A Federal Energy Regulatory Commission judge annulled committed shipper rates on the Cushing-to-Texas Seaway pipeline on Friday, despite objections from energy companies who say it could jeopardize billions in infrastructure investment.
Administrative law Judge Karen Johnson upheld a ruling she made last September, saying the contracts that Seaway Crude Oil Pipeline Company LLC negotiated with committed shippers must be "disturbed" because of the "likelihood that overall rates would be unjust and unreasonable."
The case arose from motions filed by oil companies against uncommitted shipper rates on the 400,000 barrels-per-day pipeline, which gives U.S. Gulf Coast refiners access to Canadian heavy crude and American oil.
The federal regulator had struck the judge's initial decision in March and remanded it to her review, saying her arguments misconstrued long-held commission policy.
The commission honors so-called committed shipper rates, which midstream companies enter with long-term shippers in order to finance their costly projects. It reviews the more expensive uncommitted rates on inter-state pipelines.
Enterprise Products Partners and Enbridge Inc. , who share ownership of Seaway Crude Oil Pipeline Company, reversed the pipeline in 2012. They charge uncommitted shippers $3.82 per barrel for light crude and $4.32 for heavy grades for space on the line, according to regulatory filings.
The two companies are expected to start service within the next month on a twin pipeline that will double Seaway's capacity to 850,000 bpd. (Reporting by Selam Gebrekidan; Editing by Grant McCool)