Note: Nine miles of the pipeline runs through Waterford and paid $38,410.73 in taxes last year

PORTLAND — One of Portland Pipe Line's largest customers, an oil refinery in Montreal that receives its oil through the port of Portland, plans to close at the end of 2010.

The refinery, which has the capacity to refine 130,000 barrels of oil a day, is one of two refineries in Montreal that bring in oil through two 236-mile-long pipelines that run underground between South Portland and Montreal.

Portland Pipe Line operates the pipelines, a tank farm and an unloading terminal on the waterfront in South Portland. The company is now pumping 300,000 to 350,000 barrels a day.

The refinery that will close, owned by Royal Dutch Shell, "no longer fits with Shell's long-term strategy," Shell said last week in a press release.

The Montreal Gazette reported that the refinery will be converted to a storage unit for gasoline, diesel and aviation fuels to be distributed from the company's nearby terminal.

A drop in demand for petroleum products such as diesel, jet fuel and gasoline has forced several oil companies to close refineries permanently or indefinitely. Shell decided to close its refinery after efforts to sell it attracted no buyers.

David Cyr, treasurer of Portland Pipe Line, said it is too early to gauge the impact of the closing. He said his company will proceed with "business as usual" as it waits for more information from Shell.

Since it was founded in 1941, Portland Pipe Line has always been able to adapt to changing market conditions, Cyr said, and he is confident that it will continue to do so.

Portland Harbor has been the largest oil port on the East Coast in recent years, with about 180 oil tankers visiting each year.

Jeff Monroe, a former port director who now works as a transportation consultant, said the refinery's closing will hurt the city's port for a couple of years, but he is confident that it will recover because the infrastructure of Portland Pipe Line has maintained its strategic value.

For much of Canada, Portland remains the closest port that is ice-free year-round, he said.

"There is no question there will be fewer ships calling on the port, but nobody is going to allow the expensive infrastructure at Portland Pipe Line to go unused for very long," Monroe said.

The pipeline was built in 1941 to transport oil safely to Quebec at a time when German U-boats patrolled the western Atlantic. The flow has continued because it has proven to be the most cost-effective way to move foreign oil to Quebec.

Portland Pipe Line and its parent company in Canada, Montreal Pipe Line, have studied spending $100 million to reverse the flow of oil through one of the two pipelines. The reversal would let the company deliver western Canadian crude oil to refineries in the United States.

The project was put on hold in the beginning of 2009, but the company will continue seeking the permits it needs for construction, Cyr said. "We are waiting for conditions that are more favorable to resume the project.