Enbridge wins case to hike pipeline tolls against NOVA, others

01 April 2010 17:59  [Source: ICIS news]

TORONTO (ICIS news)--US energy regulators have sided with Canadian pipeline firm Enbridge in a dispute over a toll increase on a pipeline system - against opposition from NOVA Chemicals, Suncor and other firms, they said on Thursday.

Enbridge was seeking a surcharge on its US Enbridge Energy and Lakehead pipeline systems, which supply NOVA Chemicals’ with crude oil and other hydrocarbon feedstocks for its flexi-cracker at Corunna, near Ontario’s Sarnia petrochemicals hub in Canada.

In a case before the US Federal Energy Regulatory Commission (FERC), Enbridge argued the surcharge was necessary to help finance the $1.24bn (€917m) US portion of its 450,000 bbl/day “Alberta Clipper” oil pipeline from Alberta to Wisconsin.

Importantly, the surcharge had been agreed under an earlier deal with the Canadian Association of Petroleum Producers (CAPP) which represented crude oil shippers, Enbridge said.

The Clipper project, which forms part of Enbridge’s existing US and Canadian pipeline systems, was justified by growing supplies from Alberta's oil sands sector, the company said. The pipeline is completed and due to receive its first oil on Thursday (1 April).

However, opponents - led by Canadian oil major Suncor - argued that the surcharge was “unjust and unreasonable and therefore unlawful”.

In particular, Suncor contended that the increased capacity from Alberta Clipper was not required, and until shippers actually needed the expanded capacity, Enbridge should not be allowed the surcharge.

Enbridge had “imprudently pursued” the Alberta Clipper project even as demand and other circumstances in the oil sector changed dramatically, Suncor argued.

In a detailed ruling, FERC sided with Enbridge.

The commission said that the opponents' arguments were speculative and did not justify a finding that the rate increase would be unjust or unreasonable.

In particular, the commission would not undo the agreement with CAPP, which contained no provisions for changed circumstances, it said.

Rather, that agreement had placed a stiff monetary penalty on Enbridge if the Alberta Clipper project should not be in service by 1 July 2010, it noted.

The full ruling is available to the public on the commission's website.

Canadian oil analysts said Clipper was premised on bullish pre-recession forecasts of oil production from the oil sands industry in Alberta.

However, the pipeline would eventually be fully utilised once the industry recovered and producers ramp up production, they said.

In a related development, NOVA told ICIS news recently it would continue pursuing a natural gas liquids (NGL) feedstock pipeline project to ship NGL from the Marcellus shale gas basin in Pennsylvania to its Corunna cracker site.

Enbridge last month proposed a potentially rival pipeline project to ship the NGL from Marcellus to customers in the Chicago area.

($1 = €0.74)

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By: Stefan Baumgarten
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