NEB Market Snapshot: What is pipeline apportionment?

This article was published by the National Energy Board on August 15, 2018.

Subsection 71 (1) of the National Energy Board Act (NEB Act) requires that an oil pipeline company offer service to any party wishing to ship oil on its pipeline.^Footnote1 Accordingly, all NEB-regulated oil pipelines are common carriers and should have some capacity available, or uncommitted, each month for shippers who do not have contracted capacity.

Some pipelines, such as the Enbridge Mainline, have no contracts and offer all of their capacity on an uncommitted basis every month.

Other pipelines, such as the Trans Mountain Pipeline and Keystone Pipeline, have contracts for some of their capacity, known as committed shipments. Those pipelines reserve a portion of their capacity for uncommitted shipments on a monthly basis to respect the common carriage requirement.

To find out how much oil each pipeline customer wants to transport, the pipeline company has its customers nominate the volume they would like to ship on a monthly basis. If the total volume of nominations for uncommitted capacity is more than what is available, the pipeline company must “apportion” the nominations.

Pipeline apportionment is the percentage by which each shipper’s nominated volume is reduced in order to meet the pipeline’s uncommitted capacity.

Generally, apportionment is applied equally across all shippers seeking to use that capacity: for example, if shipper A nominates 100 barrels and shipper B nominates 1 000 barrels, then, under 10 per cent apportionment, shipper A will be able to ship 90 barrels, and shipper B will ship 900 barrels.

According to the NEB, pipeline apportionment occurs when demand for uncommitted capacity exceeds available capacity in any given month.

This can be caused, for example, by increasing oil supply or if pipeline capacity is reduced because of maintenance on the pipeline. In certain circumstances, shippers may over-nominate so the uncommitted capacity they are allocated after apportionment is closer to what they actually want to ship.

This is sometimes referred to as nominating “air barrels” and, when practiced by many shippers, can cause very high apportionment on pipelines.

Apportionment, or in this case curtailment, can also be applied to contracted volumes under certain circumstances where the pipeline cannot carry its committed capacity. This can be for various reasons, including unplanned outages, maintenance, or downstream restrictions.

Each company’s tariff provides the details on how the pipeline company [Folder 92835] can apportion volumes and verify nominations from shippers.