Enbridge Defends Long-Term Mainline Contract Plans Amid Criticism
WINNIPEG, Manitoba (Reuters) — Facing criticism, Canadian pipeline company Enbridge Inc said on Thursday its plan to sell nearly all capacity on the Mainline oil network was fair and would benefit the western Canadian industry.
Enbridge plans to allow shippers to book 90% of space under long-term contracts on the nearly 3 million barrel per day Mainline, Canada's biggest oil pipeline system, rather than continue to ration space monthly.
It made its application in December to the Canada Energy Regulator (CER).
"We went to great lengths in this proposal to make sure every producer, no matter how big or small, had an option to be involved," Chief Executive Al Monaco said at a CIBC investor conference in Banff, Alberta. "Fair access to everyone is a key tenet."
The change will result in improved netback pricing for shippers and will better link the region's oil with U.S. refiners and export channels, Monaco said.
The move comes as Canadian pipelines are congested, and the industry struggles to win regulatory or legal approval to expand them over environmental opposition. But Enbridge's proposed Mainline change has come under fire from some Canadian oil producers.
It is a "market-altering event with the potential for negative consequences," said Tristan Goodman, president of the Explorers and Producers Association of Canada, in a letter to the CER on Tuesday. Switching to a contract system drastically reduces Mainline space for uncommitted capacity at a time when shippers have few transportation alternatives, Goodman said.
The country's biggest oil producer, Canadian Natural Resources Ltd, asked the CER in a letter on Tuesday to first consider the fundamental question of whether Enbridge should be allowed to convert the Mainline from common carrier status to long-term contracting, before it examines other issues. CNRL noted such a change is unprecedented and carried "potential harm" to Canadian oil producers.
Monaco said opposition is common.
"I can't remember a time when the industry was all on the same page. It's not that surprising that we're seeing a little bit of noise," he said.
Enbridge filed letters of support in December from 12 shippers representing 70% of current Mainline volume. They include Canadian producers Cenovus Energy Inc and Imperial Oil Ltd, but the list is made up mostly of U.S. refiners.
In an unusual move, the CER halted Enbridge's Mainline open season in September, after Canadian producers complained that Enbridge had too much market power.
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