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Enbridge’s plan, filed with the CER in December, would see oil companies enter into long-term agreements covering 90 per cent of the Mainline’s capacity. The remaining 10 per cent would be available for spot capacity – currently, 100 per cent of the pipeline is open access.The Associated Press

Canada’s largest oil producer is criticizing an Enbridge Inc. plan to convert its Mainline crude pipeline network to long-term contracts as “an abuse of … market power,” and is urging the Canada Energy Regulator not to allow the switch.

Enbridge’s plan, filed with the CER in December, would see oil companies enter into long-term agreements covering 90 per cent of the Mainline’s capacity. The remaining 10 per cent would be available for spot capacity – currently, 100 per cent of the pipeline is open access.

Canadian Natural Resources Ltd. told the CER in a filing Tuesday the change would amount to a “drastic and unprecedented shift” that flies in the face of previous regulatory decisions and is contrary to Enbridge’s legal obligations as a common carrier.

Forcing producers into long-term contracts is “contrary to the Canadian public interest,” CNRL argued, and would result in a “significant lack of open access for producers” at a time when existing takeaway capacity from Western Canada “is extremely limited and very valuable.”

Western Canadian oil companies have made investment decisions based on the existing and 70-year history of open access to the pipeline, CNRL said, and the change would have “a significant, adverse and highly prejudicial impact on producers and other industry participants.”

In its application to the CER in December, Enbridge said the Mainline’s current walk-up system – in which customers bid for space for the coming month – leads to uncertainty for crude suppliers and buyers. It argued that converting to long-term contracts could result in higher prices for Western Canadian oil and benefits for shippers, including competitive tolls and open access to pipeline capacity.

Vern Yu, president of Enbridge’s liquids and pipeline division, told The Globe and Mail Wednesday that CNRL’s opposition to the plan isn’t surprising.

“It’s been very difficult to get our industry to have consensus on any issue, so something like the Enbridge Mainline and how it’s contracted or tolled is going to draw a very diverse set of opinions,” he said.

“The CER should listen to the technical and economic discussions about how we did not abuse market power, how we’ve consulted with dozens of customers over the last two years, how we’re going to offer the space up equally and fairly to all customers, and how we’ve crafted the offering so it would allow smaller producers to participate where other pipelines haven’t done that,” Mr. Yu said.

Yangarra Resources Ltd., a small Calgary-based producer, told the CER in a submission that Enbridge’s proposal “will have a direct negative impact” on its ability to conduct business. It argued that smaller producers need uncommitted pipeline capacity to be able to compete with large, foreign-owned companies. Other junior players submitted similar arguments.

On the other hand, two major industry players, Imperial Oil Ltd. and Cenovus Energy Inc., have both come out in support of the Mainline change, along with a host of shippers and marketers.

The government of Saskatchewan also wants a voice in the case, saying in a letter to the CER the Enbridge plan proposes a fundamental long-term shift in Mainline operations, and its “benefits and burdens will need to be carefully scrutinized to conclude whether or not approval is in the Canadian public interest.”

Ultimately, the CER commission will have to decide who has the better case and whose arguments are the most compelling. The current toll arrangement is set to expire in June, 2021.

Supporters and opponents of the plan have until noon Thursday to submit their opinions to the CER. Enbridge will then have a week to respond before CER hearings proceed, which Mr. Yu expects to happen in the next month or so before a final decision early in 2021.

The Mainline pipeline network supplies refineries in the United States and Ontario and carries approximately 70 per cent of total Western Canadian crude exports.

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