* Enbridge to replace parts of Line 6B
* Line's capacity to rise to 500,000 bpd
* Meets rising refinery demand for low-cost oil
* Completes replacement of pipe following 2010 spill
CALGARY, Alberta, May 11 (Reuters) - Enbridge Inc, Canada's No. 2 pipeline company, plans to spend $1.3 billion doubling the capacity of its Line 6B in Michigan and Indiana as refiners boost demand for inexpensive Canadian crude.
Enbridge said in a regulatory filing it will replace up to 160 miles (260 kilometers) of existing pipeline in Michigan and another 50 miles of line in Indiana as it retires existing pipe following a July 2010 spill, when a rupture spilled more than 20,000 barrels of crude into Michigan river system and shut the line for more than two months.
Following the rupture, regulators ordered Enbridge to cut pressure on the line, reducing capacity to 231,000 barrels per day from 283,000 prior to the disaster.
The new pipe, to be laid alongside the existing pipeline, will boost Line 6B's capacity to 500,000 barrels per day, end the chronic rationing of space on the line since the spill and help meet rising demand for discounted crude from Alberta's oil sands and the Bakken shale-oil field.
"This growing demand is largely driven by ongoing and planned refinery upgrades and expansions in Michigan and Ohio and near-term anticipated demand increases by eastern Canadian refineries for growing crude supplies," the company said in a filing with the Michigan Public Service Commission.
Crude from the oil sands trades at a discount to the West Texas Intermediate benchmark, which itself trades well below the European Brent standard. Refineries that can access the low-price Canadian crudes are more profitable that those who must pay Brent prices for light oil.
The expansion, expected to be operating by September, 2013 will also help alleviate a potential bottleneck in pipeline capacity due to rising production from the oil sands and the Bakken field.
Output from the oil sands, currently about 1.5 million bpd, is expected to rise by nearly 500,000 bpd within three years, squeezing available pipeline space.
Enbridge said the project has the support of the eight refineries served by the line, as well as the Canadian Association of Petroleum Producers, which represents the line's largest shippers.
Enbridge shares were down 5 Canadian cents to C$$40.27 by late afternoon on the Toronto Stock Exchange.