Canada regulator denies Chevron bid to secure oil for refinery

Thu Jul 11, 2013 5:40pm EDT

* Regulator denies bid for priority pipeline access

* Says Chevron refinery able to operate under current conditions

* Asks Kinder Morgan to revise allocation procedures

CALGARY, Alberta, July 11 (Reuters) - Canada's National Energy Board has turned down Chevron Corp's bid to secure priority access to oil shipped on the Trans Mountain pipeline for its British Columbia refinery, arguing the facility could operate using existing supply sources.

Chevron had sought to secure supply for its 55,000 barrel per day refinery in Burnaby because it was having difficulty ensuring it could source enough oil on the chronically over-booked pipeline, which carries Alberta crude to British Columbia and Puget Sound, to keep the refinery operating.

The board, which regulates the Kinder Morgan Energy Partners LP -owned line, said the refinery had been consistently able to meet its 40,000 barrel per day minimum run rate despite the lack of secure space on the 300,000 bpd Trans Mountain line.

"The Board was of the view that it is the responsibility of Chevron to design a portfolio of supply options that will best mitigate its supply risk and ensure the long-term viability of the Burnaby Refinery," the regulator said in a statement.

Chevron sought priority access for the refinery, which supplies a third of British Columbia's gasoline, last year, after Kinder Morgan reduced the amount of space on the line available to spot shippers.

Space on the line has been rationed since 2010, with would-be shippers seeking to ship more crude than the line could carry. The board said Kinder Morgan must revise the procedures it uses to allocate space on the line or explain why its current methods are adequate by the end of September.

A spokesman for Chevron said the company will comment after it has reviewed the decision.

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