Okay, we're going to go ahead and get started with the meeting. There are still some seats up here. Grab your coffee and come on in. My name is Pam Beall, and I have responsibility for investor relations for both Marathon Petroleum and MPLX. As we begin our meeting this morning, we ask that you all put your cell phones on silent mode. On behalf of Gary Heminger, our CEO, and the entire leadership teams for Marathon Petroleum and MPLX, I welcome you to our 2013 Analyst and Investor Meeting. We're pleased to have this opportunity to share with you our plans for the future that we believe will create value for both MPC shareholders and MPLX unitholders well into the future. For those of you listening to the webcast, the materials that we'll be reviewing today can be found on the Marathon Petroleum website in the investor relations page.
At the conclusion of the meeting, we'll be posting the presentation and the full transcript on both the MPC and MPLX websites. For those of you in the room, in addition to the materials, the presentation that you have at your seat, we've also placed a diagram showing the stairwells. In the unlikely event that we would need to evacuate, you would be directed to the closest stairwell. Now I'd like to introduce members of our leadership team who are here today that are not making a presentation but will participate in the Q&A session. George Shaffner. George is our Senior Vice President of Transportation and Logistics. George leads a number of organizations, including the organization that operates the assets of MPLX. Tom Kelley.
Tom Kelley is Senior Vice President of Marketing, and his organization has responsibility for wholesale and specialty marketing, as well as the Marathon brand marketing organization. I'd also like to introduce Tim Griffith. Tim Griffith is our Vice President and Treasurer. I'd like to also introduce to those of you who have may not met them yet my team, Beth Hunter and Geri Ewing. Beth and Geri are investor relations managers. This is a safe harbor statement. It is a reminder that we will be making forward-looking statements today, both in the presentation and during the Q&A session, and actual results may differ materially from what we expect today. The factors that could change are included here and of course, also in the filings that we make with the Securities and Exchange Commission. The meeting will adjourn at 11:00 A.M. this morning.
Our prepared remarks will last about 90 minutes, then it will be followed with a Q&A session. There are no scheduled breaks so if you need to excuse yourself, please feel free to do that. With that, I'd like to turn the meeting over to our CEO, Gary Heminger. Gary?
Well, good morning to everyone. I'm glad to see a full house this morning, and welcome to Marathon Petroleum Corporation's Analyst Day. We're going to talk about a number of things today that are important to us as MPC leaders and investors. My hope is that everyone goes away with a very clear sense of our priorities. We believe we gain a strategic advantage from our focus on operational excellence, including a top-tier record of safety and environmental performance. We are committed to a strong financial profile and sharing our success with shareholders by targeting top-quartile capital returns among our peers. We're also committed to balancing capital returns with value-enhancing investments in our business.
We recognize the volatility in earnings and cash flow inherent in the refining segment, and we are addressing this by growing more stable cash flow and higher valued businesses in the pipeline transportation, MPLX, and Speedway. Our refineries generate significant cash flow throughout the business cycle. We intend to continue investing in refining projects to capture margin improvement opportunities and optimize our configuration for market developments, including conversion projects and light sweet crude processing capabilities. In addition, I know everyone appreciates our values behind those priorities. They are the foundation for all we do. Health and safety always comes first, and environmental stewardship is a close second, if not equally important. We consider these values to be our license to operate. At MPC, we maintain an absolute commitment to personal safety and process safety.
Five of our seven refineries have been certified as Voluntary Protection Program Star worksites by OSHA, but only 20% of the U.S. refineries have achieved this prestigious certification. Not only is our compensation tied to financial and operational metrics, it is also tied to environmental and safety performance. In the very short time we have been operating the Galveston Bay Refinery, we have improved the environmental performance by reducing designated environmental incidents by approximately 80%. I am very proud of MPC's record and the employees who have made MPC a high-performance organization. In the two short years since we have become an independent public company, we have taken aggressive action to boost our value. We made significant organic investments in the business, like the Detroit Heavy Oil Upgrade Project. This was a margin enhancement project designed to allow us to process a greater volume of price-advantaged heavy Canadian crude.
This $2.2 billion investment was completed on time and on budget. We made a strategic acquisition of the Galveston Bay Refinery, which is ideally located in the Texas Gulf. We expect this refinery to benefit from the growing supply of North American crude and natural gas. This refinery has significant potential, and Rich Bedell will share our vision for this asset in his remarks. We have generously shared the cash generated by the business with our shareholders. The three increases in our base dividend represent 110% increase since June of 2011. In addition, we have been steadfast in our philosophy that we will return to shareholders the excess capital that we do not immediately need to support the business. Our board has authorized $6 billion of share repurchases, and through the third quarter of this year, we have purchased nearly 20% of our shares for nearly $3.7 billion.
In his remarks, Don Templin will give more detail on our capital return philosophy. Finally, we formed MPLX, our midstream master limited partnership. We took it public and began to drop down additional assets. Most importantly, MPLX is the vehicle through which we expect to participate in the significant build-out of infrastructure to support the changing energy landscape in North America. Gary Peiffer will share our growth strategy of MPLX, along with our philosophy on the pace of growth of this strategic business. What you will hear today is a continuation of this aggressive value-building strategy. MPC leads its peer group by a significant margin on the measure of total capital return yield, and we intend to maintain top quartile performance on this metric. MPC's consistent top-tier performance throughout the business cycles is the engine behind our ability to return capital to shareholders.
All the plans you'll hear about today will position MPC to continue to deliver top-tier performance and returns of capital well into the future. Historically, we have allocated the largest amounts of capital to refining. While it is the most volatile segment of the business, it also generates significant cash to reinvest and return to shareholders. Over the period shown here, we have invested a little over $11 billion in our refining segment and generated over $22 billion of EBITDA. We recognize that volatility is an issue for long-term investors, and we are addressing that by growing more aggressively the segments of our business that produce more stable cash flows. Over these same periods, we invested nearly $1.3 billion in our pipeline transportation segment and generated approximately $1.8 billion in EBITDA. In our Speedway segment, we invested $1.2 billion and generated approximately $2.8 billion.
When you see all of the different segments that we have invested in, we have almost more than doubled the returns in a very short period of time. While the cash returns in the pipeline and Speedway segments are not as great as refining, they are certainly more predictable and stable, and we recognize investors place a higher value on those more stable cash flows. We intend to allocate more capital to grow the midstream and Speedway segments of our business to achieve better balance in the source of earnings and cash flow. We have demonstrated our commitment to this plan with the recently announced equity investments in two major pipeline projects, the Sandpiper and Southern Access Extension. These investments, in addition to the Utica infrastructure projects, create significant growth potential for MPLX and provide better access to growing sources of crude oil and condensate for MPC.
We also plan to grow our Speedway retail segment, which derives two-thirds of its margin from more steady merchandise sales. Tony Kenney will share our plans to grow this high-performing segment of our business. Our plans to allocate more capital to other segments does not mean we will shrink our refining segment. We will continue to invest in refining to capture the positive trends in the industry and to improve our margins. Mike Palmer will be walking through those positive market trends just following my remarks. Our refining segment is core to our business. It is also the source of significant and predictable volumes of both crude and refined products committed to our pipeline transportation segment and MPLX. We believe the ability to capture value from refining, logistics, and our Speedway retail business is a competitive advantage and a key differentiator.
The key difference between historic and future capital allocation is that growth capital will be focused in transportation and Speedway, while the refining segment will focus its capital primarily on margin improvement opportunities, including conversion and light sweet crude processing improvements. These changes we are making are meaningful. Here's how the future may look compared to the past. It reflects our desire to grow cash flow from all segments of the business while achieving greater balance in the source of cash flow. Our future performance will reflect the results of our strategy to reposition our portfolio to focus on higher value businesses. We believe this will help us enhance return to shareholders by achieving an improved combination of growth from our midstream and retail businesses with the substantial free cash flow from our refining operations.
The presentations that follow are all about how we will accomplish these changes to increase future returns. I'll now turn things over to Mike Palmer, Mike will provide MPC's macro outlook into the future. Mike?
Great. Thanks, Gary, good morning to all. I want to spend a few minutes this morning addressing some of the key domestic and global macro trends that are impacting our business. More importantly, I want to talk about what MPC is doing to position ourselves to take advantage of those trends. This is a simple chart showing historical and forecasted global product demand. The key message is that distillate and gasoline demand continue to rise globally. You can see that distillates are expected to grow by a compound rate of 1.2% and gasoline by 1.1%. On the other hand, fuel oil demand will decline by about 2.4%, and that's a result of the worldwide clean fuel initiatives. A little later, Rich Bedell will discuss a potential opportunity to take advantage of what we think is going to be a surplus resid situation.
In the U.S., distillate demand will grow by a compound rate of about 1.8%, stronger than the global average. While distillate demand will grow very nicely, gasoline demand will be flat to down, largely a result of increasing fleet efficiency and the U.S. CAFE standards. Resid will decline in the U.S. for the same reasons that it declines in the rest of the world. This chart looks at announced global refining capacity growth, we also approximate the vulnerable capacity, the smaller, less efficient capacity that will be challenged to stay in business. We arrive at a net change in regional refining capacity that we've shown in the dark blue on the bar. We also show the expected demand growth for each region, which has been highlighted in light blue at the bottom of the chart. Of course, there's uncertainty in all the forecasts.
All of the announced refinery building is not going to occur, that shouldn't be surprising given the magnitude of the capital dollars required and also the difficulty of execution. We also can't be sure when these inefficient teapots will shut down. A fundamental takeaway is that much of the addition to regional refining capacity is going to be necessary to fill regional demand. If you look at the Asian bar, the big bar for just a minute, that change in refining capacity from 2012 to 2020 is about 4.1 million barrels a day. That compares to product demand growth of about 3.97 million barrels a day, which is a virtual offset. We do believe that the net addition in the Middle East will be targeted to Europe, that further highlights the need to rationalize European refining capacity.
The U.S. refiners have a substantial advantage relative to our global competitors. In 2012, North American refining utilization was about 87%. That was higher than any other region in the world. MPC had refinery utilization near 100%, that was due in part to our Garyville refinery outperforming our nameplate capacity. The U.S. advantage is a result of cheaper access to crude oil and feedstocks, lower natural gas pricing, that combined with complex refineries and a sophisticated workforce that can run these plants well. We think these advantages will be difficult for our global competition to overcome. We think the competitive advantage is sustainable, especially for U.S. Gulf Coast refiners. This chart shows the actual total U.S. light product exports growth from 2005 through 2013, which I think you'll agree has been pretty impressive.
With the U.S. competitive advantage that I just discussed, combining with the scarcity of capital in many developing countries and the clean fuel mandates around the world, we think there's a win-win relationship between the U.S. exporters of finished refined product and the foreign importers. We believe that U.S. exports will continue to grow significantly faster than world oil demand. Exports of light products, both gasoline and diesel, have grown significantly at MPC since our Garyville refinery expansion completed in 2009. Of course, we now have our Galveston Bay refinery, which is also configured for exports. In the third quarter of the year, MPC exports were about 245,000 barrels a day, up from 50,000 barrels a day in 2010. We are continually debottlenecking and optimizing our export capabilities. Expect exports to grow.
Although no one would have forecasted just a few short years ago, global growth in crude oil supply over the next decade will not only come from the Middle East, but from North America. European production, we think, will continue to fall, other regions of the world will remain essentially flat. One of the trends that has developed since 2011 is an increasing number of global supply disruptions, as shown by the chart on the right. The disruptions have been caused by above-ground risks, primarily political and security issues in the countries shown. As a result, OPEC production has been largely flat, while non-OPEC production has been rising. Of course, rising non-OPEC production has been led by North America, growth in the Canadian oil sands, and growth in the U.S. shale plays.
North American production was about 10 million barrels a day at the end of 2012 and is expected to grow to about 16 million barrels a day by the end of 2025. You all know the North American growth story. This slide shows the growth we expect through 2025, with a breakdown for Canada and then each of the important shale plays. Most of the production surprises so far have been on the upside, we don't think that's going to change. Currently, more than 70% of MPC's refinery crude supply comes from North America. With our continued focus on North America, you can expect that percentage is going to increase. All of MPC's refining capacity is in PADDs 2 and 3, which we think of as being logistically advantaged.
PADD 2 has relatively cheap transportation access to both Canadian as well as Bakken supply compared to other PADDs. No end users are better located than our Canton and Catlettsburg refineries to take advantage of the Utica shale play. We have about a million barrels a day of refining capacity in PADD 3, it's very well-positioned to receive crude from a number of growth areas, that includes the Permian, the Eagle Ford, the Gulf of Mexico, and even Canada. As you all know, we've seen very significant volatility in crude oil spreads in 2012 and 2013. The volatility reflects in part the constraints that are being encountered in the logistical system as the crude flow patterns change. It also reflects the global disruptions that I just talked about. There were several key occurrences that occurred in 2013.
First, we had a dramatic collapse of the Brent and WTI spread from about $23 in February to flat in July, back out to almost $20 just recently, and the latest number is about $16.50. Secondly, as a result of continued U.S. production increases and roughly 700,000 barrels a day of refinery turnarounds late in the third and early in the fourth quarters, inventory on the U.S. Gulf Coast built substantially, and the U.S. grades, such as LLS and Mars, became significantly discounted relative to Brent. This is really an important ongoing development. Also, we've seen Canadian crudes get very weak this fall as a result of increasing production and pipelines that are full. What can we expect of crude prices as we move forward beyond 2013?
First of all, I would say that we do expect with the fundamentals that are in place that differentials will remain very attractive to the U.S. refining industry. While I can tell you that it's impossible to predict these differentials with any real accuracy, I can give you some basic principles that we believe, I can also give you some spread ranges that we think make some sense. Let's begin with the second point. Let's begin with the LLS-WTI spread. We think that WTI will generally be $5-$10 a barrel under LLS, and that's based upon the fundamental transportation cost from Cushing to St. James and a quality differential. Today, that spread is only about $4 a barrel, which reflects the weakness in LLS due to the U.S. Gulf Coast inventory build that I discussed.
We think that Brent will generally be $3-$5 a barrel over LLS. Currently, that spread is $12.50 a barrel, again, due to this U.S. Gulf Coast surplus inventory. Again, I think it's important to recognize that. LLS has disconnected from the world market. Since it can't be exported, there's no direct way to close that arbitrage, and there's no telling how wide that differential can go. That brings us back to the Brent WTI spread, which we're showing at a modest $7-$12 a barrel in range. This spread can obviously be much wider if the LLS Brent is disconnected as it is now. Currently, the Brent WTI spread is in that, again, $16.50-$17 a barrel range.
My boss has contended for some time that that spread ought to be in the $10-$15 a barrel range, and I'd have a hard time arguing with that forecast at this point in time. We do expect the spread to stay very wide through the first quarter of the year based upon all the turnaround activity that's going to happen in the Gulf Coast. The really big question is whether the shale production is at a high enough level to sustain the LLS Brent disconnect. If we haven't reached that point by mid-next year, it's probably not far off. Going back to North Dakota light, this crude competes with the U.S. grades, with WTI, with LLS, and it's going to have to price accordingly.
Canadian heavy differentials, we think, will stay attractive based upon increasing growth in that supply. We do think that the troughs will narrow as a result of coker capacity that comes on stream, as well as the new pipelines that we expect to get built. Lastly, and I can be pretty certain of this, differentials are going to be volatile. They're going to go to extremes at times, and they're going to be hard to predict. With the constrained pipeline systems and difficulty building new pipelines, there's been a lot of emphasis on crude movements by rail. The advantage of rail is the relatively short time needed to build cars and loading and unloading facilities, and also the moderate capital cost. That's the reason why it's the dominant mode of transportation out of the Bakken today.
The disadvantage is that it's relatively expensive on a full-cost basis compared with other modes of transportation, especially pipelines, when they can be justified. As you can see from this map, rail tends to serve those Bakken markets that don't have direct access by pipe. That includes the East and West Coasts, Cushing, and St. James. We estimate the cost of railing North Dakota light to the East Coast at $14-$16, $13-$15 a barrel to St. James, and $12-$14 a barrel to Cushing. The cost to move light Canadian crude oil by pipeline all the way from Hardisty to Chicago is about $4 a barrel today, $5-$6 a barrel to Patoka, $6-$7 to Cushing, and about $10 all the way to Houston. Moving North Dakota light to Patoka costs about $5 per barrel today by pipe.
This cost will increase with new pipeline build, but it will remain very attractive relative to rail. Transporting Eagle Ford to the East Coast of Canada on a foreign flagged ship is only a couple of dollars a barrel. East Coast U.S. via Jones Act ship is $5-$6 a barrel. The takeaway is that pipelines and even marine transportation offer a compelling cost advantage relative to movement by rail. We continue to think that pipelines are the most cost-competitive long-term solution. We also believe that having logistical flexibility from each growth area is extremely important in the volatile price environment that we expect. That is why we have partnered with Enbridge to build the Southern Access Extension from Chicago to Patoka and Sandpiper from North Dakota to Superior, Wisconsin. That will give MPC further access to Canadian as well as North Dakota Bakken supply.
You will hear more about both of these projects from Gary Peiffer in just a minute. We are also enhancing the light crude capabilities of our Robinson refinery that Rich Bedell will discuss in a minute. The timing of our Galveston Bay Refinery purchase was excellent. Not only has production from the Permian Basin and the Eagle Ford continued to grow, we are also enjoying increased flexibility to transport the crude on pipelines that have been reversed or built. We expect other announced projects to be completed, further increasing that access. Additionally, we are taking steps to increase connectivity between our Galveston Bay Refinery and our Texas City Refinery, we are expanding our barging capacity to further enhance our Gulf Coast flexibility. While the Utica Shale production has grown more slowly than expected, it is now ramping up nicely as gas processing capacity and takeaway is being completed.
We are in the best position of any party to take advantage of this locally produced crude oil and condensate and are positioning ourselves for future growth. This includes the Cornerstone Pipeline to Canton, a condensate splitter at both Canton and Catlettsburg, a truck unload expansion at Canton, and the Wellsville truck-to-barge facility. Gary Peiffer will address these in his remarks. In conclusion, I think we believe that our strategy to create flexibility around North American supply will position us extremely well and is one of the keys to our future success. Now I would like to turn the podium over to Gary Peiffer, Executive Vice President of MPC and MPLX President.
Good morning, everyone. Ever since Marathon, then The Ohio Oil Company, built its first pipeline in 1906, logistics have been an integral part of our business strategy. We consider logistics to be one of the major strengths that differentiates MPC from most of our downstream competitors. Our extensive midstream assets provides MPC with access to the growing supply of unconventional crude oil and its shareholders with a consistent cash flow and earnings stream to counterbalance the volatility in the refining business. Ever since we became an independent company a little over two years ago, we have been working to leverage our substantial PADD II and PADD III refining and marketing operations to increase our midstream footprint in ways often unavailable to MLPs without a significant downstream sponsor.
A couple of the midstream projects I'll review with you today are investment opportunities that MPC has developed to not only allow our refineries to tap into the growth in the Bakken crude oil production, but also gives MPC the opportunity to acquire an equity interest in a couple of major pipeline projects. Even though MPC will initially fund and own these equity interests, we will be able to drop these interests into MPLX at a later date to unlock and highlight their value for MPC shareholders, just like we plan to do with our current substantial portfolio of midstream assets. As most of you know, we launched MPLX in October of last year. The 77% increase in MPLX's unit price since we IPO'd this new partnership, we believe validates our claim that we've created an industry-leading master limited partnership.
We believe MPLX's appeal is based on the four pillars noted on the left-hand side of this slide. First, MPLX generates most of its revenue from traditional fee-based businesses, which are primarily based on FERC-regulated tariffs. In addition, most of MPLX's revenue is currently supported by transportation and storage agreements with MPC, it has no direct exposure to changes in commodity prices. Second, we plan to increase pipeline system revenues by developing organic projects and leveraging MPC's extensive assets located in a part of the country that is currently experiencing substantial infrastructure investments due to the growth in shale and Canadian production. Third, most importantly, MPC created MPLX to be its primary midstream growth vehicle. MPLX can grow by pursuing acquisitions by itself or cooperatively with its investment-grade sponsor and by drop-downs for MPC's substantial and growing portfolio of eligible assets.
Finally, we will continue to provide safe, reliable, and efficient services, another key to stable distributable cash flow. Prior to MPC becoming an independent company in July of 2011, very little growth capital was invested in our midstream businesses. As I said, we've been working over the past two-plus years on developing projects to allow us to move the needle, if you will, in the midstream space, similar to what we've done in our refining business with the Garyville Major Expansion, DHOUP, and the Galveston Bay refining project. When we were on the MPLX IPO roadshow last year, we highlighted the kind of projects we planned to pursue with MPLX. We have now more fully developed some of these opportunities, as you can see on this graph, we are substantially ramping up our midstream growth capital spending starting next year.
Most of this investment will be for projects that will leverage our refinery crude oil economics into equity investments in major pipeline projects and to gain greater access to the Utica Shale play. Even though these projects will primarily be funded by MPC, they are candidates to be dropped down into MPLX once their cash flow is stabilized sufficiently to be comparable and complementary to MPLX's other businesses. First project I'd like to discuss is Enbridge's Sandpiper Pipeline Project. We recently announced that MPC has agreed to be an anchor shipper on the Sandpiper Pipeline. The new pipeline will extend from Beaverlodge, North Dakota to Superior, Wisconsin. The Sandpiper Pipeline Project will expand and extend the Bakken takeaway capacity of Enbridge Energy Partners' current North Dakota feeder system. New line is expected to cost about $2.6 billion.
It will serve as a twin to the 210,000 barrels a day North Dakota system mainline, which now terminates at Clearbrook, Minnesota. Sandpiper will add 225,000 barrels a day of capacity on the twin line between Beaverlodge and Clearbrook, and 375,000 barrels a day between Clearbrook and Superior, Wisconsin. MPC has also agreed to fund 37.5% of the construction of the Sandpiper Pipeline Project. In exchange for this investment and its commitment to participate in the open season for Sandpiper, MPC will earn a 27% equity interest in the North Dakota system when Sandpiper is placed in service. The North Dakota system will have 580,000 barrels a day of capacity when fully operational, which is currently targeted to be early 2016. If MPC chooses to invest in pipeline improvement projects on the North Dakota system, MPC could own up to a 30% equity interest in the system.
The estimated cost of the 30% interest is about $1.2 billion. The second major project I'd like to discuss is the Southern Access Extension Pipeline Project. Enbridge previously reported that MPC has agreed to be the anchor shipper on its new 165-mile pipeline from Flanagan, Illinois, to Patoka, Illinois. The new pipeline is expected to be operational mid-2015. In return for this commitment, MPC had the option to buy a 25% equity interest in this new line. Excuse me. Because of our participation in the Sandpiper Pipeline Project that I just described, MPC now has the option to buy a 35% equity interest in Southern Access. If we exercise this option, it would cost about $250 million.
The primary reason we were able to invest in these new major infrastructure projects is because MPC's substantial refinery system in the Midwest gives us the ability to make major multiyear commitments to move advantage crude store refineries, and in return, invest in projects that will produce consistent, significant earnings and cash flows for our midstream business for many years into the future. The next group of projects we currently have underway also involve leveraging MPC's assets. This time, however, we are talking about assets MPC has in place in Eastern Ohio and Kentucky that will allow us to generate additional value from the Utica Shale region. As noted on the table on this slide, MPC and MPLX are in total planning to invest about $640 million in this area by the end of 2016.
This includes condensate splitters in our Canton and Catlettsburg refineries, a couple pipeline extension improvement type projects, and numerous smaller projects to capitalize on the geographic advantage we have with the crude and condensate production that is expected to come online literally right in our own backyard. Rich Vadel will talk about the condensate splitter projects in his part of the presentation. I would like to next discuss MPLX's Utica Pipeline Project that we recently announced, that we have named Cornerstone. During our last MPLX earnings call, we discussed our plans to build a 49-mile pipeline to connect the production in Southeastern Ohio to our Canton, Ohio refinery. We are currently evaluating our right of way options so we can begin construction of this line early in 2016 and be operational by the end of that year.
This $140 million project is expected to generate about $20 million of EBITDA annually when fully operational. Cornerstone will be financed and constructed by one of MPLX's pipeline subsidiaries. MPC also owns the pipeline, and most importantly, the right of way that delivers crude to our Canton refinery. As Utica production continues to grow, and if it ultimately exceeds our ability to process condensate at our Canton and Catlettsburg refineries, the Cornerstone project could be the foundation for other organic projects to ship, for example, excess condensate west to the refineries in Western Ohio or onto Canada to be used as a diluent. Here is a summary of the major growth projects we have underway in our midstream space.
As you can see, the investment in these projects totals about $2.2 billion through 2016. We believe have the potential to generate up to about $300 million of annual midstream EBITDA when fully operational. Since the majority of this investment is directed towards FERC-regulated pipelines that are not finalized at this time, we can't provide any further financial details regarding these projects. However, these investments are expected to generate unleveraged after-tax ROIs of 10%-13%, similar to other FERC-regulated pipeline projects. Even though all of these projects will not initially be funded by or generate EBITDA for MPLX, the MPC-funded projects will obviously add to its portfolio of future MPLX drop-down candidates. As I said earlier, MPC created MPLX to be its primary growth vehicle for the midstream business. This growth will come from a combination of increasing tariffs, organic growth, third-party acquisitions, as well as drop-downs.
As you can see from this chart, MPC currently has a significant number and variety of midstream assets which can be dropped down to help achieve MPLX's annual distribution growth goal of between 15%-20% for at least the next several years. Although we haven't finalized the EBITDA values associated with each of our eligible midstream assets, we estimate that including the 44% interest MPC currently retains in Pipeline Holdings, the annual EBITDA of these assets totals approximately $800 million. This does not include the organic projects I just described that we're planning to put into place over the next couple of years. We've had some MPC investors ask us why we aren't moving more aggressively in dropping down our midstream assets into MPLX than suggested by the growth goal I just described.
As we've said consistently, both before and after the MPLX IPO, we created MPLX to be a growth vehicle for MPC's downstream business. Unlike a number of other sponsored MLPs, we didn't create MPLX to generate funds to repair the sponsor's balance sheet or to fund a specific project or transaction. In addition, given the size of MPC's portfolio of midstream assets, we don't believe there's another MLP that can sustain as high a growth rate as MPLX can for over such an extended period of time. As a result, we've structured MPLX to highlight the substantial value of our midstream assets and to maximize financial flexibility for the company over the long term.
Based upon our review of numerous drop-down scenarios, we believe the primary impact of dropping down assets sooner rather than at a more measured pace would be the loss of the financial flexibility MPLX gives us to raise capital without negatively impacting capital returns to MPC shareholders. A more aggressive drop-down schedule or strategy would create an unsustainable growth rate for MPLX, and it seems clear that MLP investors do not pay for annual distribution growth rates above the mid to high teens. We also believe our midstream assets will be worth as much or more in the future than they are today. However, if we have the need to fund a strategic opportunity or dividends to our shareholders in a soft spot in the refining cycle, making a larger drop or selling held common units will always be options we consider to raise capital.
We're currently in the process of developing the necessary financial data for our midstream assets so that we are ready to drop down these assets when they are needed while optimizing the value, financing, and after-tax proceeds associated with future drop-downs into MPLX. Turning to MPLX's immediate financial outlook, here are our projections for MPLX's 2013 and 2014 EBITDA and distributable cash flow. We've also noted on this slide that MPLX's 2014 capital budget is $148 million on a 100% basis. As you can see, we estimate that 2014 EBITDA will likely increase to between $130 million and $145 million, or about 30% over 2013's estimated EBITDA of about $100 million. Distributable cash flow will likely increase from just over $100 million in 2013 to between $100 million and $150 million in 2014, or an increase of about 10%.
Although we are planning to drop an MPC midstream asset into MPLX next year, as noted under the table on the left, these estimates exclude the impact of any 2014 drop-downs. The increase in MPLX's projected 2014 EBITDA is larger than the projected increase in 2014 distributable cash flow, primarily because we expect to recognize in 2014 some of the deferred revenue MPC paid to MPLX in 2013 for transportation and storage agreement deficiencies incurred in 2013. In conclusion, we believe we built a very powerful tool in MPLX to both grow MPC's midstream business and create value for our MPLX unit holders and MPC shareholders. Having an investment-grade sponsor who has the financial ability and incentive to access more advantage crudes gives us the opportunity to leverage those investments and commitments to create value for MPLX and MPC.
MPC is committed to growing MPLX's annual distribution at a very healthy 10%-20% rate over at least the next several years. As you've seen, has a significant number of organic projects, in addition to a current portfolio of midstream assets, to allow us to make that happen. Now I'd like to introduce Tony Kenney, President of Speedway.
Thank you, Gary, good morning to everyone. The third segment of MPC is the company-owned and operated retail segment, Speedway. Speedway's story is an excellent one characterized by Speedway continuing to be a top performer within the convenience store industry. Speedway is currently executing an accelerated growth program, which, along with our current retail assets, will be closely aligned with MPC's extensive fuels production and distribution system. We are strong believers in downstream integration value from refining all the way through retail, we plan to continue to capitalize on those synergies into the future. I will share more on our growth plans in just a few minutes. Current operations, along with new investments, will continue to be highly focused on generating a very reliable and growing cash flow stream, while at the same time delivering attractive returns on capital employed.
Over the next few slides, I will show you how Speedway compares to our peers in the industry who report financial data publicly. The numbers on these graphs will all be shown on a per store, per month basis for comparability purposes, since the companies listed all operate a wide range number of stores. On light product volume, Speedway is near the top of the peer group. On total light product margin, Speedway, again, is near the top. Even more dramatic is a look inside our stores at merchandise sales and margins. Speedway is outpacing the peer group in merchandise sales, we are second among our public peers in terms of merchandise margin. On a combined fuel and merchandise gross margin basis, Speedway again is a top performer within the group. Looking specifically at Speedway's performance, here are our three-year sales and margin trends.
In 2013, we are on pace to sell 3.2 billion gallons of gasoline and diesel. For those of you who think like my refining friends, that's almost 209,000 barrels per day or the equivalent of a good size refinery. Our merchandise sales in 2013 are expected to be approximately $3.2 billion. What I really want you to take note of is at the bottom of this slide, showing the mix of Speedway's gross margin contribution from light products and merchandise. Over this three-year period, almost two-thirds of our gross margin was generated from activities inside our stores. The sales and margins from store merchandise tend to be much more ratable and predictable. They are streams for which we have a greater degree of control, unlike the volatility we see in gasoline and diesel sales and margins from time to time.
Prior to the creation of MPC as a standalone company in 2011, Speedway's average annual capital budget was approximately $100 million per year. This capital level basically represents a sustaining or maintenance level for a chain of 1,500 convenience stores. Consistent with what Gary has told the market after the formation of MPC, what he again mentioned this morning, we are executing a strategy to accelerate Speedway's growth. As a first leg of our growth over the next five years, we plan to invest almost triple the level of capital per year than we averaged the prior five years. A majority of that capital will be spent constructing new stores and rebuilding several of our older stores. The second leg of Speedway's growth is to look at and take advantage of good quality, opportunistic acquisitions.
The convenience store industry continues to grow and remains a viable channel of trade, one that consumers continue to show a preference to shop. In taking a look at the store ownership makeup of the nearly 150,000 convenience stores in the U.S., you will note the industry is highly fragmented. The pie chart shows that 75% of stores are chains of 50 stores or less, with 63% of them being single store owners. As convenience store owners face increasing future costs to comply with the changing slate of transportation fuels, cost to modernize stores, future federal and state minimum wage increases, healthcare costs, and other increasing costs, chains that lack size and economies of scale will be competitively challenged and may present some attractive acquisition opportunities for Speedway.
Organically, we have a great book of projects, having identified 280 fill-in opportunities for new stores in our existing markets, as well as 230 stores that are candidates to be rebuilt. The third leg of our growth strategy is to expand into two new contiguous markets: western Pennsylvania and Tennessee. In 2013, we opened our first stores in both Pennsylvania and Tennessee, and we have several stores currently under construction that will open over the next 30 to 90 days. Additionally, we are actively acquiring real estate in both markets to be in a position to accelerate the pace of growth over the next several years. In preparation for growth beyond Pennsylvania and Tennessee, we currently are evaluating additional potential markets for Speedway.
With continued enhancements to our base business and the focus to grow Speedway, expectations are to continue to deliver a very reliable and growing cash flow stream. Looking a little further out and given the opportunities that exist, along with continuing investments, we believe, and see, and expect Speedway to be a $1 billion EBITDA business by the end of this decade. Final thoughts I'd like to leave you with. Speedway is in a great position. We have the organizational infrastructure as well as the technology platforms to scale our business efficiently. We have an industry-leading loyalty program that is a key to our go-to-market strategy, and one that provides us a clear competitive advantage. We have outstanding control over expenses and overall, an infrastructure that leverages store growth with nominal incremental costs.
Further, as a fully integrated refining retail company, we have a unique opportunity to continue to capture maximum value across the entire fuels value chain. Our focus on retail growth will only serve to further leverage and strengthen this position. We are bullish on the future of the convenience store industry, and especially the outlook for Speedway. During the 2008 through 2012 period, we saw some of the most challenging economic conditions for the consumer in this country since the '30s. Yet during this time, Speedway actually achieved some of the best results in our history. During this five-year period, we averaged a 17% return on capital employed. Speedway performed exceptionally well during the economic downturn, and we are in an excellent position to take advantage of the economy's return to some modest levels of growth, reduced unemployment, particularly in the Midwest, and higher levels of consumer confidence.
As a result, we ultimately will execute on our plan to deliver long-term sustainable value. Now I'd like to introduce Rich Bedell, Senior Vice President of Refining.
Thanks, Tony Kenney. This morning I'll be updating you on our progress on executing three of our key strategies, which are increasing our light crude and condensate processing, growing diesel production, expanding our exports. I'll also provide you with an update on the Galveston Bay Refinery, as well as introduce a project we're evaluating at the Garyville Refinery. We have three light crude and condensate projects underway. The Canton and Catlettsburg projects are focused on increasing our ability to process Utica crudes and condensates. Canton is currently running about 10,000 barrels a day of Utica condensate, and this project will increase its capacity to 25,000 barrels a day. The completion date on this is at the end of 2014. Catlettsburg's project will be operational in the second quarter of 2015 and will give us 35,000 barrels a day of condensate capacity.
The third project is at the Robinson Refinery. This is a light crude debottlenecking project that will allow us to run 100% light crude. Its completion is tied to a turnaround in 2016. Overall, our refineries can process a crude slate of 65% light crude or over 1.1 million barrels per day. Canton, Catlettsburg, and Texas City can already process 100% light crude. As I mentioned, Robinson has a very high light crude capacity and will take it to 100% by 2016. In order to run these light crudes and capture more than just a topping margin, you need to have reforming capacity to upgrade the naphtha. It's a very important point to consider. Marathon has some of the highest reforming capacity as a percent of crude in the industry, and this applies not only to our Midwest, but also our Gulf Coast refineries.
This puts us in excellent position to take advantage of the growth in light crude production. We also have a very strong position in the aromatics market, which allows us to capture additional value from our reformers. With the Galveston Bay acquisition, we acquired a much larger position in this market, and this market's been very good this year. We've seen margins on aromatics running $65 a barrel over blend grade values. The second leg of our strategy is to increase our distillate production. The Garyville Project shown here is a multi-year project with the final phase scheduled for completion in 2015. This fall, we completed the first phase, which modified one of the crude units to improve distillate recovery. In the first quarter of 2014, we'll complete the second phase, which is a hydrocracker expansion that will raise the Garyville hydrocracker capacity to 110,000 barrels a day.
This unit was originally commissioned as part of the Garyville Major Expansion at the end of 2009. At that time, it had a capacity of 75,000 barrels a day. We've gradually increased its capacity to 93, and this project will take it to 110,000 barrel a day. Essentially what we've done is we've added a 35,000 barrel a day hydrocracker in a very capital-efficient manner. The final piece of the Garyville project is to expand the distillate hydrotreater by 10,000 barrels a day, and that project will be completed in the first quarter of 2015. We'll also complete hydrocracker projects at Galveston Bay and Robinson in 2015. These projects are designed to shift the yields from gasoline towards ULSD. Between 2013 and 2016, we're forecasting that our distillate production will increase by 65,000 barrels a day.
Building on the projects here, we have additional distillate projects, which I'll show you a couple of those later in my presentation. The third leg of our strategy is to increase our export capacity. Over the past few years, we've steadily grown our export volumes from Garyville, and with the Galveston Bay refinery, we have the potential to increase them even further, as well as optimize our exports across the Gulf Coast system. This year, we'll complete a 500,000-barrel gasoline export tank project at Garyville that gives us additional flexibility to blend cargo quantities of gasoline for the export market. Low-cost dock expansions are in the design phase at both Garyville and Galveston Bay with a target completion of 2015. Looking to future opportunities, we see that there is potential at Galveston Bay to increase its gasoline export capacity by another 120,000 barrels a day.
Both Garyville and Galveston Bay are ideally situated with Gulf Coast locations with deepwater docks to serve the export market. Turning our attention to Galveston Bay. We've now been operating the refinery for 10 months, and I can tell you we're very pleased with its performance. The employees have done an extraordinary job absorbing the changes in our organizational structure, job responsibilities, and operating philosophies. They've also done a remarkable job in improving the environmental performance of this refinery, as Garry showed you in his presentation. Process safety has been excellent, and personal safety has also been excellent, placing Galveston Bay in the top quartile of U.S. refineries.
We successfully increased our throughputs and lowered our operating costs compared to our original forecast, and our focus this year has been on integrating the refinery into our systems, improving its operating reliability, and then capturing those easy-to-capture margin improvement projects as we've shown here. Galveston Bay has the hardware to process a wide variety of crudes and logistical options to take advantage of those most price-advantaged crudes on the Gulf Coast. Since taking over the refinery, we've used this optionality. We've eliminated foreign sweet crudes. We've increased our processing of Eagle Ford and Permian crudes, as well as increased the amount of heavy Canadian in our crude slate at Galveston Bay. Overall, now our crude slate has gone to 85% North American crudes. We're expecting to capture about $100 million in synergies in our first year of operation.
This is more than double the $40 million we forecasted in our original estimate that we gave you last October when we announced the acquisition. The capital required to capture these synergies has also been significantly less than originally estimated. We'll be able to capture additional synergies starting in 2015, when we will complete an interconnecting pipe bridge between our Texas City and Galveston Bay refinery. This will allow Galveston Bay to utilize tankage at the Texas City refinery and allow Texas City refinery to transfer intermediates for processing to finished products at the Galveston Bay refinery. Galveston Bay is a very target-rich environment for low-cost, high-return process improvements. In the short term, we're looking at increasing our aromatics yield, improving resid processing, and increasing our light ends recovery. Sustaining capital and major maintenance investments have also been lower than originally forecasted.
Over the next three years, the sustaining capital requirements are going to be in the $200 million-$300 million range, most of the spending is designed to bring this refinery into compliance with government regulations and bring it up to Marathon standards. We see these costs trending lower, we've also been able to smooth out the cost profile or spend profile in this refinery. The major maintenance expenditures, which include turnaround and other large maintenance expenditures, are also trending lower. Overall, this is a pretty good story for us. We see the reduction of almost $450 million in this planned spending versus our original estimates. Looking to the long term, as we say, Galveston Bay is a very attractive asset because of its size, complexity, and logistical options for crude and products. Our goal over the long term is to capitalize on these strengths.
We have engineering studies that have been in progress to determine which configuration will ultimately be the best for this refinery. Consistent with our strategy of increasing light crude processing, increasing distillate production, and growing exports, we're focusing in the following areas. The first is revamping the crude units to take advantage of the changing crude markets on the Gulf Coast and to maximize the diesel recovery from every barrel. The second area is focused on ULSD production. Galveston Bay and Texas City are the only refineries in our system that cannot make 100% ULSD. We're evaluating a project to increase the hydro treating capacity at Galveston Bay and move both these refineries into 100% ULSD production. Another option being evaluated to increase diesel production is to build a gas oil hydrocracker and shut down one of the smaller cat crackers.
Thereby, we'll be shifting our yields from gasoline towards ULSD. Ultimately, we've said we see Galveston Bay and Garyville Refinery being two powerhouse refineries on the Gulf Coast. Building on that theme, we're evaluating a resid hydrocracker project for the Garyville Refinery. This is a margin enhancement project that upgrades resid to ULSD and gas oil. The economics are driven by the large spread between ULSD and low-value resid. It also uses hydrogen produced from low-cost natural gas to swell the liquid volume by almost 10%. If the project is sanctioned, it will increase Garyville's ULSD production by 28,000 barrels a day and reduce gas oil purchases by 30,000 barrels a day. The hydrocracker has an attractive ROI of 20%-25% and an EBITDA in the $800 million-$1 billion per year range.
With the Garyville Major Expansion and more recently, the Detroit Heavy Oil Upgrade Project, we've demonstrated we can deliver large projects on time and on budget. Just as important, we have a very experienced team to staff these projects into the future. In conclusion, I'd like to leave you with a few thoughts that Marathon Petroleum's refining system is in an excellent position to benefit from the domestic growth in light crude and condensate. We're also committed to increasing our diesel production and growing our exports. Now I'd like to introduce Senior Vice President and Chief Financial Officer, Don Templin.
Good morning. Over the next few minutes, I'll give an overview of our historical financial performance, share with you why we believe our strong earnings and cash flow base will continue into the future, provide some perspective on how we will deploy our cash in the next several years, review our capital return philosophy and commitment, also share certain outlook information for the first quarter of 2014. When I stood here two and a half years ago or two years ago, there were several points that I highlighted. First, I noted that MPC had a track record of delivering peer-leading results, both at the bottom of the cycle as well as when the markets were strong. As you can see from this slide, we've generated very strong earnings and return on capital employed over the last three years.
Second, I indicated that this management team and the MPC board were committed to returning capital to shareholders on a sustained basis. We have had substantial increases in our dividend in each of the last three years, we've been very active returning capital through share repurchases. Our business has undergone a number of significant changes in the last five years, including the completion of the Garyville Major Expansion in 2009, the Detroit Heavy Oil Upgrade Project in 2012, and the Galveston Bay acquisition earlier this year. This slide adjusts our historical EBITDA for the last five years as if our current configuration had existed in all of those years. It also shows pro forma mid-cycle EBITDA for that period adjusted for the current configuration.
I think it's interesting to note that even assuming the challenged market conditions that existed in 2009, under our current configuration, we would have generated approximately $2 billion of EBITDA. The average EBITDA for the five years, including the recession years in 2009 and 2010, was approximately $4.6 billion. We believe that this further illustrates the point I made earlier that MPC can generate significant earnings and cash flows through all of the business cycles. It's what gives us confidence that we will be able to pursue investments in our business while returning substantial amounts of capital to our investors in the future. How do we think about capital allocation? We start with the principle that all capital in excess of our core liquidity requirements is available to return to shareholders or to invest in the business.
Given the importance of core liquidity to our capital deployment considerations, I thought I would share briefly how we determine our core liquidity requirement. We view core liquidity as the amount of liquidity below which we never want to go. Our view around core liquidity is by design conservative. It's intended to protect us on the downside, even if we think that occurrence is unlikely. First, we consider ongoing calls on capital, including maintenance capital, interest payments and debt service, and dividends, which we view as a long-term commitment that we've made to our shareholders. Second, we consider contingent liquidity events, including the impact on our crude purchasing activities if we lost our investment-grade credit profile. Currently, we buy substantially all of our crude on an unsecured basis. That would likely change if we did not have an investment-grade credit profile.
We modeled the impact of a major operating upset at one of our refineries and what that would do to our liquidity needs. There would likely be a significant call on capital until the operations return to normal or until the business interruption insurance kicked in. We also considered the impact of working capital shocks. For example, if crude prices drop quickly, it has a negative impact on our working capital. We probability weight all of these contingent events. They're not all additive, but we believe that there is some correlation between them, particularly if there'd be a major operating upset at one of our refineries. We think that could also have some credit rating implications. We also consider the cash flow that our operations would generate in a stressed environment.
Adding all of these factors together, we believe it's prudent to have available minimum liquidity in the range of $4.2 billion-$5.2 billion at any point in time. How do we satisfy these liquidity needs? First, we have a revolving credit facility of $2.5 billion that expires in 2017. Second, we have a $1 billion trade receivable facility, which we believe we could expand by another $250 million or so given the increased receivables activity at the Galveston Bay Refinery. Lastly, we target a minimum cash balance of between $500 million-$1.5 billion to support our incremental liquidity needs. This slide shows our capital investment profile for the next three years. As Gary Heminger mentioned, a significant portion of our capital is going to be spent on growing midstream and retail.
Over the next three years, we expect to spend $640 million on midstream, $2.4 billion on pipeline transportation investments, and $925 million on Speedway growth for a total of more than $3.9 billion. To put that in perspective, our investment in midstream and retail will be $2.4 billion greater in the next three years than it was in the past three. On the refining side, our investments will focus on reducing feedstock costs and improving margins, increasing the proportion of diesel fuel that we produce, and enhancing our export capabilities, as Rich just mentioned. Rich also discussed earlier the Garyville resid hydrocracker project that we are evaluating. This slide shows both the detailed feasibility and engineering costs that our board has sanctioned, as well as the incremental capital that would be required if the full project was sanctioned.
Our capital budget is substantially below the mid-cycle EBITDA I referred to earlier. This gives us confidence that we can invest in the business while returning capital to shareholders in a very meaningful way. As I mentioned earlier, we expect that a certain portion of our cash will be used to support our core liquidity needs. Cash above our core liquidity needs will be allocated to investments in the business and return of capital to shareholders. Our goal is to return 100% of free cash flow to investors. You will recall that we had about $1.6 billion of cash when we started as a standalone company in 2011. Two and a half years later, our cash balance is at roughly that same level, meaning that we returned 100% of our free cash flow over that period, and that commitment continues.
Since July 2011, we have returned a total of $4.6 billion to our shareholders in the form of dividends, $925 million worth of dividends, and $3.7 billion in share repurchases. As this slide shows, during the last 12 months, we have returned about two and a half times our free cash flow to shareholders. We believe this is strong evidence of our commitment to return capital to shareholders through various market conditions. During our earnings call a month ago, we provided certain outlook information for the fourth quarter of 2013. This slide provides certain outlook information for the first quarter of 2014 and also has comparable data for the first quarter of 2013. I might point out that the 2013 first quarter information does not include Galveston Bay for the month of January before our acquisition.
In addition to the information on the slide, I wanted to share a few other data points on which we get questions. First, income taxes. For modeling purposes, we are expecting that our tax rate for 2014 will be 35%. Next, some Speedway statistics. So far in the fourth quarter, same-store gasoline sales are up slightly, and same-store merchandise sales, excluding cigarettes, are up 5.9%. Lastly, our share repurchase activity. For the first two months of the fourth quarter, we repurchased approximately $250 million worth of shares. It has been and continues to be our goal to provide you with information that allows you to understand our business. Since becoming a standalone company, we have made a number of enhancements to the market metric and other data that we provide to investors.
Effective January 2014, we will be making a number of additional enhancements, including changes to our gross margin calculation to make it more consistent with the way several of our peers provide that information, providing certain throughput, crude yield, and operating cost information on a regional basis. That information will be shown for both the Midwest and for the Gulf Coast. With that, I would like to turn it back over to our CEO, Gary Heminger.
Thank you, Don. Today, we hope we've given you a better understanding of our priorities, how we'll execute on them, and how they'll impact each of us as investors. Safety and environmental performance will always be at the forefront of what we do and reflect our fundamental values. We are sharply focused on shareholder returns. Today we provided more clarity on how we'll continue our good record in that area. We're putting our growth capital where it will produce more predictable cash flows and higher valuation multiples in both MPLX and Speedway. We're enhancing margins in our refining business. MPC's strengths are clear. We're well-positioned in attractive geographic markets. We consistently achieve top-tier financial performance through all the business cycles. We generate significant free cash flow, and we're building a reputation for sustained capital returns and value-enhancing investments in the business.
Our path ahead is clear, as are the rewards. We're enthusiastic about the future of MPC and MPLX. As we continue to reposition our portfolio, we will remain unrelenting in our goal of driving shareholder value by building on our reputation for sustained capital returns and value-enhancing investments. I thank you for your attention this morning. Before we go into the Q&A, I just want to take a moment to recognize a very dear friend of mine, but also a very dear friend of all investors here. Garry Peiffer is going to be retiring after nearly 40 years with the company. I still think he's a little bit too young to be retiring, but almost 40 years with the company, he's going to be retiring the 1st of January. Garry's been instrumental.
If you look at his last 40 years, what we've achieved in the downstream part of the business. Garry was one of the main architects in putting together, back in 1997, when we started the Marathon Ashland joint venture, which really was the first step towards our journey of where we are today, of putting that together. He was very much the architect when we bought out Ashland shares in 2005 of the joint venture, and then as we proceeded down the path to separate the company to start MPLX and where we are today. If all of you will recognize Garry. He's just been a great executive and a friend to all investors. Garry. With that, if my team would join me here on the stage, and we'll start with our Q&A.
We have a mic that we're going to pass around. Want to give Arjun back here. We'll start with Arjun Murti.
Thanks, Gary. It's Arjun with Goldman Sachs. Two questions. You mentioned the growth emphasis will primarily be the midstream and some of the other segments. You did add Galveston Bay. Any updated thoughts geographically on refining acquisitions sticking to your core knitting? Does California or other areas make any sense for Marathon? I think the answer's no, but thoughts there. I had a second question as well.
Okay. Great question. We will continue to look at opportunities as they come across. We have little to no interest in going across the Atlantic. I think everyone here would shake their heads and agree with me on that. We will continue to look if there are any strategic opportunities on either coast. What we do best is where we're integrated. I've talked about this a number of times, where we're integrated with our vast logistics system which includes terminals, pipelines, marine, and then our retail system. I believe having this controlled volume, as we've talked about through the Speedway and the Marathon brand, has been a key differentiator to us. To go off and buy something that would be considered more of a merchant plant, it just doesn't make sense for us right now.
That's great. Thank you. A follow-up question on Gulf Coast crude spreads. You gave some outlook on LLS, the potential or reality of it disconnecting. I'm curious on heavy and medium sour pricing, whether it's Maya or Mars. It would seem like prices are substantially higher for some of those crudes than the rest of the world. There's a lot of imports that do come into this country. Do those crudes stay linked to global benchmarks, or would there be some reason why Maya or Mars would stay depressed and maybe more linked to LLS? Thank you.
Sure. Mike?
Yeah, Arjun, I guess the way that I would describe that is that much of the global crude, the foreign crude that comes into this country today is linked to domestic pricing, and that certainly helps us when we're evaluating those crudes relative to the domestic rates. Again, I think that what we've always said is that in addition to these light sweet crudes that we're taking actions to process as much as we can, there's going to be a home for the heavy and medium sours. We think that there's going to be access to Canadian. It's going to be important. It's going to be well priced. We think that other crudes such as Maya will have to compete with that. We think the Gulf of Mexico looks very good from a growth standpoint. There'll be more medium sours to take advantage of.
We think the opportunities will be there, and they'll make sense. Could there be some pullback as prices are much higher globally than in the U.S.? It's possible, but many of the countries, I think, want to have a position in the U.S.
Okay. Why don't you just hand over to Doug there?
Okay. Doug Terreson, ISI. Gary, the Galveston Bay returns appear likely to exceed expectations, both your synergies and also your capital investment. Rich highlighted four to five fairly significant capital projects that look as if they're going to hold longer-term potential for you guys. My question is whether or not you guys could provide some color on these projects. I know that they're only in the assessment phase, but how excited are you specifically? How do you think that they're going to end up fitting in the pecking order versus the hydrocracker at Garyville that you talked about and some of the other opportunities in the portfolio? Just some color on how excited you are about these opportunities.
Right. Where's Rich? There's Rich. I'll have Rich take that up. Let me tell you, we're very excited, but we're also very cautious. You notice the way we have staged this idea of the resid hydrocracker at Garyville. We're only doing the feed stage, and if you go back to when we did GME project, we had already been through the feed stage and had not announced that we were looking for that, and then we sanctioned the project. We're going to be very cautious. The key to that project, you have to look at what's going to be happening with the labor market. There's a tremendous amount of ethylene cracking and other investment going on in the Gulf Coast. What's happening with the labor market? What's happening with the major contractors?
How we're really, if we were to go forward, how we would position that project. We're enthusiastic about Garyville, as Rich said, two powerhouse engines in the Gulf Coast, Garyville and Galveston Bay. I'll let Rich then go into a lot of the different things that we are assessing right now in GBR.
With Galveston Bay, we've really taken an approach. We want to see how we want to position this refinery in the future. There's a pent-up demand in that refinery to do projects. They have not invested except in infrastructure and getting it back up and running. There's been this pent-up demand, and there's a thousand ideas. We're trying to say, let's take the long-term approach and do some very detailed engineering to figure out what's the best configuration. Like I said, because it doesn't produce 100% ULSD, I think that's a real focus in that refinery to improve its gross margin, and that would be a key thing, a key aspect there. We're trying to figure out, is it better to do a hydrocracker or better to do that hydrotreater and maybe convert some of the other hydrotreaters. That's really the balance right now.
The crude units themselves, I think we see that the light ends handling capacity, there's real value in increasing that so that we can run these lighter crudes that are coming from Eagle Ford and Permian. Those things have to be tied to turnaround cycles and a little longer term. The Garyville project, like I said, is attractive in that in a high crude price situation like we are, this really favors, it's really much more favorable over coking. When you're coking, you end up with taking those high-priced molecules, and you produce, you get the ULSD and gas oil, but you also get a pile of very low-value coke. Whereas a hydrocracker, you're taking those molecules, and you're converting them to a higher value product. That's really what drives, especially with the low natural gas prices. Not every place can do a project like this.
You need to have a large-scale refinery. You need to have excess resid, and you need to have a coker, too, to take the unconverted oil off the hydrocracker and then coke it. It doesn't fit everywhere. It's sort of a unique project for us. We have, of course, the Galveston Bay resid hydrocracker, and we started many years ago looking at resid hydrocrackers, actually a crude hydrocracker. At one time we looked at would we take Robinson to a heavy crude refinery, and one way to do that would be to put this on the front end. We've been looking at this technology for quite a while. We feel comfortable with it, and we just need to see how the front-end engineering pans out.
Some of the siloed benefits around GBR's all logistics changes, we didn't announce those today. We have a number of projects we're working on to get this Eagle Ford, Permian crude at better economics than we have historically down into this plant. Also how we export, whether we export over the water, whether we export up the pipelines to Pasadena, where we can then go to the East Coast or go to the Midwest, whichever direction we want to go.
Thanks.
All right. You want to pass it? Oh, you have another question, Doug?
That's all.
You want to pass it up to Paul here, and then we'll go over to Ed.
Thank you, Paul. Thank you, Deutsche Bank. Gary, I think the investments you've announced here don't increase your crude distillation capacity in any way. I just wanted to confirm that these are feedstock and yield type investments. Going beyond that, you've shown here that your exports of products are about 245,000 barrels a day. You also showed that your capacity to export is about 245,000 barrels a day. It seems obviously that you're maxed out on product export. I was wondering why you're not more aggressive in that graph on page 64, I think, in terms of expanding export capacity. It's just notable that it's not going to be hugely higher in 2015, and the numbers you have here are actually post-2018 for the 400,000 barrels a day.
Finally, I'll call it part 2 of my question, could you talk about the crude oil export ban in the U.S. and how sustainable or where you see that going? Thanks.
Sure. Mike or Rich, you want to take the?
Well, on the export front, we continue to increase, it seems like each month between Mike's guys and my guys increasing that capacity. A dock capacity is something a little bit different than a barrels per day through a crude unit. You have the logistics of moving imports in and exports out and demurrage and full utilization of that dock. There's competing uses. If we're not importing crude over the dock, we've got more room to export products. We'll be pushing beyond that 245. What I showed there, going from 245 to 275, that's an expansion of Galveston Bay's dock distillate exports. Garyville's project is really to increase the gasoline capability and maybe an either/or. It will push beyond that 245 before 2015, I'm confident.
Paul, they're being quite conservative. They've already pushed beyond that 245 when we were looking at a slide yesterday, and I reviewed the mid-month numbers. We're well beyond. It depends on which markets you're going to, the size of ships that you're going to fill, whether it's barges, blue water vessels. Just depends.
Yeah.
With this Galveston, or excuse me, Garyville 500,000-barrel tank, it's going to put us solidly into the gasoline market in Garyville from an export standpoint. We have not been strong there in the past. We've been working on this tank for the last 18 months, so it comes up at the end of December.
Yeah.
Rich?
Probably next week.
That tank will come on service. You're right, we are quickly and aggressively moving to, as I say, underpromise, overperform to outperform on that. The question on whether or not we see crude oil being exported. I believe we are, as I think I spoke last night to many of you, we are exporting crude oil today. It just happens to be in the form of refined products. Talked to the administration many times about this issue. If we want to export crude, sure, we're exporting a lot of refined products. I'm certainly not going to be negative on exporting crude. You have to step back and look at where would the market demand be for exported crude. Will the eventual completion of the Panama Canal expansion, is that going to change logistics on how you move crude out of the Gulf?
We're already moving a lot of crude on non-Jones vessels up to Canada. You step back and look, where are we shipping the refined product to? We're shipping it to many countries in Latin America, some to Europe. The gasoline, as Rich was talking, Mexico has a big appetite for U.S. gasoline. You look at the refining capacity in those countries. Where they're getting their crude from today versus refined product, I think it still leans, the economics lean towards let's just those countries import refined product instead of taking the crude oil from the U.S. Will continue to be a debate. I think it's a big push uphill to allow crude oil, though, to be exported.
On the capacity expansion, you asked about capacity. The only real expansion we have in the numbers we've reviewed is the splitters can handle about 60,000 barrels a day. We say today we can do about 25. That difference, 35 or so, is about the only expansion we're talking about at this point. It'll be just that. That's about the only expansion numbers we have.
Yeah, thanks. Good point. Ed?
Yeah, Ed Westlake, Credit Suisse. You've got a great chart in there of all the cash that you've returned to shareholders, and obviously, the share price has done very well-
Thank you
over time. You've also got a comment around special dividends versus buybacks. Could you talk a little bit about your thought process around that and perhaps how you would communicate if there was a change that decision on special dividends to the market?
Okay. Don?
Yeah, sure, Ed. Our view around returning capital to shareholders, I think our first priority is on base dividend. We think it's important to have a strong growing base dividend that we can sustain over a long period of time. That's the starting point for our capital return. To date, we favored share repurchases. We favored them for a number of reasons. One, we believe that while our share value is below intrinsic value, that it makes good economic sense to do that. Secondly, purchasing shares buys us capacity in the future for dividend increases. We're taking shares out of the market, which is allowing us to increase our base dividend without putting undue stress on the system. I don't think special dividends are out of the question, but to date, we favored base dividend and share repurchases.
I think early on, we had some accelerated share repurchases. I think those were tied around certain events. The $500 million share repurchase was tied around the Galveston Bay announcement and the launch of MPLX. We wanted to make sure people understood how important those assets were. They weren't mutually exclusive with returning capital to shareholders. Since then, we've been generally in the market, not on an accelerated share repurchase kind of program, but in the market sort of on a continuous basis.
A question on Galveston again. You're probably going to get lots of these. OpEx was obviously high, one of the areas where you could get a lot of synergies given the size of that refinery. Can you talk a little bit about could you get OpEx down to the regular level of a Gulf Coast refinery? When?
Well, in the refining industry, we always have to focus on our operating costs. Galveston Bay, because of its complexity, very large aromatics unit, very large resid hydrocracking unit. Those operating costs for those units will always keep that at a higher level than, let's say, a refinery that does not have that kind of complexity. You got to be a little careful if you say it's going to get down to a standard cracking refinery because of those two big complexes. We're always looking at those opportunities where there's opportunities around our turnaround costs, our execution of projects overall. We'll keep working on that to make it the most efficient refinery we can.
It's a fair question, Ed. We're going to go to Doug Leggate here next. It's a very fair question. As we look at Galveston Bay, I've had a number of questions. When are we going to tie the two refineries together? We still are being very methodical. We've only owned this plant now for 10 months. Being very methodical to get this plant like we want it. Rich needs about another year to get it to our standards. All that is baked in the numbers that we were showing you here, and the numbers are better than we thought they were going to be. To get this like we want to operate refineries we're not going to have a distraction yet of trying to merge the two refineries. We don't want, as I say, that distraction.
We don't want people worried about which plant do they work on. We're going to get this one right first, and we're really moving down the highway here too and making great progress in that. Ray Brooks, who is our refinery manager, is just doing an outstanding job of building a new culture. That's the methodical process that we're going about first.
I'll just add that really the way you get sustainable cost control, cost reduction is through you've got to drive the reliability, and you've got to have units that run reliably. You got to have everybody engaged in that process. That's the only way to really get it down into in a sustainable level.
Okay, Doug.
Thanks, Garry. Doug Leggate, Bank of America. Two questions, please. First of all, thanks for the comments on the pacing of the drop-downs in MPLX. However, what you haven't addressed is how the value accretes to the general partnership and how the proceeds from the drop-downs could potentially, again, enhance what has already been a very robust share buyback program. Could you talk a little bit more about how those factors come into it? My follow-up is on retail. What kind of metrics do you consider when you look at retail acquisitions, and do you have the headroom in terms of where the balance sheet is right now for anything that, let's say, might be a material bolt-on?
Sure. Garry will take your first question, then Tony will talk about the metrics on Speedway.
Sure, Doug. Well, I think from the presentation and everything we've looked at, I guess we're targeting this 15%-20% type of growth rate for at least the next several years for MPLX. To the extent we need drop-downs of bigger or smaller values to achieve that's kind of our first order of business regarding drop-downs. I guess you follow on and what I also talked about, but should we have a need for a special type of funding at the MPC level, that whether it be a transaction or some big opportunity, that's the perfect opportunity for us to consider a drop-down or selling some of the common units.
I think if you look at some of the other of our MLP competitors with sponsors, a lot of the accelerated growth they've had recently or the big drop-downs they've had have really been targeted for a specific purpose. Because over time, as I said, MLP investors don't pay you for that high growth because I think they realize it's not sustainable either. You get beyond the mid to high teens, and you don't get much of a pop in your price because they know that's not sustainable either.
the faster growth or faster drops will probably be driven for the most part from a specific corporate purpose of the MPC level or should, as I said, we get a little bit of a soft spot in the refining cycle and we need it to make sure that we can continue paying dividends again at the MPC level.
To be clear, Gary, what I'm really asking is the value in the common units I understand may not get the recognition, but the GP will with the higher splits. How does that factor into your thinking on the pace of drop-downs?
Well, I think again, we're talking about a 15%-20% growth rate, that's going to get us into the high splits relatively quickly at the MPLX level. We're comfortable with that pace at the moment. Again, should some opportunity comes up, we've got the flexibility with this vehicle to take advantage of it and preserve capital at the MPC level for the shareholders level we want to try to return it to them as well.
I think, Doug, the word is methodical. As Gary was saying, how sustainable can the growth rate be? We're going to be very methodical. We were illustrating here, we've worked on this Sandpiper-Southern Access Extension Pipeline for the last year and a half. It's been a very, very methodical set of work that Mike Palmer and Gary's team have done to put this together. We now have the flexibility to fund that however we want. First of all, we wouldn't have the capital to be able to fund that just inside MPLX. We can fund it inside MPC, incubate it, drop it in when we want, when it makes sense. We have tremendous flexibility, but you will see in our drops we're going to be methodical in how we do this. That positions, we believe, the MPC shareholder for the best in the long run.
That's the direction that we think is best. Tony, you want to handle the Speedway question?
Doug, was that just around acquisitions?
Yeah. Largely.
Yeah. There's a lot of attributes we look at. It's a lot different than our organic growth plans and our new market expansion plans because we could choose where we build those locations. In terms of the overall fit, in terms of how we're gaining access to the market, we have a lot more control over that. Acquisitions, when you try to bring them into your existing portfolio of assets, you've got to watch things like cannibalization of existing business and how that affects the returns that you're looking for on those projects. Overall, Doug, our priorities are on quality and how they'll fit overall with the brand strategy that we have around Speedway. The size of the box is important when you look at being able to, as Gary alluded to, the two-thirds of our gross margins being generated inside the store.
We want to be able to continue to grow that inside business. It's very important to maintain that sustaining and growing cash flow. Ultimately on just an acquisition, just traditional ways of valuing the business is the way we look at opportunities to acquire those assets.
Might I add, Doug, that we will also include all the way from the refinery up to the convenience store and the gas station. What are those economics from a refining standpoint, a logistics standpoint? We've talked about having a assured place to sell either through the Marathon brand or Speedway. We think there's economic rent in knowing where that is and knowing every day how you're going to be able to have bigger tankers, bigger ships, bigger barges that moves that product to the marketplace. Pipeline space that is sometimes allocated, and how do we acquire that pipeline space? You'll recall when we bought Galveston Bay, we also have a very keen incremental allocation to Colonial. It's worth a lot of value to us. How do we move and make sure we fill those pipeline spaces?
We'll take all that into account, and I think gives us somewhat of a differentiation in value before we ever look at the forecourt on a retail gasoline property, and then the back court. I'll leave it there. Thanks. Okay. Why don't you pass it to Faisel, then we'll go to Robert.
Thanks. Just Faisel from Citigroup. Looking at the margin per barrel competitor graph that you guys used in the beginning of your presentation, you've gone from number 1 to number 2 to number 4 over the last couple of years, and some of that coincides with the acquisition of Galveston Bay. I'm wondering, besides some of the synergy announcements or synergy plans that you guys have out of Galveston Bay, how do you get back up to that top tier level? Is it the $3 billion in capital spending that you have planned to get you back up to that level to make you more competitive with all the other refiners that are also spending on similar type of projects? Can you just discuss how you get back up to that more competitive level?
That's a very fair question and good review of that slide. Yes, we fell to number 4. First of all, number 1, it's no surprise if you're a company that's situated in the Mid-Continent and all your refineries are in the Mid-Continent and you have wide discounts, you're going to be number 1 in this industry, and it's been that way for the last couple of years. When we bought Galveston Bay, we knew we were going to fall a little bit, probably a position or two in the first couple of years just because as Rich was saying, we have to go in and we have to get this plant to where we want it to be. We knew the operating costs, and so on and so forth, were going to be higher on the front end.
We knew we were going to sacrifice a little bit, but we also saw this as a very strategic acquisition. Going forward as I said earlier, it's going to take us another year, we believe, to really be able to polish this plant up and get it like we want it. The investments that we're making in the just finishing up here at Garyville to be able to bring this gasoline tank on, to be able to expand our exports have a full year of DHOUP now that that's complete, and you look at the spreads out in the DHOUP market. You look at the third quarter and the way we were situated in the third quarter, it was really the Gulf Coast performed better in the third quarter than the Midwest had too, which is generally the opposite.
A couple of the markets were upside down in the third quarter. Differentials were upside down in the third quarter. We think now that the market inventories seem to be getting back in pace with what they have been historically. We will definitely be in the top tier we expect going forward in just some of those changes.
Thanks.
Robert?
Hi. Thanks, Gary. Robert Kessler, Tudor, Pickering. A few questions about your outlook for the environment and how you fit it in with your capital program. You presented a view that refined product exports for gasoline and distillates grow by 4% per year. You already highlighted that refining utilization is running high. We're not expanding refining capacity by 4% per year, I don't think.
You presented an outlook for domestic demand on a net basis that looks to grow slightly. The first question is, where do you get the exports from? Presumably, you're doing a little bit more from conversion. You're doing some from condensate splitters. Where do you get that balance, is one question. When I look at a resid hydrocracker investment at Garyville, I think of that as very much levered to the bottom of the barrel. The preponderance of supply growth in most people's estimates in North America, even including Canada, is very light. Why would you place a heavy oil conversion project at presumably a higher priority than incremental access to light crude, for example, something you're already doing a lot of, but why not accelerate that further first?
Finally, when I look at LLS and the price depression today, I consider that you've got a very low-cost pipeline with Capline going north, costing you maybe $0.80, $0.90 per barrel to get it all the way to Patoka, would you expect, and have you already seen, an increase in volumes going north on that pipeline in the midst of this dislocation?
Your first question, Mike, you want to cover the product exports and the markets that you're seeing those go to?
Yeah, sure can, Gary. We've got a pretty diverse program when it comes to exporting our products. We've got direct relationships with some European companies. We've got the same thing in Latin, South America. In addition to that, we run this competitive bidding process to make sure that we're always selling out of Garyville or Galveston Bay at the highest price that we can get. It's a pretty diverse program. We showed the slide on the U.S. exports to show how quickly they had risen. What we're saying is that we think they're going to continue to rise out of the U.S. at least at that 4% level, which is we basically concluded that it'll be much higher than what product demand is. All we're saying there is that we think there's going to be continued ability to move this product into other countries.
The big driver continues to be the competitive advantage that our U.S. Gulf Coast plants have relative to the cheap feedstock on the Gulf as well as the natural gas advantage. The plants exist. The workforces are there. We just think that goes forward. When you look at our exports, obviously, the growth in our exports have been way beyond 4% since 2010. While they may slow down a little bit, we still think that there's plenty of room.
The other thing is the Midwest PADD II used to be a natural importer of maybe 600,000, 800,000 barrels a day of refined product into PADD II. PADD II is much more balanced today. You have that product that's more available on the Gulf Coast that we can export. When you look around the globe, I mentioned again, Europe, Latin America, the Gulf Coast engines are much more competitive than those refineries, as well as the crude costs that we have available. I think we're going to be able to outperform and compete very well with those markets. The refining question, and I want Rich to cover this because I want to be very clear, make sure everybody understands that what we're looking at here, while not sanctioned yet, it's not a heavy crude upgrading. It's really looking at the resid and that portion of the barrel.
We're not doing this at the expense of light crude processing. I showed you some of the projects we're doing, and we're in very good position there. Also there are limits, economic limits to light crude processing if you can't convert it to gasoline, right? But with the resid upgrading we're looking at, we have excess resid at Garyville, right? Then we can supply it also resid on the Gulf Coast. There's 300,000 barrels a day of resid out there. The marine bunker specs are changing. I don't think you're really going to want to put ULSD and dump it into bunker. That's not a real good money maker. There's plenty of resid to fill these units.
The economics are such that you would fill a resid hydrocracker today before you ever put a drop of that resid in a coker because the yields are so much better. Again, it's not an either/or light crude. We're doing plenty of light crude work. I think the biggest potential for additional light crude we have probably is at Galveston Bay, that again, is part of our long-term look at this refinery and how we want to configure it.
Okay. Mike, you want to cover the LLS question and Capline?
Sure. With regard to LLS and Capline volumes haven't changed a whole lot over the recent months. Now, as we continue to see a discount on LLS, you certainly will see some additional LLS move up into the Midwest. I don't think it'll be huge volumes, but some of that we would expect to happen.
Okay, Brian?
Great. Sorry. It's Evan Calio, Morgan Stanley.
Oh, I'm sorry.
Yeah, I'm on the groom side over here, I guess. A strategic midstream question first for you. Really among MLPs there's a widening difference among companies that have significant growth and those that do not. MPC's affiliation with the $1.1 billion current as well as projected projects of EBITDA that is current and planned clearly puts you within the growth have category. You have also been acquisitive on other assets. Do you really see a big potential here with MPLX to be a consolidator, a baby Kinder Morgan so to speak, and do you think today you need to add any internal capabilities to potentially execute on that strategy?
Follow-up.
Yes. I'm sorry, Evan. These lights got me right here.
Got it.
I saw Brian sitting here, I called you, Brian. I'm sorry about that. We have looked at some opportunities of being a consolidator. We have this great stable, if you will, of opportunities. The key is anything that we've seen so far that made sense on a consolidation was going to be very expensive and very high premiums to be able to execute. Doesn't say we won't. We continue to look at different opportunities. We think that's a big part of our strategy. When we rolled out MPLX, we said the four pillars that Gary was showing here in his slide, fee-based businesses, we also said we're going to do organic, which we have now executed, both organic inside of MPC and then the deal we're doing with Enbridge, we said we wanted to be acquisitive. We will continue.
We've looked at some transactions that just closed, in fact. They just didn't fit us, I always like to say that we're very capital disciplined, we're not going to get emotional of saying that we just have to have some asset.
Right. I guess I was focusing on a corporate acquisition, given your premium multiple, using your better currency is what I was thinking. I guess my one follow-up would be is, on slide 14, where you show the future and you show a higher composition of less cyclical, less volatile EBITDA in midstream. Maybe you can help me with the timeline to get to future. Should I assume it's just the 15%-20% growth, which takes about 15 years of your current 1.1 drop? Is there some sooner timeframe to get there?
Right. That's a very fair question, Evan. What that slide was trying to illustrate was the direction that we intend to go. We were very clear to not put a timeline on it because that leaves open if we want to be acquisition, if we want to do a corporate deal. It gives us all those options. We're just indicating we think it's very important, both on the transportation side of our business, MPLX, and Speedway, to grow those businesses that have more stable cash flows. I take you back to 2009 in this industry. We were the only, I think, downstream company that year to have positive earnings. We have recognized, ever since then and continue, that we want to grow those parts of the business. It will take a long time to overshadow, though, what refining can do.
Refining on a mid-cycle basis dwarfs those other businesses. We can continue to grow those, and we see the much higher value that is given in the marketplace for those. We certainly can grow both of those around our refining system, as I said earlier. Logistics are a big key. Retail is a big key. We want to capture both sides of that molecule movement. Chi? I'm going to pass over to Chi. Then we'll go to Joe.
Thanks. Chi Chow, Macquarie. I want to ask you about your Midwest pipeline system. The investments in Sandpiper and Southern Access, does that allow you to be 100%, I guess 100% supplied from your Midwest refining system from the inland Bakken Canadian markets? I guess a follow-up question to Robert's, what does that mean for the strategy on Capline? Does that open up the opportunity to, if it's even needed in the market, reverse that pipeline?
Okay. Mike, you want to take the first question?
Sure. With regard to supplying our Midwest system all from Canada as well as from the Bakken, the answer, Chi, is no. That's not really what we've intended. That's not our strategy. We think that it's important when you look at our roughly 650,000 barrels a day of capacity in the Midwest. We think it's very important that we have access to the Canadian as well as the Bakken in a reasonable size to supply those plants. We also think it's important because of the way these markets move, that we have the opportunity of continuing to bring in WTI from the Mid-continent, as well as LLS on Capline, if that's where the differentials go.
Robert, going back to what you were asking about, one of the reasons that LLS hasn't shot up on Capline is that where it's priced now, if you look at WTI and LLS together, the margins that we get in our Midwest plants on those two crudes are relatively the same. They'll move back and forth $5 or something, but they're very close. There's been no real emphasis to ship a lot of LLS. Now, if the spread gets really wide, we'll do exactly that, and then we'll back off on other WTI priced crudes. With Sandpiper and SAC, the object was to increase our flexibility coming from the north, not to supply the entire system.
Chi, as you know, there are three owners in Capline. It takes all three. You have to have a unanimous vote in order to be able to reverse that line. We certainly, I'll tell you, are in favor of giving consideration someday. Before you do that, you have to have a south to north solution. If you were to take that big line that can move 1 million barrels a day and turn it into a south to north movement, you certainly have to have another line. There are some lines that are already in place that possibly could fit that solution. Before going there, you have to have all three people that are wanting to go, and I think that will evolve over time. There are some of the other players or owners, they have different strategies and what they're looking at as well.
I think over time we'll get there.
Quick question on MPLX. We noticed your coverage ratios on the high end relative to your competitors. How do you balance managing that down to some more normalized level versus drop-downs to meet your growth rates?
Yes, you're right. The last few quarters it has been higher, I think like 138 in the third quarter. We've got a bit of a seasonality to our business, and we've said, I think, pretty consistently, that we're shooting for a 110 coverage over time, and I think we still feel that's a reasonable number. I think in the fourth quarter we may dip a bit. On average, for a 12-month period of time, 110 is probably the right number to think about for us over time. We are watching that closely. That's one of the metrics everybody measures against. We don't think that's going to be a problem, I guess, given our distribution growth rate as well as what we see in the seasonality of how we spend primarily maintenance capital in the Midwest.
Maybe one point or one additional response to what Evan asked about in terms of consolidator, and we aren't using this premium value we have in the MPLX shares at the moment. When you think about Sandpiper and Southern Access Extension, I guess I don't view those as organic projects because we didn't own that property, and we didn't have the right of ways, and we didn't have the ability to do it as quick as obviously Enbridge did. I guess I'm not sure those are really acquisitions either, but they're kind of a hybrid. We're able to leverage some of our other big footprint we have in the midstream space to do some things we think are accretive that at the moment we think by going out and actually buying something is a little bit challenged at the moment.
I think we are doing some of that, but maybe in a little bit different way because of the assets we have and the ability we have to make commitments.
Jeff?
Yeah, it's Jeff Eder with Simmons & Company. Following up on the Southern Access topic, are there opportunities downstream of Patoka on the Marathon system for expansion given the incremental 300,000 barrels a day coming down Southern Access? Or are those pipelines already optimally designed to serve your refining assets and you're just really getting a cheaper crude?
Rich?
Yeah, there are opportunities. In fact, you'll notice the Robinson light crude project. We're going to expand the pipeline running from Patoka to Robinson to handle those additional barrels to the Robinson Refinery. We've also got an expansion on the line running from Robinson to Mount Vernon to get more of those barrels onto the Ohio River. From there, we can take them to markets in the South, even all the way down to PADD III from the Midwest. We do have a lot of opportunities with Southern Access coming into Patoka to expand the refineries and the pipelines in the Midwest.
We've also been able to debottleneck the dock at Wood River to get more on the marine side of the business.
Good. Secondly, on Speedway, could you talk about return expectations for the new locations that you're adding?
Okay, Tony?
Yeah. Generally, our new investments, organic investments are mid-teen type projects for us. An after-tax mid-teen return is what we're looking at.
Thank you.
Okay. You want to pass it back to the young lady? Thanks, Cindy.
Thanks. I'm a little older than I look. It's Kate Minyard with JPMorgan. I have a question on your efforts to grow to a distribution of cash flow that comes a little more from midstream and Speedway than historically versus your decision to sort of maintain peer leading return of capital. Does your current capital program eventually get you to that distribution between the different business segments of EBITDA generation? If not, how do you evaluate whether you should be a little more aggressive in your investments versus maintaining that cash return level? Thanks.
Don?
Yeah. I guess, as you look into the future, clearly there will be opportunities. We think that the capital investment program that we have now is starting to position us to get to a view or a cash generation profile that's different than maybe it was historically. It's also a lot of things can happen in two or three or four or five years, and we've just witnessed what's happened in the last five years. Our view is we want to make sure that we're investing when we have the opportunity to invest in midstream, and particularly in midstream. The build-out opportunity is now, and we don't want to miss out on that build-out opportunity. On Speedway, Tony talked about the consolidation opportunities, we don't want to miss out on consolidation opportunities.
We will evaluate some of the other levers that we have and tools, for example, drops into MPLX LP units if we need to make sure that we're returning an appropriate amount of capital or investing an appropriate amount of capital to get those targets. We think we have more tools to use and more levers to pull than many of our peers do.
Pass up forward, please. Roger?
Hopefully I won't knock too much over. Roger Read, Wells Fargo. Coming back to the export question. It's grown obviously very rapidly. You've got pretty, I'd say for this industry, healthy growth rate expectation of 4%. As you approach the export market today, is it more of a push market or a pull market? Is there anything you'll need to do as the market continues to grow, as it probably becomes a little bit more competitive to move product out of the U.S.? Is there a trading organization you need to beef up or you simply as you look at Latin America, you look at Europe, the pull is going to be there?
Mike?
Yeah, Roger, I guess what I would say that up to this point, I think it's really been a pull, not a push. We always compare the ability of us to sell another cargo on the export market with our domestic pipeline alternative. Those opportunities always generate margin for us. We've had absolutely no problem coming up with the export demand that we've needed to grow that part of the business. Again, I think just based upon the competitive advantage that we've got, I don't know why that should change.
Okay.
We have a very robust trading group under Mike's organization. Every day, they're looking at the alternatives. They're comparing, should we export?
Yeah.
The export market has turned in to be an internet type of market. Everything's very quick, very efficient, and you're bidding out every cargo.
Yeah. We've done studies to look at the ultimate end pricing that we could achieve if we were moving into certain other countries. Frankly, there are other companies that have spent a lot of time and a lot of money, I mean a lot of time, a decade or more, building those relationships, for example, in certain South American countries. I see that as a good partnership. We can't do that overnight, and it would be very costly for us to do that. I think at least for the time being, we like the model that we've got. We don't think we're leaving a lot of money on the table.
Okay, the unrelated follow-up question, the $800 million of EBITDA, the candidates for drop-downs. Originally, if I understood correctly, Capline and some of the other minority partnership ownership structures you have were not candidates for the drop-down. Is that still the case? That's excluded from the $800 million?
No, that is in the $800 million. When we were talking about Capline and some of those other equity interests, we were just saying specifically on Capline, the cash generation profile of Capline was a little uncertain at the time, we didn't want to put something in there was unreliable or likely to change dramatically. As well as some of the other equity interests. Given the initial size of MPLX, we didn't want to have those type of uncertain cash flows included. They're in the $800 million estimate, and those would not be our first candidates to go down or the next candidates to go down just because their characteristics aren't steady enough or predictable enough until we get a little bit bigger at the MPLX level.
Thanks.
All right. Let's give it to Brian. Right back there, Garry.
He's got it.
Thanks, Gary. I think since you called my name, I figured I'd ask a few questions now. Can you give a little more color on Sandpiper? Project obviously won't be online until 2016, will MPC be receiving cash flows from Enbridge's North Dakota system before then, or is it contingent upon Sandpiper coming into service?
We don't gain an economic interest, if you will, in that system until it comes online. Until the Sandpiper project is complete, we will fund our 37.5% of the Sandpiper project only, and Enbridge will still receive all distributions from the classic system and the Bakken Pipeline System US system. We don't gain an interest in those new systems until Sandpiper goes live.
Okay. Can you perhaps provide a little more of a timeframe on MPLX's distribution growth target of 15%-20%? Obviously, you have a large inventory of drop-downs, and you commented on several years. Would that be closer to 10 years, or how would you sort of put a range on potential timeframe for what you already have? Looks like about $1 billion of EBITDA, including the projects of Sandpiper and SAX .
Well, like we've said, we're going to use this as a vehicle to allow us to get financial flexibility. Depends on how fast the other business will grow, how fast FERC tariffs grow, and how fast these organic projects come online. We haven't been more specific, at least to this point, as to how long that would take. Obviously, there's a pretty long runway of opportunities there that give us a lot of flexibility for things we can do at the corporate level or, as was suggested earlier, with those units.
Yeah, I think going to an earlier question about being acquisitive with MPLX, obviously if we were acquisitive with MPLX and there was an opportunity to be a consolidator in the market, that then changes the profile a little bit in terms of how many years that drop-down portfolio covers. That's kind of a challenge in answering that question sort of in an absolute term when there's a bunch of moving pieces to consider, Brian.
Fair enough. I want to echo everyone. Good luck to Gary in retirement and an excellent career. When would you anticipate a successor to be announced at MPLX?
We'll be doing that soon. Before the end of the year. I have a great team and a great bench from which to pull.
Something that we've worked very hard on is developing people, having people that have the right skills, have seen many parts of the business, and will be ready to step in. I give Gary Heminger a lot of credit. I tried to talk him out again of retiring. He said, "Gary, I have a lot of people that have worked behind me, that it's time to give them a chance." That's a great character of a man. Back here, this gentleman's been very patient.
Thanks. Jeffrey Birnbaum from UBS. Couple quick questions, additional questions on midstream. Gary Heminger, if I heard you right earlier, I think you mentioned On the $2.2 billion-$2.4 billion of midstream investments through 2016 between MPC and MPLX that you were expecting about 10%-13% returns. Two questions on that. Just wondering, one, if there's any difference in the expected returns on the cash being spent at MPC versus MPLX, and then two, given those expected returns, how the boards think about appropriate multiples for potential drop downs to MPLX. A quick follow up after that.
Okay. Garry Peiffer ?
Right. I guess what I was referring to there was primarily the Sandpiper type of project, which is the lion's share of that $2.2 billion that the open season just started last week on the 26th of November, and we'll extend to, I think, the 24th of January. We really can't comment on the financial aspects of that project. We would expect those type of pipeline projects, they're going to be FERC-regulated pipelines, that they will achieve DCFs after tax of 10%-13%, which is pretty typical of a FERC-regulated pipeline type of project. That was what we're referring to. To your follow-on question, that's fairly typical of what you look at in the pipeline space in terms of returns. Anthony R. Kenney mentioned for the Speedway type of businesses, it's mid-teens we tend to look for.
In the transportation related, it's in the low 10% to 13%-type returns, both at the corporate level and even MPLX as well.
I think your follow-on question was around the-- Was it drop down? What the board looks at as a drop down as well?
Yes.
I think if you looked at our first drop down, that was in sort of the 9.5 times EBITDA range. Given that portfolio and profile of assets, that steady cash flow, we believe that that was a reasonable market transaction. If there were similar properties or similar sort of cash flow generation capabilities, I think that's what the market has been, sort of 9 to 10 times.
It comes back to the word balance. The board, the way we look at our whole portfolio is what is the balance? We've been over 115 years in this company. What's the balance that we can sustain and continue to invest and have good returns? As I said in my remarks, refining is the big engine, and it's the scale that provides some very large-- As I said, we've invested-- I know a number of you questioned me when I rolled out the Garyville Major Expansion on why would you want to do that. We've invested $11 billion over the last six years and returned $22 billion in EBITDA. It's been a very good investment. We're going to be balanced. We will continue to do some investing in refining. As you recognized, most of the returns here were very substantial returns in refining.
Gary already outlined the other two big components of our business. You had a follow-up?
Yeah, t hanks. The quick follow-up would just be, you also mentioned that there would probably be a drop in 2013. I was just hoping you could talk a bit about, obviously, to the extent you can, which assets you view as kind of the best near-term versus long-term drop opportunities, whether that's specific assets like pipes or storage or docks, et cetera, or asset characteristics, tax basis, what have you, given the clean balance sheet, the returns you're expecting, the growth you're expecting and things like that.
Sure.
I guess, again, MPLX is just about a year old, a little over a year old now. We think our MPLX unit holders have spoken that they like what they've seen so far in terms of MPLX's growth and the characteristics of its cash flow. Something that's very similar to what we've got in MPLX today is probably, at least initially, the most likely candidates. Obviously, one of the big targets is the 44% interest we still retain in the pipeline holdings at the MPC level. That's probably the most likely at the moment. If there's an opportunity comes up, we do have some organic things we're doing. Like I talked about the new pipeline in Eastern Ohio. We'll be starting to finance that next year too.
From a drop-down standpoint, probably the most likely would be the pipeline holdings, which is most similar, most easy from a market understanding standpoint of what we're dropping down into MPLX. At least it'll get some scale to it to absorb some different types of assets.
Ed? Over here.
Sorry, just one follow-up. Q3 was negatively impacted by RINs. It was negatively impacted by the crude spike, asphalts, LPGs. It just turned into a fairly weak quarter. Can we assume that current market conditions are somewhat better given the decline in crude prices and the decline in RINs?
You want to talk about RINs?
I mean versus the data pack that you gave. You were saying there were distortions on the data pack.
Yeah. No, your assumptions are right, Ed. RINs, we've worked very hard on the RINs and think we have a temporary solution, albeit we don't want it to be the final solution. We're going to continue to work very hard to get some legislation on the RINs. Yes, crude spreads have widened out. As we mentioned earlier, some gas oil we were buying from Garyville, and Pam already has numbers out there what our volumes are for this quarter. We finished a very important turnaround at Garyville, and it's back up and running as expected to plan. We had some of those things in the quarter, but all the components are performing well. Okay. Well, again, I thank everyone for your attention and for attending our program and look forward any follow-ups you have.
Pam, Beth, and Gary are certainly available for any follow-up questions you might have. Everyone have a very merry Christmas and happy holidays. Thank you