Enbridge wins right to hike pipeline fees

Pipeline tolls are set to surge for Canada's oil producers after Enbridge Inc. won a key battle against oil sands companies that have criticized the company for building what they called an unnecessary pipeline to the United States.

The U.S. Federal Energy Regulatory Commission ruled against Suncor Energy Inc., which wanted to avoid paying additional tolls for the new $3.7-billion line. Suncor said Enbridge should not have built the pipeline, and its argument was supported by a number of other producers.

FERC sided with Enbridge, which wants raise the tolls on its network of crude pipelines on April 1 in order to pay back the costs of the line, which runs 1,607 kilometres from Hardisty, Alta., to Superior, Wis.

Clipper is set to receive its first crude today.

The ruling means Enbridge tolls will increase by 97 cents, a 33-per-cent hike, over 2009 levels, Enbridge said. About three-quarters of that increase is because of Clipper costs.

That's not enough to significantly impact oil producers' profits, since it's a small percentage of the price of crude. But had Enbridge lost against Suncor, "it would have been a negative for Enbridge earnings," said UBS Securities analyst Chad Friess.

Tolls could, however, rise even further as TransCanada Corp. works to build even more oil pipeline capacity, which will further divert volumes from the Enbridge system. The toll impact could last for years, as the oil patch suffers the hangover from the boom, which bred huge optimism in oil sands production forecasts before the economic crisis forced the cancellation or suspension of a number of projects.

"At some point this [Clipper]pipeline is going to be used. But it may take 10 years," Mr. Friess said. "Unfortunately the producers couldn't ramp up production as quickly as they thought, but eventually they will."

Enbridge welcomed the ruling. "We are pleased that FERC agrees with our position, and to be able to begin collecting tolls as of April 1," said Enbridge spokesman Glenn Herchak. "This further supports the common carrier system, which we believe benefits the producing community as a whole."

Marathon Petroleum Co., Total E&P Canada Ltd., Canadian Oil Sands, Husky Gas Marketing Inc., Nova Chemicals (Canada) Ltd. and Flint Hills Resources Canada LP had all sought to intervene on Clipper, which oil producers argued was unnecessary.

Suncor led the argument, asking FERC to suspend any toll increases until Enbridge can prove Clipper's 450,000-barrel-per-day capacity is needed. Suncor argued that Enbridge should have known that the pipeline wasn't needed after the economic crisis resulted in a number of oil sands projects being cancelled.

That has meant that expected production levels from the Fort McMurray, Alta., area may not materialize for years to come. Because Enbridge receives a regulated rate of return on its oil pipeline system irrespective of volume, producers fear the per-barrel toll for carrying crude could rise if some of those pipelines are not filled to expected capacity.

ENBRIDGE (ENB)

Close: $48.44, down 46¢