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By Nia Williams
CALGARY, Alberta, July 18 (Reuters) - U.S. regulators haveapproved a plan by Canada's largest pipeline company EnbridgeInc to alter how it calculates the amount of crude shippers cannominate on its export network, a move the company says will cutoverbooking on congested lines.
The plan has been criticized by a number of shippers, whosay the changes would give Enbridge too much discretion toallocate capacity and warned pipeline apportionment could riseas a result.
The opposition to Enbridge's move, designed toreduce overbooking, shows the fierce competition among oil sandsproducers and refiners for space on pipelines that are runningclose to full capacity.
The U.S. Federal Energy Regulatory Commission (FERC) onThursday approved Enbridge's proposal to use a new system basedon the capacity of refineries to calculate the amount of crude shippers can nominate on pipelines each month. Enbridge willthen verify the nominations itself.
U.S. approval is needed as parts of Enbridge's pipelinenetwork runs through the United States.
"In this case, Enbridge has filed a proposed NominationVerification Procedure that the Commission has deemed to be justand reasonable," said the FERC document that was released onThursday. Telephone calls to FERC for comment were not answeredThursday afternoon.
Since 2010, when a huge oil spill in Michigan shut forseveral months a major oil line between Indiana and Sarnia,Ontario, shippers have based nominations on the highest monthlyvolume they moved to refining facilities in the U.S. Midwest andOntario over the previous two years.
According to filings, Enbridge say the change will helpeliminate "air barrels" - industry terminology for nominationsabove shippers' ability to move oil. It is a way of gaming thesystem so companies get as much crude as possible to refineries.
"We are pleased there's some clarification now around theissue and we intend to execute on the procedure for our nextround of nominations in September," Enbridge spokesman GlenWhelan said.
Big shippers including Imperial Oil Ltd, SuncorEnergy Inc, ExxonMobil Corp and Philips 66 have all filed motions with the regulator in protest,arguing the new system gives Enbridge too much discretion indetermining whether to accept nominations from refiningfacilities.
"We're disappointed in the decision. We'll review itclosely. At this point it is too soon to say what our next stepsmay be," Suncor spokeswoman Sneh Seetal said in an email.
A spokesman for ExxonMobil said it had been apprised of theFERC ruling and was evaluating its impacts.
Enbridge's pipeline system is the largest supplier of crudeoil to U.S. Midwest refineries, and the single largest source ofU.S. oil imports.
APPORTIONMENT CONCERNS
Surging Canadian oil production and regulatory delays onpipeline projects have forced Enbridge to instituteapportionment on its network in recent years, contributing todiscounts on Canadian crude that in January slipped to $40 belowthe West Texas Intermediate benchmark.
Shippers who protested the changes warned apportionmentcould surge under the new system, with large and newly expandedfacilities - like BP Plc's 405,000 barrel per dayWhiting, Indiana, refinery - able to nominate to their fulltakeaway capacity including storage, terminals and refineries.
Previously these shippers were limited by their historicalnominations.
"I expect this quantum increase in nominations into apipeline that has finite capacity will push apportionmentthrough the roof," said one Calgary-based crude trader.
"The August trade cycle for September nominations, andsubsequent September apportionment, will be very interesting tofollow. I think this could get ugly."
Other industry players said refineries that relied primarilyon Enbridge lines to carry their crude feedstock would be mostvulnerable as a result of the ruling.
"People that are bringing barrels in from alternativesources win the game because they will maximise the totalcapacity to their refinery, then if there's 20 percentapportionment they just pull it in from other sources," anotherCalgary trader said.
