Enterprise Products Partners, co-owner with Enbridge of the Seaway crude oil pipeline, is asking the U.S. Federal Energy Regulatory Commission to break with tradition and allow it to set a market-based tariff for the connection from the storage hub at Cushing, Oklahoma, to Gulf Coast refineries.
But oil producers have raised immediate objections, saying a precedent-setting approval by FERC to let Enterprise and Enbridge set their own rates would give them too much control over the system that is designed to ease the bottleneck at Cushing and provide an outlet for Bakken crude.
Although FERC has never granted such a tariff for a crude pipeline it has allowed market-based rates on 22 pipelines that carry refined products.
OIPA worried about smaller companies
The Oklahoma Independent Petroleum Association, in asking for the request to be turned down or FERC to hold a public hearing, is among those arguing that a market-based tariff would see large producers “take advantage” of the smaller companies.
Oklahoma Gov. Mary Fallin, through a legal submission to FERC, opposed the Seaway application, arguing a floating rate would “significantly reduce” taxes in the state by lowering prices realized by producers.
Enterprise has asked for a decision by June.
Strong open season response
In 2010 the federal agency turned down a request by ExxonMobil for a market rate on its Pegasus pipeline from Illinois to the Gulf Coast, a decision that is still being appealed.
In that decision, FERC said oil pipelines have the ability to seek market-based rates, but “do not have the right to them. The burden of proof is on the pipeline to establish that it lacks significant market power.”
Reversing the Seaway line is on track to start carrying 150,000 barrels per day by late May, increasing to 400,000 bpd in early 2013 and 850,000 bpd by mid-2014 based on a strong open season response from shippers.
—Gary Park
