UPDATE: FERC Rules For Enbridge In Clipper Surcharge Dispute
March 31 2010 - 4:44PM
Dow Jones News
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
Imperial Oil (AMEX:IMO)
Historical Stock Chart
From Jun 2024 to Jul 2024
Imperial Oil (AMEX:IMO)
Historical Stock Chart
From Jul 2023 to Jul 2024