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Permian oil pipelines EPIC, Cactus II caught in FERC backlog

Highlights

Pending petitions would add 2.4 million b/d in capacity

Industry asks if FERC has imposed informal moratorium

Last approval went to Sunrise pipeline in October

Washington — Two major crude oil pipelines poised to help relieve the Permian bottleneck this year have had routine regulatory orders held up for months in Washington, leaving the developers and anchor shippers without certainty that the Federal Energy Regulatory Commission will approve terms underpinning the projects.

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The 585,000 b/d Cactus II and 550,000 b/d EPIC pipelines are among 15 liquid pipeline projects with capacity totaling about 2.4 million b/d waiting longer than normal for FERC decisions, despite drawing no opposition. FERC has not issued any similar orders for four months, since approving rates for Plains All American Pipeline's 350,000 b/d Sunrise in October.

The pipelines will still likely go into service as scheduled if they do not receive a response from FERC, analysts said. But knowing FERC's view on their rates in advance helps projects make long-term commitments.

"This is placing our project time line in some jeopardy, and causing concern to our shippers," EPIC CEO Phil Mezey said in a letter to FERC in early January. FERC has not responded to Mezey's letter.

The pipeline developers have filed petitions for declaratory order, a voluntary process done before a new pipeline or expansion starts service. A FERC approval confirms any benefits given to anchor shippers are appropriate under the Interstate Commerce Act. Without the order, the terms could be challenged as unfair by future shippers on the line and spark a long and expensive tariff fight.

What's not clear is whether this growing backlog of petitions is merely a slowdown at FERC or the sign of an ideological shift about new oil pipeline capacity or pipeline rate structures.

"Some in the industry believe that FERC has implemented an informal 'moratorium' on ruling on PDOs," Gary Kruse, research director at Law IQ, said in a recent note to clients. "If you are a shipper awaiting new capacity, a liquids pipeline seeking to expand, or an investor waiting for the cash to begin flowing, you need to be aware something is apparently stopping this routine process."

UP TO 244-DAY WAIT

Law IQ, an energy data analytics firm, found that approvals of such petitions took fewer than 80 days on average in the two years preceding FERC's loss of a quorum in early 2017. The average wait grew to 90 days for approved applications filed in 2018.

Pending applications that have drawn no opposition have been waiting between 57 and 244 days, with the oldest being Enterprise Products Partners' 190,000 b/d expansion of its New Mexico crude gathering system. Enterprise filed the petition June 27 and had asked FERC to act by October 1. The company put the expansion into service in July, a spokesman said.

Buckeye's petition to reverse its Laurel refined products pipeline has waited even longer, since April 30. But unlike the other uncontested cases, it drew opposition from the Pennsylvania Public Utility Commission.

EPIC filed its petition October 10 and requested an answer by January 4, "based on our experience of many petitioners that had gone before" that 90 days was sufficient time, Mezey said.

"We have worked diligently with counsel and our shippers to insure that all features of our project comply with commission policy," he added. "We have no indication from commission staff that any aspect of our project is problematic from a regulatory standpoint, but we are committed to addressing and resolving any issues that should arise in that regard."

Christi Tezak, managing director of ClearView Energy Partners, suspects the routine orders just are not on the commission's radar right now.

Tezak does not expect the Permian projects to be held up by the delay, as they can start construction without the orders and are only required to file a tariff 30 days before starting service.

"Since they aren't contested, there won't be any need to have any proceedings or approve them subject to a refund," Tezak said. "If FERC gets to them by summer, then there would be no worries."

Andy Black, president of the Association of Oil Pipe Lines, said the Washington trade group has noticed the delays and hopes FERC is able to return to more timely action.

"FERC's policies have contributed to the expansion of liquid pipelines for a long time," he said, adding that previously timely actions on petitions for declaratory orders "have helped give pipeline operators and shippers certainty as they form agreements to expand pipeline capacity."

Uncontested oil pipeline cases awaiting FERC action
Developer Pipeline Capacity (b/d) Location Startup
Enterprise New Mexico System expansion 190,000 New Mexico's Delaware Basin Jul-18
Targa NGL Pipeline Targa NGL Pipeline expansion 110,000 Oklahoma's SCOOP, STACK plays to Mont Belvieu, Texas Sep-18
Enterprise TE Products Refined products and LPG pipeline expansion 34,500 Seymour, Indiana, to Chicago Q3 2018
EnLink Chickadee crude pipeline expansion 38,000 West Texas Q4 2018
EnLink Delaware Basin crude gathering system 100,000 New Mexico and West Texas Q1 2019
Tallgrass Energy, Silver Creek Midstream Iron Horse Pipeline 100,000 Powder River Basin, Wyoming Feb-19
EnLink EnLink NGL Pipeline 54,000 Mont Belvieu, Texas, to central Louisiana Q2 2019
Magellan Pipeline West Leg refined products pipeline expansion 150,000 Houston to El Paso, Texas mid-2019
EPIC Crude Pipeline EPIC Crude Pipeline 550,000 West Texas to Corpus Christi Q3 2019
Plains All American Pipeline Cactus II Pipeline 585,000 West Texas to Corpus Christi Q3 2019
White Cliffs NGL pipeline 50,000 Weld County, Colorado, to Mont Belvieu, Texas Q4 2019
Medallion Pipeline Midland Basin crude gathering system expansion 207,000 West Texas Q4 2019
OneOK Elk Creek NGL pipeline 180,000 Montana to Kansas 2019
Sunoco Pipeline Mariner East C3+ pipeline 10,000 Marcellus/Utica basins to Pennsylvania, Delaware 2019
Plantation Pipe Line Refined products pipeline expansion 21,000 Baton Rouge, Louisiana, to Greensboro, North Carolina Apr-20
Source: Company filings

-- Meghan Gordon, meghan.gordon@spglobal.com

-- Edited by Valarie Jackson, newsdesk@spglobal.com

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