Canada’s energy regulator on Aug. 27 responded to shipper complaints about Enbridge Inc.’s plan to switch to fixed contracts on its Mainline pipeline network by announcing a fast-track process to gather comment on the proposal that could lead to its being delayed.
The unusual move from the Canadian Energy Regulator (CER), which was until this week known as the National Energy Board (NEB), comes after a slew of letters from companies including Canadian Natural Resources Ltd. and Suncor Energy asking the regulator to intervene.
Enbridge is proposing to switch to long-term, fixed-volume contracts on 90% of the Mainline, which is North America’s largest oil pipeline network and ships the bulk of Canadian crude exports to the U.S. Currently, space is allocated on a monthly basis.
Calgary, Alberta-based Enbridge launched a two-month open season on Aug. 2 to solicit bids for committed capacity on the Mainline, a process that some producers have said should be delayed until the regulator approves the terms and tolls on offer. Typically a pipeline company would apply to the regulator for approval after an open season finishes.
In a letter, the CER said it will establish a fast-track process to gather comment from all interested persons by the middle of next month.
The regulator is asking for comments addressing whether an open season should be held before or after the regulator considers the terms, conditions and tolls set by Enbridge. They should also address whether the CER has the authority to delay the open season.
ConocoPhillips Canada, MEG Energy Corp., Royal Dutch Shell Plc, Japan Canada Oil Sands Ltd. (JACOS) and the Explorers and Producers Association of Canada have all written to the regulator expressing concerns about the planned Mainline changes.
“Enbridge does not agree with the assertions in the letters filed by these parties to the NEB. We have significant support for the open season offering and we look forward to responding as part of the process outlined by the NEB,” Guy Jarvis, Enbridge’s executive vice president of liquids pipelines, said in a statement.
Canadian shippers have complained the switch to fixed contracts would enable U.S. refiners downstream to secure most of the Mainline capacity, and tie producers into delivering crude to the Midwest region at the expense of other markets.
“Enbridge’s proposal is completely inappropriate, and is being made at a time when considerable market power imbalance exists because of the shortage of pipeline capacity leaving the Western Canadian Sedimentary Basin,” Canadian Natural President Tim McKay said in the letter.
Canada is the world’s fourth-largest crude producer, but congestion on existing export pipelines and delays building new ones have led to deep price discounts, prompting Alberta’s provincial government to impose mandatory production curtailments.
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