October 23, 2014 / 10:54 PM / 3 years ago

Canexus Corp's Alberta crude-by-rail terminal loses deal after delay

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CALGARY, Alberta, Oct 23 (Reuters) - Terminal operator Canexus Corp said on Thursday an unnamed midstream company cancelled its contract to ship two unit trains per week from Western Canada's first dedicated crude-by-rail facility.

Canexus did not name the company, which signed a take-or-pay agreement in December 2013, and said the contract was cancelled after delays in connecting the crude-by-rail terminal to the Cold Lake pipeline system.

"We are very disappointed that the delay in the tie-in of the Cold Lake pipeline system to the unit train facility triggered the termination right under this agreement," said Doug Wonnacott, Canexus' president and chief executive officer.

The Bruderheim terminal near Edmonton, Alberta, was planned as a 70,000 barrel-per-day facility but as a result only has contracted volumes for up to four units trains per week, roughly 40 percent of its capacity. In a unit train, all of the cars travel from the same origin to the same destination.

It is the latest set-back for the troubled Bruderheim terminal, which was put up for sale over the summer.

Canexus was the first company to ship mile-long unit trains loaded with crude from Western Canada to markets in the United States but the project was dogged by delays and costs spiralled.

Under the terms of Canexus' contract with the midstream company, Bruderheim was meant to be connected to the Cold Lake system, Inter Pipeline Fund's 450,000 bpd oil sands network, by Sept. 1.

But in August MEG Energy refused to allow Canexus to do the work needed to tie the Cold Lake system into a key feeder pipeline running from MEG's Stonefell terminal to Bruderheim.

The dispute went to court and though it ruled in favour of Canexus, the tie-in work was delayed.

"Because of MEG's decision we missed the Sept. 1 deadline and the contract allowed for this midstream company to be able to terminate if they wanted," said Canexus director of investor relations Lavonne Zdunich.

MEG Energy and Cenovus Energy Inc are both still committed shippers at the Bruderheim terminal with long-term contracts between three and five years. Canexus said it is still in talks with the midstream company.

Zdunich said Canexus was not actively pursuing additional contracts because the terminal is up for sale, as some buyers might prefer not have to contracted volumes at the facility. (Reporting by Nia Williams; Editing by Alan Crosby)

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