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Railroad Commission sides with Eastman in pipeline dispute

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Written by David Hunn

Click HERE to Read the Article by the Publisher.


State oil and gas commissioners on Wednesday ruled that Houston-based Westlake Chemical cannot charge a free-market rate for use of its Texas pipeline, concluding a 3-year-old dispute.

The state Railroad Commission, which has the power to set pipeline rates, set a price below what Westlake was charging a customer, Eastman Chemical, to use the pipeline. Eastman filed a complaint with the commission after Westlake nearly doubled its rate in 2013, to $3.50 per 100 pounds from $1.90. The Railroad Commission, on a 2-1 votes, set a rate of $2.45 per 100 pounds.

The dispute between Westlake and Eastman has has been carefully watched by pipeline, chemical and oil industry leaders. Some were anxious to see if the commission would award Westlake a market rate, something it has not yet allowed.

The dispute centers on the cost of shipping ethylene, a building block of plastics, 200 miles through Westlake’s pipeline from Longview, near Dallas, to Mont Belvieu, near the Houston Ship Channel. In July 2013, Westlake not only increased Eastman’s rates, but also removed a discount for shipping more than 320,000 pounds in a day. Eastman lodged a complaint with the Railroad Commission.

Eastman proposed a rate of $1.67 per 100 pounds. The commission staff recommended $2.45, which commissioners Christi Craddick and Ryan Sitton supported. David Porter voted for a $1.55 rate.

Sitton, despite his vote, penned a dissenting opinion that sided with Westlake and a market driven price.

“We missed an opportunity in this case,” Sitton said, “to begin the process of setting market-based rates for common carrier pipelines.”


Tags: oil, gas, pipeline


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Written by David Hunn

Click HERE to Read the Article by the Publisher.

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