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Commissioner Tony Clark Statement
March 21, 2013
Docket No. OR13-6-000
Item No. G-5

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Enbridge Pipelines

“Regulatory certainty can play a critical role in unlocking the benefits of new infrastructure development for consumers and our nation. Here, Enbridge North Dakota petitions the Commission for upfront regulatory certainty on several cost recovery mechanisms to enable $2.5 billion in new pipeline investment that will transport growing Bakken crude oil production to downstream markets. In declining to address Enbridge North Dakota’s request, today’s order results in a complete dismissal of the pipeline’s proposal that will unduly delay much needed investment in infrastructure.

“Recent advances in drilling and hydraulic fracturing have resulted in significant increases in Bakken oil production. Pipeline capacity out of North Dakota is currently maximized and additional infrastructure is needed to ensure efficient and safe transportation. At the time of Enbridge North Dakota’s submittal, Bakken crude oil production in Montana and North Dakota had risen from approximately 100,000 bpd in 2006 to approximately 770,000 bpd annualized in 2012. Between 2006 and 2011, Enbridge North Dakota has more than doubled the capacity of its North Dakota System; nonetheless, it states that the system has remained in constant apportionment.

“Enbridge North Dakota now proposes to invest $2.5 billion to create the Sandpiper project and increase its ability to transport this growing production to downstream markets. In its petition, Enbridge North Dakota is not requesting a novel declaration from this Commission; prior Commission actions demonstrate the Commission’s ability to address many aspects of Enbridge North Dakota’s proposal at this stage. For instance, the Commission has previously approved contested cost-of-service surcharges in petitions for declaratory order. We’ve also addressed the merits of contested cost-of-service components. Given the information Enbridge North Dakota has already provided in its filing, we could have addressed its petition at this time.

“Regrettably, today’s order relies on a procedural sidestep to avoid making any calls on the merits. The order responds to Enbridge North Dakota’s request by directing the company to comply with the Commission’s procedures for setting or changing a pipeline rate, such as by submitting a full cost-of-service filing. The order comes to this conclusion despite the fact that Enbridge North Dakota is not seeking to charge a rate at this time. While certain aspects of the cost recovery mechanisms are protested and may lack adequate support, a full cost-of-service filing is not necessary to address Enbridge North Dakota’s proposal.

“Nevertheless, to the extent the record can be supplemented with additional cost-of-service information, we encourage Enbridge North Dakota to do so in a future petition. Further discussions with existing shippers and potential settlement on contested rate issues would also be advantageous for relations with current shippers and for review of any future filing.

“In addition, a key aspect of Enbridge North Dakota’s proposal involves the allocation of risk of the project between the pipeline and its shippers, some of whom argue that the project is not needed. Certain shippers, for example, claim that Enbridge North Dakota seeks a guaranteed return on equity through its proposed annual true-up mechanism. The Commission has no role in the siting of oil pipelines, and our statutory obligation under the Interstate Commerce Act to ensure just, reasonable and not unduly discriminatory rates does not extend to an examination of project need. However, the Commission must ensure that, in addressing Enbridge North Dakota’s cost recovery mechanisms, shippers are protected from risks that should appropriately be assigned to the pipeline.

“By denying Enbridge North Dakota’s petition outright, and not addressing any of its proposed cost recovery mechanisms, we are concerned that a significant investment in this nation’s infrastructure could be unnecessarily delayed.

“For these reasons, we respectfully dissent from this order.”




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Commissioner Tony Clark

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Updated: June 7, 2013