Plains withdraws surcharge on Cactus 2 crude line

Plains All American Pipeline is removing a 5¢/bl surcharge on the 670,000 b/d Cactus 2 crude pipeline that would have covered the cost of steel tariffs.

The move comes after ConocoPhillips and Encana Marketing objected to the extra fee on Cactus 2.

Plains filed an amended tariff today to the US Federal Energy Regulatory Commission (FERC) which removes the 5¢/bl surcharge. The filing does not state a reason for the change. Plains did not respond to a request for more information.

Cactus 2 started service earlier this month, moving crude from the Permian basin in west Texas to Corpus Christi on the Gulf coast. The 5¢/bl surcharge would have gone into effect on 1 April.

ConocoPhillips and Encana last week urged federal regulators to reject the 5¢/bl surcharge because Plains had "failed to demonstrate" that the surcharge "is just and reasonable" under the Interstate Commerce Act, according to a joint filing to FERC.

ConocoPhillips and Encana also said that including the surcharge in the Cactus 2 tariff is premature as Plains is still pursuing an exclusion from the steel tariffs.

Plains first filed to add the surcharge on 2 August, telling FERC that it would be implemented "for the purpose of amortizing capital expenditures associated with increased construction costs as a result of governmental regulation and tariffs."

The US Commerce Department in May denied a request from Plains to waive import tariffs on hundreds of miles of steel pipeline imported from Greece for Cactus 2. The waiver request was not a "complete submission," the agency said.

Plains last year said having to pay the steel tariff would add $40mn to the cost of the 562-mile (904km) project. Commerce's denial came 10 months after it denied a nearly identical request from the company, also on the grounds it was incomplete.

Plains had asked Commerce to lift tariffs on 155,500 metric tonnes of pipeline imported from Greece's Corinth Pipeworks.

The oil and gas industry has lost the majority of its requests to win exemptions from steel import tariffs that President Donald Trump set at 25pc for most countries in March 2018.