ALBERTA

NEB denies request to dub Chevron refinery 'priority destination' for crude

07/11/2013 05:13 EDT | Updated 09/10/2013 05:12 EDT
CALGARY - The National Energy Board has denied Chevron's request to deem its refinery in Burnaby, B.C., a "priority destination" for crude shipped on Kinder Morgan's Trans Mountain pipeline.

The Canadian unit of U.S. energy giant Chevron Corp. (NYSE:CVX) brought the case before the regulator more than a year ago because it said it hasn't been able to economically access enough crude for the 55,000-barrel-per-day refinery.

The Trans Mountain line wasn't able to accommodate all of the crude shipments its customers were demanding, which led to a conflict between refiners on both sides of the border over who should get first dibs.

In order to be considered a priority destination, the NEB said Chevron had to prove it was "unable to meet, or is at substantial risk of not meeting, its minimum run rate" and could not "reasonably ensure its long-term viability."

In a release Thursday, the energy watchdog said it was not convinced by Chevron's arguments. It was the first time the board had to make a decision regarding a priority destination designation.

"Among other reasons, the board observed that Chevron had consistently met its 40,000 (barrel per day) minimum run rate using the existing options in its supply portfolio," the NEB said.

"The board was of the view that it is the responsibility of Chevron to design a portfolio of supply options that will best mitigate its supply risk and ensure the long-term viability of the Burnaby refinery."

As well, the NEB says Kinder Morgan has until the end of September to either change its procedures for allocating pipeline space or explain why they're adequate.

Kinder Morgan is preparing to file a regulatory application to nearly triple the size of the 300,000-barrel-per-day Trans Mountain line, which currently ships a variety of crude products from the Edmonton area to the B.C. Lower Mainland and Washington State.

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