CALGARY – Enbridge Inc. is firing back at companies that have criticized its plans to revamp the operation of Canada’s largest oil export pipeline network.
In a filing Wednesday with the Canadian Energy Regulator, Enbridge responded to a deluge of complaints by 25 companies and oil lobby groups concerned about changes to the Mainline, North America’s biggest pipeline system that ships the bulk of Canadian crude exports to the United States.
The complaints request the CER — formerly the National Energy Board — to postpone or delay the proposed changes to the Mainline. But those requests, Enbridge says in its sharply worded filing, “have no basis in law and granting them would be unjust and unreasonable.”
The complaints were headlined by submissions from major producers such as Suncor Energy Inc., Canadian Natural Resources Ltd. and Shell Canada Ltd. but also include a range of smaller and mid-sized oil producers such as Crescent Point Energy Corp. and even U.S. refiners like Venezuelan-government-owned CITGO Petroleum Corp.
These companies and such groups as the Explorers and Producers Association of Canada want the CER to intervene in Enbridge’s plans to revamp the way it operates the Mainline, which has for 70 years operated as the Canadian oil industry’s de-facto spot market for shipping crude to the U.S. Midwest and Central Canada, at a time when space is at a premium in all oil pipelines leaving Canada.
Now, Enbridge wants to contract the pipelines that make up the Mainline network and potentially invert the amount of space available for the spot market — moving from a system that is 100 per cent available to the spot market to a system that is 90 per cent contracted.
In its response, the Calgary-based company notes that based on volume of oil shipped on the Mainline, there is more support for the contracted system than opposition to it.
“Of the 25 parties that express (concerns with Enbridge’s proposed changes), only eight of them are shippers on the Mainline,” Enbridge wrote.
Of the 25 parties that express (concerns with Enbridge’s proposed changes), only eight of them are shippers on the MainlineEnbridge’s filing to the CER
Moreover, Enbridge argued that it would be unprecedented for the CER to intervene in the process at this stage, where Enbridge is in the middle of an open season, calling for companies to sign contracts. The time for an intervention comes next, when the pipeline giant applies to the CER to approve the contracts and the change to the Mainline.
“The board has never before intervened in an open season process, even when an abuse of market power has been alleged,” Enbridge wrote.
The common theme between many of the complaints is the allegation that Enbridge is using its market power to force companies to sign contracts on the Mainline while space elsewhere is scarce.
CITGO and Paris-based Total SA called the offering a “Hobson’s choice,” a false choice between taking a contract or being left with nothing.
Calgary-based oilsands producer MEG Energy Corp. called it a choice of “sign or die” because if companies do not secure the necessary pipeline export capacity they need, there are no other options currently available to the market.
“Enbridge denies that it exercised market power in developing the package of terms and conditions for firm service on the Mainline. The package is the outcome of 18 months of extensive negotiations that included significant compromises made by Enbridge in favour of its shippers,” the company writes.
In a recent interview with the Financial Post, Enbridge executive vice-president, liquid pipelines, Guy Jarvis said, “We think we’ve done a lot to address the concerns of the small producers,” including allowing shipping commitments as low as 2,200 barrels of oil per day.
CITGO and Paris-based Total SA called the offering a ‘Hobson’s choice,’ a false choice between taking a contract or being left with nothing.
As for the Hobson’s choice, Enbridge countered that both CITGO and Total have the ability to sign a contract and then protest the process with the CER so neither company has the sole choice of being left empty-handed.
The fight between Enbridge and opposed Mainline shippers is expected to drag on, even if the CER gives Enbridge what it wants and allows the open season to continue.
In filings in recent weeks, Suncor, Shell and CNRL have all indicated that they plan to participate in the open season by bidding for contracts and then raise their objections with the CER again.
Enbridge launched the open season at the beginning of August and the call for contracts is active until Oct. 2. At that point, the company plans to apply for approvals to the CER for the new tolling and service arrangement on the Mainline.
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