How Pipeline Contracts Are Crushing Some Producers

The contract model for oil pipeline space has some North American producers locked into high per-barrel transportation rates, while others benefit from steep discounts pedaled in bearish markets, a new report by Reuters says. Traditionally, producers that sign a long-term contract with a major pipeline company, such as Plains All American or TransCanada Corp, receive a generous discount for their commitment. The pipeline company can then utilize said receivables as collateral to secure funding for new routes, creating a cycle of asset growth.…