High Prairie Pipeline LLC, a wholly-owned subsidiary of Durango, CO-based Saddle Butte Pipeline LLC, expects FERC to act soon on its complaint that Enbridge Energy Ltd. has discriminated against it by denying it an interconnection to deliver oil from the Bakken Shale formation to the market hub at Clearbrook MN, a spokesman said Tuesday (see Shale Daily, June 4).
The company’s optimism is based on the Federal Energy Regulatory Commission’s (FERC) recent action on a similar complaint against Enbridge Energy, which was lodged only weeks before it brought its own complaint. Last Thursday the Commission set for hearing a complaint filed by PBF Holding Co. LLC, which operates refineries in New Jersey, Delaware and Ohio, and its affiliate Toledo Refining Co.
In the complaint, which was filed on May 11, PBF alleged that Enbridge Energy’s procedures and practices in apportioning capacity on its crude oil pipeline system creates undue preference for shippers and users of heavy crude oil, while causing undue discrimination against shippers and users of light crude oil. PBF’s refinery near Toledo is designed to process light crude oil and relies on Enbridge Energy’s Line 5 (mainline) to obtain a substantial portion of its feedstock.
“The Commission’s preliminary analysis indicates that PBF’s complaint raises issues about Enbridge Energy’s allocation policies and practices that cannot be resolved on the basis of the record at this point. Therefore, the Commission will set PBF’s complaint for hearing and settlement judge procedures,” the FERC order said [OR12-14]. FERC encouraged both sides to “make every effort to settle their disputes” before the hearing procedures begin.
Similarly, High Prairie has accused Enbridge Energy of engaging in discriminatory practices by refusing to grant it an interconnection “except on proposed terms that are unjust, unreasonable and unduly discriminatory,” while allowing affiliates to tie into its system at Clearbrook [OR12-17]. High Prairie is seeking to build a 450-mile pipeline to transport 150,000 bbl of crude oil from the Bakken formation in North Dakota to Clearbrook, at which point it would feed into the Enbridge system. The U.S. portion of Enbridge transports Western Canadian oil and U.S. oil produced in the Williston Basin area of Montana and North Dakota to the Midwest, eastern Canada and New York State.
The success of the High Prairie project rests on High Prairie obtaining an interconnect from Enbridge. It has received commitments from prospective shippers for a “significant portion” of the project, but a “number of those commitments are contingent on High Prairie establishing an interconnect with Enbridge at Clearbrook,” it said.
In June High Prairie officials said they had reached an agreement with an “anchor shipper/equity partner” to transport 50,000 b/d, or the equivalent of “a quarter of available domestic oil from the Bakken region” (see Shale Daily, June 27). They contend that the impact of the deal carries over to “dozens of refineries” across the nation that will be able to access lower-cost domestic oil.
According to High Prairie, Enbridge Energy has sufficient capacity on its system to receive High Prairie’s capacity. High Prairie contends that Enbridge Energy is showing preferential treatment toward its own pipeline affiliates. “Enbridge Energy has allowed only one other pipeline to establish a delivery interconnect into Clearbrook — its affiliate, Enbridge Pipelines (North Dakota) LLC. In addition, Enbridge Energy recently announced plans for a new Enbridge Sandpiper Pipeline,” which will connect with Enbridge Energy at Clearbrook.
Enbridge Energy counters that accommodating the interconnection request would constrain its system when High Prairie goes into operation. “Given anticipated volumes from connecting lines, Enbridge Energy expects there will be significant capacity constraints for light crudes downstream of Clearbrook by the time High Prairie says it would begin operations in December. As such, the only way to accommodate High Prairie’s requested interconnection without current (and future) shippers incurring significant prorationing is either to expand capacity downstream of Clearbrook or to establish an alternative interconnection point (i.e. at Superior, WI.” Enbridge said it offered the two options to High Prairie, but it rejected both. Enbridge called the options “reasonable,” but High Prairie begged to differ.
An interconnection at Superior would require the construction of new tankage facilities at an estimated cost of $200 million to High Prairie. By comparison, an interconnection at Clearbrook would require the construction of new tankage at a cost of $100 million, as well as a new $1 billion 235-mile looped line from Clearbrook to Superior to handle the capacity constraints downstream of Clearbrook, according to Enbridge Energy.
Rep. Collin C. Peterson (D-MN) last month called on FERC to give “fair and prompt consideration” to the interconnection dispute. “Clearbrook is the nearest regional hub for transporting crude oil to the east by pipeline from the Bakken formation in North Dakota. Currently only one pipeline runs eastward across North Dakota to Minnesota, and there is a critical need for additional pipeline capacity to support oil production in this region.
According to NGI‘s Shale Daily Unconventional Rig Count for the week ending Aug. 10, the Bakken/Sanish/Three Forks play has 224 rigs currently in operation, which is up 20%, or 38 rigs from the 186 rigs in operation in the play one year ago.
“Several constituents have raised concerns about possible discriminatory practices that could be impeding the construction of new pipelines and block potential investments in infrastructure. We need to ensure that new market participants have open access to the common carrier pipelines located across the country and are given the same treatment as more established companies,” he wrote in a letter to FERC Chairman Jon Wellinghoff.
High Prairie is one of six separate proposals for pipeline takeaway capacity in North Dakota totaling 900,000 b/d, according to state pipeline authority officials.
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