Start date for new Permian oil line in jeopardy on regulatory delay

NEW YORK (Reuters) - EPIC Crude Pipeline LP said the projected third-quarter start-up of its crude pipeline from the Permian basin to Corpus Christi, Texas is in “some jeopardy” after U.S. regulators delayed action on its petition to set initial tariff rates.

FILE PHOTO: A pump jack operates in the Permian Basin oil production area near Wink, Texas U.S. August 22, 2018. REUTERS/Nick Oxford/File Photo/File Photo

The San Antonio, Texas, based company said in a letter to U.S. Federal Energy Regulatory Commission dated Jan. 8 that the requested Jan. 4 action date for FERC to pass a declaratory order that would allow EPIC to set rates has “now come and gone,” causing concern to shippers.

The planned 900,000 barrels-per-day (bpd) pipeline, stretching from Southeast New Mexico and West Texas to refineries and other destinations in and around Corpus Christi is one of the largest lines currently under construction, and is seen as vital for bringing crude out of the largest oilpatch in the United States.

Crude prices in the Permian basin have come under pressure in recent months as a production surge has overwhelmed existing pipeline and infrastructure, sparking a race to add new lines. Prices in Texas collapsed in 2018 due to full lines.

Currently, the Permian produces about 3.8 million bpd, accounting for about a third of overall U.S. production of 11.7 million bpd, according to U.S. Energy Department figures.

The pipeline was projected to be up and running to Corpus Christi by the third quarter.

EPIC filed a petition in October, asking for FERC’s approval within about 90 days that would allow the company to start setting shipping rates on the line. Pipeline companies typically hold bidding rounds known as an open season to solicit shippers that commit to long-term contracts and fill the line with crude before commercial deliveries begin.

“We have had no indication from Commission Staff that any aspect of our project is problematic from a regulatory standpoint, but we are committed to addressing and resolving any issues that should arise in that regard,” EPIC said in its letter, urging FERC to vote on the petition by Jan. 15.

EPIC currently has committed transportation agreements with five shippers, covering about 60 percent of the system’s capacity, it said in the letter.

“The case is still under review,” a FERC spokeswoman said.

EPIC was formed in 2017 and the crude line is one of its first projects. In October, EPIC said it would convert a portion of its planned natural gas liquids pipeline to transport crude instead.

Reporting by Devika Krishna Kumar in New York; Editing by Marguerita Choy