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BP lodges complaint with Canadian regulator over Enbridge oil shipping rules

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BP lodges complaint with Canadian regulator over Enbridge oil shipping rules

Canada's National Energy Board will investigate Enbridge Inc.'s decision to implement, and then scrap, new rules for shipping crude on its mainline pipeline network that links Canada's oil sands region with the U.S. Midwest.

BP PLC asked the regulator in a June 6 letter to review the abandonment of the so-called Shipper Verification Program just over a week after Enbridge announced it. Jennifer Geggie, BP's vice president of global oil for the Americas, said in the letter the timing of the decision, which came while traders were actively negotiating contracts for July shipments, was unreasonable. Enbridge told pipeline users it was implementing the new verification procedures May 24, then told shippers June 4 it was scrapping the plan. Geggie's letter said her company needs at least one month's notice to adapt to the changes.

Enbridge planned the verification procedure to discourage the nomination of so-called air barrels, or capacity requests in excess of a shipper's actual need, to increase delivered volumes and reduce scheduling headaches. The mainline is normally oversubscribed. When nominations for transportation exceed capacity, Enbridge pro-rates the space it allocates to shippers based on their initial requests. While Enbridge gets paid tolls for the nominated barrels whether they arrive or not, if the system was actually full it would run more efficiently.

The company had proposed allocating space on the mainline system based on actual shipper volumes in the previous 12 months, with some variables. News that the plan would be scrapped resulted in a surge in the spot price of Canada's benchmark crude blend on the perception that the Shipper Verification Program favored contracted volumes over cash sales.

"Notifying shippers just a few days prior to implementation of the Shipper Verification Program without having provided opportunity for deeper review by shippers beforehand is unreasonable," Geggie said in the letter. The complaint seeks an order to have Enbridge give shippers at least one month of notice before making changes to the program and to keep it in place until at least August 2018.

The board gave Enbridge until June 18 to respond to BP's complaint. In a June 7 letter, National Energy Board Secretary Sheri Young also gave BP until June 20 to review and respond to Enbridge's comments. Other interested parties have until June 13 to file their comments. Once all the comments are received they will be reviewed by the board which will either issue a decision or hold further hearings into the matter.