Testimony and Exhibits of Seaway Crude Pipeline Company LLC under OR15-6.

Exhibit No. SEA-7 Page 1 of 14 STATEMENT E POTENTIAL COMPETITION FOR SEAWAY PIPELINE Exhibit No. SEA-7 Page 3 of 14 STATEMENT E POTENTIAL COMPETITION FOR SEAWAY PIPELINE 1 I. Introduction 2 Evidence of potential competition in Seaway Pipelines destination and origin 3 markets appears in the form of recent new entry and excess supply capacity held by 4 others. There has been substantial recent new entry into the destination and origin 5 markets served by Seaway Pipeline. This recent new entry demonstrates that there are 6 no serious barriers to entry. Therefore, potential new entry functions as a very real 7 constraint on Seaway Pipelines behavior. 8 Crude oil production in North America has increased dramatically over the last 9 several years and is expected to continue increasing. The areas where major increases 10 have occurred include: (1) the Western Canadian oil sands; (2) the Bakken oil shale 11 area in North Dakota; (3) the Niobrara oil shale area in Northeastern Colorado; (4) the 12 Eagle Ford oil shale area in Southwest Texas; and (5) the revitalized Permian Basin 13 area. Substantial new crude oil pipeline and rail entry has occurred to accommodate 14 the increase in crude oil production. 15 II. Recent New Entry Into The Destination And Origin Markets Served By 16 Seaway Pipeline 17 A. Destination Market 18 In Seaway Pipelines Gulf Coast destination market, recent entry includes new or 19 expanded pipelines delivering Eagle Ford crude oil to Corpus Christi and Houston, TX, 20 new or expanded pipelines from Northern Texas, Western Texas, or Oklahoma E-1 Exhibit No. SEA-7 Page 2 of 14 TABLE OF CONTENTS FOR STATEMENT E Section Page 1 I. INTRODUCTION ............................................................................................................................ 1 2 II. RECENT NEW ENTRY INTO THE DESTINATION AND ORIGIN MARKETS SERVED 3 BY SEAWAY PIPELINE ................................................................................................................ 1 4 A. Destination Market ................................................................................................................ 1 5 B. Origin Market ........................................................................................................................ 3 6 C. Conclusions .......................................................................................................................... 4 7 III. THE IMMEDIATE ENTRY OF EXCESS CAPACITY HELD BY OTHERS .................................... 4 8 IV. SUBSTANTIAL NEW ENTRY HAS OCCURRED IN RESPONSE TO SHARP 9 INCREASE IN NORTH AMERICAN CRUDE OIL PRODUCTION ................................................ 5 10 V. NEW PROJECTS THAT WILL INCREASE COMPETITION IN THE CUSHING ORIGIN 11 MARKET AND GULF COAST DESTINATION MARKET IN THE FUTURE ................................ 5 12 A. Sunoco Logistics Permian Express 2 ................................................................................... 5 13 B. Plains Cactus Pip