UPDATE: FERC Rules For Enbridge In Clipper Surcharge Dispute

U.S. regulators ruled in favor of Canadian pipeline company Enbridge Inc. (ENB) Wednesday in a dispute with oil producers over higher tolls for a new pipeline scheduled to begin pumping oil into the U.S. on Thursday.

The U.S. Federal Energy Regulatory Commission dismissed arguments made by Calgary-based oil producers Suncor Energy Inc. (SU) and Imperial Oil Ltd. (IMO) against surcharges to pay for the Alberta Clipper line, a 1,000-mile, 450,000 barrel-a-day crude oil expansion line between Hardisty, Alberta, and Superior, Wis. FERC approved Enbridge's plan to implement the surcharges when the pipeline begins bringing Canadian crude into the U.S. on Thursday.

Enbridge will charge $3.89 per barrel of oil transported the full length of its system from Hardisty to Chicago, about 75 cents of which is the surcharge to pay for construction of the Alberta Clipper expansion, according to company spokesman Glenn Herchak.

Suncor and Imperial argued that economic circumstances had changed since producers agreed in a 2008 industry settlement to a surcharge to help pay for Enbridge's Alberta Clipper line. The agreement was made before the global economic downturn hit, as oil prices reached record levels in the summer of 2008. Oil demand dropped steeply afterwards and still hasn't recovered to pre-recession levels.

Suncor argued that Enbridge "imprudently pursued the Alberta Clipper even as circumstances changed dramatically," according to a FERC filing, and asked that producers not be required to pay the higher surcharges "until the shippers need the expansion capacity."

FERC dismissed that and other arguments put forward by Suncor and Imperial, saying it "will not undo a settlement because certain parties now argue that the deal turned out differently than they thought."

"We are pleased that the FERC agrees with our decision and to be able to begin collecting tolls as of April 1, tomorrow," Enbridge's Herchak said. Representatives of Suncor and Imperial weren't immediately available to comment.

"It would have been a shock had it gone the other way," said Carl Kirst, an analyst with BMO Capital Markets. "Companies cannot do multi-billion investments like this, with the backing of shippers at the time, only to have the market change on you and have the rug pulled away. All of a sudden you'd have a fairly large chilling effect on [pipeline] investment," he said.

It wasn't clear how much extra producers will pay in the surcharge, but Kirst estimated it was close to an extra 25% per barrel of oil above the base toll rate.

Enbridge shares closed down 17 cents at $47.75 in New York Wedesday. Suncor shares closed down 26 cents at $32.54. Imperial Oil shares closed up 34 cents at $38.87.

-By Edward Welsch, Dow Jones Newswires; 613-237-0669; edward.welsch@dowjones.com

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