NEW YORK, March 6 (Reuters) - The U.S. federal energy regulator ruled in favor of Seaway Crude Oil Pipeline Company LLC last week after it upheld rates the company had negotiated with committed shippers for space on its Oklahoma-to-Texas pipeline.
The Federal Energy Regulatory Commission (FERC) issued the order on Friday, reversing an Administrative Law Judge’s September decision that had found the transportation service agreements Seaway entered with committed shippers “unjust” and “unreasonable.”
FERC struck administrative judge Karen Johnson’s decision to determine committed shippers’ rates based on costs, saying her arguments “misconstrue long-held commission policy.”
The regulator remanded the case back to the judge for further action.
The ruling is a welcome relief to pipeline companies who decide the fate of their projects based on committed rate agreements they secure with long-term shippers, which are then used to finance these costly undertakings.
FERC honors these rates but at times reviews the more expensive uncommitted rates that are available to shippers without a binding long-term agreement.
With its Friday decision, the commission affirmed that it will not open for review transportation service agreements and negotiated rates that have already been executed and signed by companies.
The September ruling, which addressed committed rates, had drawn fire from energy companies who said it could jeopardize billions of dollars in investments.
The case arose from contests filed by oil companies against the uncommitted rates they were charged to ship oil on the pipeline.
In April 2012, oil companies including Apache Corp., Chevron Products and Cenovus Energy, among others, had filed a motion contesting Seaway’s proposal to charge non-contracted shippers $3.82 per barrel for light crude and $4.32 for heavy grades.
The Seaway pipeline can ship up to 400,000 barrels-per-day of oil from the Cushing, Oklahoma storage hub to the Jones Creek terminal near Freeport, Texas.
Enterprise Products Partners and Enbridge Inc. , who share ownership of Seaway Crude Oil Pipeline Company, reversed flows on the line in 2012.
The companies are building another 30-inch pipeline, dubbed the Seaway Twin, that will double Seaway’s capacity to 850,000 bpd when it comes online in the second quarter.