NEW YORK (Reuters) - A U.S. energy regulator ruled that Enterprise Product Partners LP broke the law when it closed a distillates pipeline running from the Gulf Coast to the Midwest, according to an order issued on Thursday.
The Federal Energy Regulatory Commission said it can order damages in the case and would set a hearing to see how much if any should be awarded. But it said it did not have the authority to demand a reversal of the shutdown by the pipeline operator, Enterprise TE Product Pipeline Company LLC.
FERC said the closure had broken an agreement with shippers signed earlier this year that stipulated all tariffs in that agreement should remain in effect for two years.
A number of smaller shippers, fuel marketers, two airlines as well as FedEx have battled the closure since May arguing it would leave consumers either short of diesel and jet fuel or paying far higher prices as the fuels are trucked in.
Enterprise argued shippers had been alerted to its plans to shut the line before the agreement. It had said that the shutdown was a change in its operations not covered by the agreement and that it interpreted the phrase "to remain in effect" as meaning only that the tariffs could not be raised.
But FERC disagreed.
"To adopt Enterprise TE's argument that the Settlement did not prevent unilateral discontinuation of service would not only render much of the Settlement a nullity as Complainants argue, but could have a chilling effect on other oil pipeline contracts and settlements," the order read.
But this ruling will not prevent Enterprise from continuing with its plans to reverse the pipeline and enable it to carry ethane gas from the shale plays of Ohio and Pennsylvania and ship it back to the Gulf Coast.
FERC said it did "not possess the authority to, as an equitable remedy, prevent or delay the abandonment of service by an oil pipeline". Instead it can only order damages and said it would set a hearing to determine how much should be awarded.
(Reporting by Sabina Zawadzki; Editing by Alden Bentley)