For the first time, the U.S. Federal Energy Regulatory Commission has approved an oil pipeline's proposed tariff rates prior to construction.
The approval was granted for Express Pipeline Partnership, which will bring Canadian crude oil into the U.S. Rocky Mountain region.
The $530 million (Canadian) Express Pipeline System plans to ship 179,000 b/d of oil from Hardisty, Alta., to Casper, Wyo., to replace declining Rocky Mountain production. From Casper, the oil would move to Illinois via the Platte Pipeline, also owned by Express Pipeline sponsors.
Express is a partnership owned 50-50 by Express Pipeline Inc., an Alberta Energy Co. Ltd. affiliate, and Trans- Canada Express Holding Inc., a Trans- Canada PipeLines Ltd. affiliate.
Express sponsors have rejected claims by Wyoming independent producers that they will have to pay high tariffs to move oil on the Platte line, saying the producers are free to negotiate long term rates.
Rate details
In planning the project, Express offered shippers transportation contracts for terms of 5, 10, or 15 years.
Rates were lower for longer term contracts, and term rate shippers also will receive lower rates than those who use Express after the project is built and must pay the uncommitted rate.
FERC said 85% of the project's capacity is subscribed under term contracts.
The term shippers provide the financial support for the project, but Express needed FERC approval of the rate structure.
Previously FERC required Express to support the term and uncommitted rates with projected cost and revenue data.
After reviewing the data, FERC said the term rates were appropriate, finding that varying rates among customers did not violate the Interstate Commerce Act.
FERC also found that projected costs supporting the uncommitted rate were consistent with previous oil pipeline rate decisions.
It said it would not further investigate the uncommitted rate if actual construction costs are substantially the same as projected costs.
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