pipeline LP (NYSE: PAA) announced Feb. 27 that they have formed Saddlehorn Pipeline Co., a 50/50 limited liability company.

The newly-formed company will construct, own and operate the Saddlehorn pipeline, a 550-mile pipeline that will transport crude oil from Colorado to Cushing, Okla..

The pipeline will transport various grades of crude oil from the Denver-Julesburg (D-J) Basin, and potentially the broader Rocky Mountain area resource plays, to storage facilities in Cushing, Okla., owned by Magellan and Plains. An extension to Carr, Colo., is also under consideration for connection to existing crude oil assets owned by Plains in that region.

The project is currently estimated to cost between $800-850 million. Magellan will serve as construction manager and pipeline operator. Subject to receipt of necessary permits and regulatory approvals, the Saddlehorn pipeline is expected to be operational during mid-2016.

The open season for the Saddlehorn pipeline is set to expire at 5 p.m. CST on Feb. 27. Binding commitments have been received from Noble Energy Inc. (NYSE: NBL) and a subsidiary of Anadarko Petroleum Corp. (NYSE: APC). In addition, Anadarko has an option to participate in equity ownership up to 20% in Saddlehorn Pipeline Co. Anadarko's option expires about two weeks after the closing of the open season.

"Magellan is pleased to work with Plains on the Saddlehorn pipeline," said Michael Mears, Magellan's CEO, in a statement. "Aligning with Plains makes strategic sense due to their significant marketing and pipeline presence in this region, adding further value to the pipeline project to deliver crude oil to the Cushing hub."

"Plains is excited to partner with Magellan on the Saddlehorn pipeline project," said Greg L. Armstrong, chairman and CEO of Plains, in a statement. "The project is underpinned by ship-or-pay contracts with major producers in the area that protect our investment. Moreover, this arrangement provides us the opportunity to realize meaningful upside to base level returns by shipping additional volumes associated with PAA's marketing activities in the region."