Gunvor fights Colonial Pipeline fine on orphaned refined product barrels amid high stocks

Washington — Trading group Gunvor USA is urging US pipeline regulators to reject Colonial Pipeline's plan to fine shippers up to $25 million if full storage facilities prevent them from taking delivery of their oil supplies.

In a May 13 tariff filing, Colonial notified the Federal Energy Regulatory Commission that it had temporarily changed its tariff "in order to have an appropriate deterrent in place to keep shippers from placing product on Colonial without guaranteeing there is a destination terminal that is willing and able to receive the product."

It describes a "worst-case scenario" of Colonial having to pay to clear product and slow or shut down a line due to "shipper misbehavior."

"These changes benefit all shippers by minimizing the risk that Colonial may not be able to find a buyer for the product, which could potentially shut down segments of the Colonial system, affecting all shippers," Colonial said.

Colonial said the temporary tariff changes would take effect May 24 and last for 90 days.

Gunvor protested the changes in a May 28 motion to intervene. It argued that Colonial already has tools in its tariff and through its pipeline system to prevent the damages it envisions with stranded oil supplies.

It added that Colonial did not meet its burden of demonstrating both that a problem exists on its system that its current tariff cannot address and why this "drastic remedy" is justified.

"Colonial's tariff filing appears to be an effort to not let a good crisis go to waste," Gunvor said. "But the current pandemic cannot be converted into a profit opportunity for Colonial by using it as an excuse to make unjustified tariff changes that would give Colonial unbounded discretion to impose damages liability on shippers."

FERC has not yet responded to Gunvor's filing.

Colonial's Line 1 carries 1.37 million b/d of gasoline from Pasadena, Texas, to Greensboro, North Carolina, and its Line 2 carries 1.16 million b/d of distillate fuel along the same route.

From Greensboro, the two lines meet the 855,000 b/d multiproduct Line 3 that runs to Linden, New Jersey, and the 504,000 b/d Line 4 that runs to terminals in Virginia and Maryland.