U.S. FERC accepts Shell Ho-Ho oil pipeline rates, pending hearing

NEW YORK Thu Jan 9, 2014 4:49pm EST

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NEW YORK Jan 9 (Reuters) - The U.S. pipeline regulator has provisionally accepted proposed rates for non-contract shippers on Royal Dutch Shell's newly reversed Ho-Ho crude oil pipeline, pending a hearing into complaints that they are unfair.

The U.S. Federal Energy Regulatory Commission (FERC) said it had "accepted and suspended" tariffs on the line, which has been reversed in order to carry crude from Houston, Texas to Houma, Louisiana. It called for a hearing to determine whether the initial rates were "just and reasonable".

A lawyer familiar with such cases said the decision meant that operations on the line would be allowed to proceed, although shippers could be eligible for a refund if Shell's proposed rates are deemed unreasonable.

Generally these kinds of actions are met with a settlement between the pipeline operator and shippers, the lawyer said.

A FERC spokeswoman was not immediately able to comment on the ruling. A Shell spokeswoman was unable to comment.

The so-called Ho-Ho pipeline is one in a series of growing infrastructure projects supporting the U.S. oil boom. Shell reversed the pipeline's direction to send crude oil from growing producing fields in Texas to refiners in Louisiana.

The project reversed flow on a 360,000 barrels-per-day (bpd) pipeline from Port Neches, Texas to Houma, Louisiana, and a 500,000 bpd line from Houma to the Louisiana Offshore Oil Port's (LOOP) hub in Clovelly, Louisiana.

Anadarko Petroleum Corp, ConocoPhillips, Marathon Oil Company and Pioneer Natural Resources USA filed motions to intervene with FERC. The potential shippers on the line complained that the rates on the line reversal "are substantially higher than the rates it charged for service on the same pipeline facilities in the opposite direction."

Shell argues it was "under-recovering its cost-of-service" on the pipeline rates before the reversal.

FERC's decision went into effect on Dec. 12, four days before Shell said it had started the pipeline.

FERC said the tariff rates "have not been shown to be just and reasonable and may be unjust, unreasonable, unduly discriminatory or otherwise unlawful."

Shell has 30 days from the order date file "cost, revenue, and throughput data," with FERC.

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