The Canada Energy Regulator has agreed to open a probe into Enbridge Inc.'s plan to fundamentally change the way it sells space on the nation's largest export pipeline network.
The regulator, which was formerly known as the National Energy Board, said in an Aug. 27 letter to oil producers that it will begin an expedited process to review Enbridge's open season for its mainline system. The companies that filed complaints about a plan for Enbridge to move to long-term contracted service for 90% of the system have until Sept. 13 to provide reasons why the open season should be halted. The open season ends Oct. 2, and Enbridge plans to make the switch to contracts when its current tolling agreement expires in 2021.
The regulator took the action after Canadian Natural Resources Ltd., the nation's biggest oil producer by volume, joined Suncor Energy Inc., Royal Dutch Shell PLC, MEG Energy Corp. and the Explorers and Producers Association of Canada in raising objections to the plan.
Under the current agreement, shippers bid for space on the line on a month-prior basis. That system allows full access, but because of capacity restrictions, demand often outstrips available space, leading to pro-rating of orders. The proposed switch to long-term contracts has led to concern among producers that refiners in the U.S. Midwest would monopolize capacity, giving them the ability to control prices and shipments to other points in the nation.
"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," Canadian Natural said in its letter. "Canadian Natural will be forced to participate in the open season, but has advised Enbridge in writing that its participation is not to be construed as support for the open season."
The regulator, now known as the CER, is asking all of the participants to present written arguments about whether it is appropriate for Enbridge to conduct its open season before the proposed change has been approved.
"Persons submitting comments, including Enbridge, should also address whether the CER has the authority to stay the open season pending the CER's decision on the submissions, and any prejudice or harm that may occur as a result," the regulator said.
