February 23, 2018 / 6:53 PM / 25 days ago

Shale producers urge FERC to deny White Cliffs oil pipeline's fee request

NEW YORK (Reuters) - Top shale oil producers asked a U.S. regulator this week to reject White Cliffs pipeline’s application to charge market-based rates for shipments from Platteville, Colorado, to the storage hub at Cushing, Oklahoma.

U.S. shale producers ConocoPhillips Co (COP.N), Kerr McGee Oil & Gas Onshore LP, a unit of Anadarko Petroleum Corp (APC.N), Noble Energy Inc (NBL.N) along with Bill Barrett Corp (BBG.N) told regulators White Cliffs will likely raise fees if given the authority to charge market-based rates.

Kerr McGee and Noble are shippers of crude oil on the White Cliffs system. Bill Barrett supplies crude oil produced in the Denver-Julesburg (DJ) basin to shippers on the White Cliffs system and a potential shipper. As a producer in the DJ basin, ConocoPhillips is positioned to use the White Cliffs system either as a shipper or a supplier to shippers.

White Cliffs is a joint venture that is majority-owned and operated by Rose Rock Midstream, a unit of SemGroup Corp (SEMG.N).

In December, White Cliffs filed an application with the U.S. Federal Energy Regulatory Commission (FERC) seeking market-based ratemaking authority for crude oil shipped from the Niobrara Shale Region origin and delivered to the Tulsa-Bartlesville, Oklahoma, destination.

It said market-based rates would allow it to have the flexibility to respond quickly to market conditions and compete more effectively in those markets.

The alternative to market-based rates are cost-based rates. They ensure that pipelines charge rates that recover only the cost of providing the service.

FERC allows certain pipelines to charge market-based fees, provided the companies do not have a monopoly or exert “market power” in those markets.

    The protesters, however, said White Cliffs’ application is based on “overly broad” classification of the market and that if allowed to charge market-based rates, it would leaved shippers “basically powerless to resist.”

    “White Cliffs erroneously presumes that all alternatives within its broadly defined ‘Niobrara Shale’ producing region are available and competitive alternatives to transport crude oil produced anywhere within the area, when in fact ... this is not the case,” the companies said in a filing with FERC on Tuesday.

    A spokesman for SemGroup did not immediately comment on the protests.

    The White Cliffs Pipeline has current capacity of 185,000 barrels per day (bpd). The system is undergoing an expansion that will increase the capacity to about 215,000 bpd by mid-2018.

    The application does not include White Cliffs’ origin point at Healy, Kansas.

    Reporting by Devika Krishna Kumar in New YorkAdditional reporting by Ayenat Mersie in New YorkEditing by Matthew Lewis

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