February 5, 2015 / 12:07 AM / in 3 years

UPDATE 1-U.S. regulators probing BP crude shipments on Enbridge pipeline

(Adds details on Enbridge system, quote)

By Nia Williams

CALGARY, Alberta, Feb 4 (Reuters) - A U.S. investigation into oil major BP Plc breaking anti-fraud and reporting rules on using oil pipelines is related to crude shipped on Enbridge Inc’s Mainline system, Enbridge said on Wednesday.

Graham White, a spokesman for Canada’s largest pipeline company, confirmed the investigation is related to crude volumes nominated by shippers on its system. He said the Commodity Futures Trading Commission (CFTC) had not indicated Enbridge was under investigation.

“We are prevented from publicly commenting on this matter as company information will be required for the investigations,” White said. “Our downstream nominations process was reviewed by FERC in 2013 and approved as ‘just and reasonable’.”

The CFTC told BP last November it planned to recommend an enforcement action alleging violations of the Commodity Exchange Act in connection with Canadian pipeline nomination procedures and related trades, BP said in a quarterly earnings statement Tuesday.

The British oil giant said it submitted a detailed defence to U.S. regulators in mid-December.

“We have responded to the CFTC’s allegations and challenged their jurisdiction over the alleged conduct,” said a company spokesman.

Sarah Kiley, spokeswoman for Canada’s National Energy Board, the country’s energy and safety regulator, said at this point the NEB was not involved in the investigation.

Enbridge’s 2.2 million barrel-per-day Mainline system ships the bulk of Canadian crude exports to the United States.

It also supplies BP’s 413,500 barrel-per-day Whiting, Indiana, refinery, which in 2013 underwent a major revamp so it could run more heavy Canadian crude.

Limited export capacity between Canada’s growing oil sands and U.S. refining markets mean export pipelines are routinely overbooked, with shippers nominating more crude than there is space for.

In 2013, Enbridge altered how it calculates the amount of crude shippers can nominate to help eliminate “air barrels” - referring to nominations that are higher than the physical volume shippers can move.

Under the new system, approved by the Federal Energy Regulatory Commission (FERC), shippers calculate how much crude they can request to ship based on the capacity of downstream refineries. Enbridge then verifies the nominations itself.

The changes met with fierce resistance from many traders in Calgary, who argued the new system favoured the biggest refineries and gave Enbridge too much discretion. (Additional reporting by Nia Williams; Editing by Bernard Orr and Jessica Resnick-Ault)

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