Shipper demands differ on Colonial tariff
OREANDA-NEWS. Colonial Pipeline must make more changes before a new tariff governing the largest refined products pipeline system between the US Gulf coast and the New York Harbor is acceptable, a majority of shippers have told federal regulators.
Larger, historic shippers on the constantly-full 5,500-mile (8,851km) pipeline system sought small changes ensuring their own business flexibility. But companies seeking new space on the Colonial called on the Federal Energy Regulatory Commission (FERC) to act before they lose any competitive access to the line.
"The evaporation of this liquidity will increase costs in line space and thus costs to end use consumers," a nine-member New Shippers Group said in a filing.
Companies have effectively split between long-time shippers and new interests hoping for steady space on Colonial's pipeline system connecting Pasadena, Texas, to Greensboro, North Carolina, and on into the New York Harbor market.Laws governing marine movements between US ports keep the pipeline system the least expensive route to the Atlantic coast for the largest US refining complex.
The pipeline has operated at full volumes for roughly four years, but Colonial has no public plans to further expand the system. Shippers have instead fought to preserve their limited space on the system or use quirks in how volumes on the pipeline are allocated to wring valuable access out of the system.
Trades called line space have emerged as access along the Colonial pipeline system shrank. The trades mark the difference in value between barrels produced on the US Gulf coast and delivered by Colonial to east coast markets. A company's history of shipping across the system largely determines its access to this hotly contested pipeline system, and whether a company pays or collects that difference in value. Colonial has sought to rein in how shippers can trade this history to end what it called a "vicious cycle" of rising prices beyond the tariff to move on its pipeline.
Historic shippers have bristled as a surge of interest on the system eroded their traditional access. Marathon Petroleum said its allocation on the pipeline has fallen by 16pc over the past three years — consistent with the average decrease for large shippers over the same period.
Large, historic shippers generally supported Colonial changes that would drop shipper batch volumes to 15,000 bl from 25,000 bl and tighten gaps between Colonial-awarded volumes and actual volumes shipped on the system. BP, Marathon Petroleum, Flint Hills Resources, Western Refining, Sunoco, Valero and Murphy filed statements that generally supported Colonial's proposal. The proposed changes "remove the existing small volume regular shipper bias", BP said in its filing.
The large shippers generally sought changes to how companies could pass pipeline access between affiliates, potentially disrupting operations united under holding companies or joint ventures. Shell Trading US Company (STUSCO), which is involved in an unwinding US Gulf coast joint venture between Shell and Saudi Aramco, sought several changes to make transfers more available.
"STUSCO opposes any limitation on shippers' ability to transfer their shipment history," the company said.
New shippers also opposed Colonial's proposal to restrict shipping history transfers, but for different reasons. New shippers say Colonial's changes give them a slightly better chance of gaining regular service on the pipeline than being struck by lightning. A group of ten new shippers, including retailer Costco, which said it had managed access to just one out of more than 24 shipping cycles, pressed FERC to end a structure it said would erode competition and raise prices. Costco urged the commission to "open a new docket to review and establish a lawful prorationing policy."
World Fuels and Costco joined the nine smaller shippers in seeking either broader changes or maintaining the status quo to access the pipeline system.
Shippers have until 22 April to make a full, formal filing on the proposal. FERC has held Colonial's tariff in abeyance until 4 July as it works to resolve complaints on the new tariff system.