Canadian regulator halts Mainline open season
Midstreamer Enbridge’s plans to switch key north-south crude pipeline infrastructure from spot to long-term capacity access takes a hit
The Canada Energy Regulator (CER) in late September ordered Enbridge to prematurely end its two-month open season looking to change its Canadian Mainline crude pipeline system into primarily a firm contract carrier.
Despite the setback, Enbridge maintains that it will not change its plan for Mainline. But the reasons given by the CER for taking this unprecedented step—an open season is normal prior to requesting a significant change of contract from a regulator—and vehement opposition by many western Canadian oil producers suggests the company’s plan could ultimately be thwarted.
“[T]he commission has concerns regarding the fairness of Enbridge’s open season process and the perception of abuse of Enbridge’s market power,” the CER wrote in a letter to parties who had filed complaints about the open season, which was due to end on 2 October.
Large and small Canadian oil producers—including industry heavyweights Canadian Natural Resources and Suncor— representing over half of the country’s production, had submitted letters to the regulator. They see Enbridge’s plan to convert 90pc of Mainline capacity to fixed contracts for up to two decades in length, after operating as a month-to-month common carrier since its inception in 1950, as an abuse of market power in western Canada’s constrained pipeline environment.
Although the CER indicated in its letter that potential shippers would benefit from a regulatory review of the terms and conditions of firm service on Mainline prior to signing on the dotted line, it is questionable whether Enbridge and the oil producers opposed to the change could find common ground for such contracts. The two sides failed to overcome their differences during 18 months of consultations prior to the launch of the open season on 2 August.
And one of the reasons the CER cited for prematurely ending Enbridge’s open season—that the proposed fixed contracts involving only existing, rather than new pipeline capacity—was the primary reason the US Federal Energy Regulatory Commission denied US midstreamer Colonial Pipeline’s attempt to shift from common to contract carrier in 2014.
The competitive tolling system that currently governs transportation contracts on Enbridge’s Mainline is scheduled to expire on 30 June 2021.