| CALGARY, Alberta, July 18
CALGARY, Alberta, July 18 U.S. regulators have
approved a plan by Canada's largest pipeline company Enbridge
Inc to alter how it calculates the amount of crude shippers can
nominate on its export network, a move the company says will cut
overbooking on congested lines.
The plan has been criticized by a number of shippers, who
say the changes would give Enbridge too much discretion to
allocate capacity and warned pipeline apportionment could rise
as a result.
The opposition to Enbridge's move, designed to
reduce overbooking, shows the fierce competition among oil sands
producers and refiners for space on pipelines that are running
close to full capacity.
The U.S. Federal Energy Regulatory Commission (FERC) on
Thursday approved Enbridge's proposal to use a new system based
on the capacity of refineries to calculate the amount of crude
shippers can nominate on pipelines each month. Enbridge will
then verify the nominations itself.
U.S. approval is needed as parts of Enbridge's pipeline
network runs through the United States.
"In this case, Enbridge has filed a proposed Nomination
Verification Procedure that the Commission has deemed to be just
and reasonable," said the FERC document that was released on
Thursday. Telephone calls to FERC for comment were not answered
Since 2010, when a huge oil spill in Michigan shut for
several months a major oil line between Indiana and Sarnia,
Ontario, shippers have based nominations on the highest monthly
volume they moved to refining facilities in the U.S. Midwest and
Ontario over the previous two years.
According to filings, Enbridge say the change will help
eliminate "air barrels" - industry terminology for nominations
above shippers' ability to move oil. It is a way of gaming the
system so companies get as much crude as possible to refineries.
"We are pleased there's some clarification now around the
issue and we intend to execute on the procedure for our next
round of nominations in September," Enbridge spokesman Glen
Big shippers including Imperial Oil Ltd, Suncor
Energy Inc, ExxonMobil Corp and Philips 66
have all filed motions with the regulator in protest,
arguing the new system gives Enbridge too much discretion in
determining whether to accept nominations from refining
"We're disappointed in the decision. We'll review it
closely. At this point it is too soon to say what our next steps
may be," Suncor spokeswoman Sneh Seetal said in an email.
A spokesman for ExxonMobil said it had been apprised of the
FERC ruling and was evaluating its impacts.
Enbridge's pipeline system is the largest supplier of crude
oil to U.S. Midwest refineries, and the single largest source of
U.S. oil imports.
Surging Canadian oil production and regulatory delays on
pipeline projects have forced Enbridge to institute
apportionment on its network in recent years, contributing to
discounts on Canadian crude that in January slipped to $40 below
the West Texas Intermediate benchmark.
Shippers who protested the changes warned apportionment
could surge under the new system, with large and newly expanded
facilities - like BP Plc's 405,000 barrel per day
Whiting, Indiana, refinery - able to nominate to their full
takeaway capacity including storage, terminals and refineries.
Previously these shippers were limited by their historical
"I expect this quantum increase in nominations into a
pipeline that has finite capacity will push apportionment
through the roof," said one Calgary-based crude trader.
"The August trade cycle for September nominations, and
subsequent September apportionment, will be very interesting to
follow. I think this could get ugly."
Other industry players said refineries that relied primarily
on Enbridge lines to carry their crude feedstock would be most
vulnerable as a result of the ruling.
"People that are bringing barrels in from alternative
sources win the game because they will maximise the total
capacity to their refinery, then if there's 20 percent
apportionment they just pull it in from other sources," another
Calgary trader said.