An Alberta-based pipeline fund has inked a deal to buy into the expansion of the oilsands by purchasing a key link between an oilsands project and an upgrader.

Inter Pipeline Fund said Monday that it will pay $275 million and assume $485 million of debt in the purchase of the Corridor Pipeline System from U.S. energy company Kinder Morgan.

Corridor links the Muskeg River bitumen mining operation near Fort McMurray, Alta., to the Scotford upgrader in Edmonton, about 445 kilometres south. The operation involves about 1,000 kilometres of pipeline and over two million barrels of storage.

The Muskeg-Scotford project, called the Athabasca Oil Sands Project (AOSP), is owned by Shell Canada,  Chevron Canada and Western Oil Sands L.P. Because AOSP is expanding, Corridor has begun a huge expansion of its pipeline, estimated to cost $1.8 billion.

To be finished in 2010, that expansion will boost Corridor's capacity for diluted bitumen — the main produce produced at Muskeg River — by about 185,000 barrels a day to 465,000 barrels a day.

Before the expansion is finished in 2010, "the Corridor acquisition is expected to provide approximately four per cent accretion to Inter Pipeline's cash available for distribution," the company said.

But once it's finished, Inter Pipeline expects that the acquisition will provide approximately 25 per cent increase to cash available for distribution.

The Corridor line was part of Terasen, a B.C. company whose assets have been sold after it was bought by Kinder Morgan in 2005. Earlier this year, Kinder sold Terasen's natural gas business to Newfoundland-based power producer Fortis Inc. for $3.7 billion.