Enbridge faces complaints of oil sands favoritism from Bakken producers
By SHAWN McCARTHY
The Globe and Mail
OTTAWA -- Enbridge is battling industry complaints in the United States that it is favoring oil sands companies over producers from North Dakota's prolific Bakken field, as the shortage of capacity costs companies billions in revenues.
In a filing with the US Federal Energy Regulatory Commission, High Prairie Pipelines charges that Enbridge is refusing to connect a High Prairie pipeline from the Bakken to its system to preserve space for future oil sands exports.
The Calgary-based pipeline company denies High Prairie's complaints, saying it "presented several reasonable alternatives" to the American pipeline firm.
But the dispute underscores the growing scramble for limited pipeline space, as burgeoning production from the Bakken and light, tight oil plays in Canada compete with the expanding oil sands for transportation space.
In a report this week, the Canadian Association of Petroleum Producers cited an "urgent need for additional transportation infrastructure" as a key risk factor in its bullish forecast that oil sands production will double to 3.1 million bpd by 2020, from 1.6-million today.
Consulting firm Wood Mackenzie warned an inability to get crude to markets could undermine the commercial viability of future oil sands projects, in part by driving down prices Canadian producers receive for their oil.
But producers in Alberta and Saskatchewan aren't the only ones facing a costly logjam.
Companies in North Dakota are resorting to shipping their crude by truck and rail, which can add $10 (US) a barrel to transportation costs and reduce the revenue to producers, as well as landowners in North Dakota and the state government.
High Prairie, a subsidiary of privately held Saddle Butte Pipeline from Durango, Colo., proposed a 150,000-bpd, 750-kilometre pipeline from the Bakken to connect with the Enbridge network in Minnesota, and won sufficient binding commitments from shippers to proceed.
The company hopes to have the pipeline in service by the end of 2013, but needs a connection to Enbridge's network at Clearbrook, Minn.
In its filing with FERC, High Prairie alleges that Enbridge has spare capacity on its line and has an obligation as a common carrier to provide non-discriminatory service. It wants the regulator to order Enbridge to proceed to connect with its line.
"First they agreed to an interconnection and then they came back and changed their story," Greg Ward, general counsel for High Prairie, said in an interview. "They have the spare capacity but they are reserving it because they expect production in the Canadian tar sands to increase."
Mr. Ward is accusing Enbridge of using its monopoly power to favor oil sands producers so that it can count on more lucrative long-haul business from Alberta rather than the shorter route from North Dakota's prolific Williston Basin.
In an e-mailed statement, Enbridge spokeswoman Lorraine Little said FERC has already thrown out one complaint from High Prairie, but that was a protest in a tariff hearing. The regulator must now deal directly with the complaint.
"We continue to believe High Prairie's claims are wholly without merit and have filed a response with the FERC asking the commission to dismiss the complaint just as it denied the earlier protest," Ms. Little said.
"The Williston Basin is in need of additional pipeline transportation options and despite these complaints Enbridge is still open to negotiations with Saddle Butte."
High Prairie is not the only company to take a complaint against Enbridge to the US regulator.
PBF Energy, of Parsippany, N.J., operates a 170,000 bpd refinery near Toledo, Ohio, and has claimed in a filing that Enbridge has shown "undue and unjust preference for shippers and users of heavy crude oil" over users of light crude.
In its complaint, PBF cited Enbridge's decision in April to formalize a cap on shippers' access to its mainline system due to a shortage of capacity versus demand.
But the refiner said Enbridge was more generous to oil sands producers and their customers than it was to refiners that process light oil.
Enbridge also denies that it is discriminated against light oil producers and their customers.
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