By Janet McGurty
NEW YORK, May 7 (Reuters) - Enterprise Products Partners said on Monday a decision by the Federal Energy Regulatory Commission (FERC) will not delay the startup of the reversed Seaway pipeline, which is planned to occur around May 17.
On Monday, FERC, which regulates interstate pipelines, denied the application by Enbridge and Enterprise to be able to set market-based rates on its reversed Seaway pipeline, according to an order released by the commission.
The Seaway, which will initially carry 150,000 barrels per day of both sweet and sour crude from Cushing, Oklahoma to the refineries along the Gulf Coast, will be the first of several projects to unlock the surplus of crude in the oil hub.
This makes it difficult for the duo to provide the proxy for prevailing prices needed for FERC to evaluate market power analysis, the filing said.
A spokesman for Enterprise, which jointly owns the line with Canada's Enbridge, said that about one-third of the initial capacity would be affected by the order.
"It's a small amount of total capacity," said Rick Rainey, a spokesman for Enterprise, who said total "walk-up" capacity is about 50,000 bpd initially, and about 10 percent of the planned 400,000 bpd capacity.
Seaway was seeking $3.82 a barrel for non-committed shippers.
Enterprise did not say how it will respond to the FERC decision.
Rising crude flows from Canada as well as burgeoning production from new U.S. oil plays like the Bakken and rejuvenated oil plans like the Permian Basin have pushed the amount of crude held in Cushing -- the delivery point of the NYMEX crude futures contract -- to a record high of 42.96 million barrels for the week that ended April 27, according to government data.
Several projects are under way to move the glut of low-priced crudes from Cushing down to the U.S. Gulf Coast.
This includes TransCanada's controversial Keystone XL pipeline, which has become a political football in the run-up to the 2012 elections.
In April, the Seaway Pipeline Company filed proposed initial fixed-rate tariffs with the Federal Energy Regulatory Commission (FERC) for sending oil from Cushing to the Gulf ranging from $2.07 to $4.32 a barrel, depending on whether the crude was light or heavy in quality.
The company has also a separate application for flexible market rates with FERC, which has control over interstate pipelines.
This application was protested by some of the prospective users, including Suncor Energy Marketing Inc, a unit of Canadian-based Suncor and U.S.-based Apache Corp. .
Sources familiar with pipelines and FERC rulings said that the companies will be watching the outcome of the Pegasus pipeline rate case.
FERC, whose original ruling denied Exxon, the pipeline owner, the ability to set market based rates on the Pegasus pipeline from Illinois to the Texas Gulf, was told to reconsider its refusal by the U.S. Court of appeals.