Protesting shippers have won the opening round of their fight against converting Enbridge Inc.’s oil Mainline into a contract transporter after 69 years as an open access common carrier providing service with monthly bookings.
The Canada Energy Regulator (CER) ordered a halt last Friday to Enbridge’s open season auction to test support for contracts up to 20 years for 90% of Mainline capacity for 2.85 million b/d.
The order responded to complaints that the auction was an abuse of market power from Suncor Energy Inc., Canadian Natural Resources Ltd., Shell Canada Ltd. and the 170-member Explorers and Producers Association of Canada.
The Mainline dominates Canadian oil shipping service for a total of 4.4 million b/d, and with regulatory ordeals delaying expansion projects, the lines run full. Service is rationed because of excess production capacity, especially in Alberta.
CER noted that the halted open season departed from the standard Canadian pipeline practice of using contract auctions to gather support for expansions. Enbridge only offered current Mainline capacity, and prospective takers have to sign confidentiality agreements.
The successful shipper protest described the canceled contract sale as a bid to corner a forecast C$150 billion ($112 billion) in tolls before projects by TC Energy Corp. and Trans Mountain Pipeline can be completed to confront Enbridge with competition.
The CER said Enbridge is free to seek approval for a Mainline contract carrier conversion in advance, before holding an open season. But the application would have to disclose service costs and terms, with all concerned able to influence the service package by participating in an open regulatory review.
Enbridge promised to respond “as soon as practical” to the CER’s invitation. The company called the agency’s order to stop trying to make the switch with an open season contract sale “a departure from the decades of precedent and commercial practice in our industry.”
Enbridge said the CER order “does not change our plans to respond to the desires of our customers for priority access to Mainline capacity, toll certainty and access to the best markets that contract carriage offers."
The CER did not interfere with a parallel auction of contracts for a capacity addition proposed by Enbridge subsidiary Express Pipeline.