Page 8 - NorthAmOil Week 35

NorthAmOil PIPELINES & TRANSPORT NorthAmOil
Canadian regulator seeks comments on Enbridge’s Mainline proposal
NORTH AMERICA
IN an early test, the newly renamed Cana- dian Energy Regulator (CER) has asked for comments on a change proposed by pipeline operator Enbridge to contracts on its Mainline system.
Enbridge is proposing to switch to long-term, xed-volume contracts on 90% of the Mainline, which is North America’s largest oil pipeline net- work and accounts for the majority of Canadian crude exports to the US. Space on the system is currently allocated on a monthly basis. e pro- posal has angered Canadian producers.
e move by the CER – formerly the National Energy Board (NEB) – has been described as unusual. It comes after producers includ- ing Canadian Natural Resources Ltd (CNRL), Suncor Energy, ConocoPhillips, MEG Energy, Royal Dutch Shell and Japan Canada Oil Sands (JACOS) wrote to the regulator, asking it to intervene.
e Canadian shippers are arguing that the switch to xed contracts will enable US re n- ers to secure most of the capacity on the Main- line. ey assert that this would lock producers into delivering crude to the US Midwest at the
expense of other markets.
e CER has announced that it will under-
take a process of gathering comments on the proposal, fast-tracking it to be complete by the middle of September. Even if the new contract terms are subsequently approved, the switchover to them will now likely be delayed.
e move comes a er Enbridge launched a two-month open season on August 2 to solicit bids for committed capacity on the Mainline sys- tem. But some producers have argued that the open season should be delayed until the terms and tolls on o er are approved by the regulator. is is despite the fact that pipeline operators typically apply to the regulator for approval a er an open season is concluded.
The CER is now asking for comments on whether an open season should be held before or a er the regulator considers the terms, condi- tions and tolls set. It is also asking for comments on whether the CER should have the authority to delay the open season.
Enbridge has said it does not agree with the assertions in letters to the regulator from producers.™
Plains drops plan for Cactus II surcharge
TEXAS
PLAINS All American Pipeline has dropped a proposal to impose a surcharge of $0.05 per barrel for shipments of crude on its Cactus II pipeline a er the plan led to a backlash from producers.
e levy was rst proposed in an e ort by the pipeline company to o set an additional $40mn of construction costs related to Cactus II that it said were a result of US steel tari s that were imposed last year. Plains was planning to apply the surcharge until the costs were fully o set.
However, ConocoPhillips and Encana asked the US Federal Energy Regulatory Commission (FERC) to reject the proposed tari surcharge on the 670,000 barrel per day (bpd) Cactus II, which entered service last month.
e surcharge had been due to go into e ect in April 2020, but the producers argued that the plan was premature given that Plains has an application lodged with the US Department of Commerce (DoC) requesting an exemption to the steel tari . e producers added that sur- charges “are generally disfavoured” by the FERC. e DoC has already denied two requests from Plains for a waiver on the steel tari , but the pipe- line operator continues to seek an exemption.
Plains did not give a reason for dropping the proposed surcharge in an August 26 ling with the FERC.
e surcharge was comparatively small and appears to be mainly motivated by the compa- ny’s push to highlight the impact of steel tari s on its business as the DoC considers its latest application for a waiver. Nonetheless, produc- ers did not want the company to set a precedent for other pipeline operators in setting such surcharges.
Indeed, Plains’ proposed surcharge came as the company – and other pipeline operators – are o ering lower spot rates amid intensifying com- petition brought about by new takeaway capacity additions out of the Permian Basin.
e same week that Plains dropped the sur- charge, EPIC Midstream proposed a lower rate to transport crude on its newly operational pipeline to the Gulf Coast. EPIC proposed to drop tari rates for all volumes on the pipeline to $1.35 per barrel, according to an August 29 ling with the FERC, down from $2.50 per bar- rel previously. is marks a further cut from $5 per barrel before the EPIC pipeline started crude shipments in mid-August.™
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w w w . N E W S B A S E . c o m Week 35 03•September•2019