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Enbridge Inc’s proposal to keep its massive Mainline oil pipeline network full through long-term contracts has been rejected by Canada’s top energy regulator in a win for some producers who want more flexibility to ship their crude.
“Mainline contracting would likely reduce the access to pipeline capacity realistically available to certain shippers,” the Canada Energy Regulator said in its ruling on the 26th February.
“The package of tolls, terms and conditions in the service offering would result in a distribution of benefits and negative impacts which is uneven and disproportionate.”
The decision deals a blow to North America’s largest pipeline company as it upgrades a vast system which ships more than three million barrels of crude a day from Alberta to the US Midwest and Gulf Coast, as well as Ontario and Quebec. The network includes the Line 3 and Line 5 conduits which have faced opposition in the US.
Enbridge argued that the current system allowing producers to decide the volumes they want to ship each month, without firm commitments, puts it in a disadvantage to rivals.
While producers such as Canadian Natural Resources Ltd said they feared Enbridge could abuse its market power, others including BP Plc and Exxon Mobil Corporation’s Imperial Oil supported long-term contracts.
Enbridge had sought to reserve as much as 90% of capacity on its Mainline system to refiners and producers who sign contracts for as long as 20 years.
The company’s proposed tolling method, giving those with longer-term contracts and more volume a bigger discount, was also rejected by the regulator because it would “excessively favour shippers who signed long-term contracts,” according to the decision.
In regulatory hearings last spring, Enbridge argued that, without long-term contracts, the system could lose volumes to competitors. The Trans Mountain expansion project and TC Energy Corporation’s existing Keystone pipeline offer most capacity to shippers with contracts, requiring them to pay a regular fee regardless of whether they use it or not.
Other companies who opposed the change to contracted volumes include oil-sands producers MEG Energy Corporation and Athabasca Oil Corporation.
Enbridge is worth more than US$80 billion, about US$30 billion ahead of its largest US rival, Enterprise Products Partners LP.
US-traded shares of Enbridge fell in after-hours trading on a day of reduced liquidity following the Thanksgiving holiday. They were 0.5% down from the close, at US$38.77, as of 4:51 pm in New York.
Source: WorldOil