Enbridge Inc. said on May 4 it has reached a 7.5-year toll agreement with oil shippers for its Mainline crude pipeline system, one of North America’s biggest, after scrapping earlier plans for long-term contracts.
The agreement, which still requires Canadian regulatory approval, covers tolls charged for service on both the US and Canadian portions of Enbridge’s Mainline, which moves more than three million barrels a day of crude oil and liquids from Western Canada to refineries in Eastern Canada and the US Midwest. The agreement means that, if approved, Enbridge will continue to ratio space on a monthly basis.
“This settlement is a win-win-win — customers will continue to receive competitive and responsive service; Enbridge will earn attractive risk-adjusted returns,” said Colin Gruending, president of Enbridge’s liquids pipelines segment.
Scotiabank analyst Robert Hope said the settlement removes the uncertainty that has weighed on Enbridge shares, even though the stock was down on May 4.
Enbridge spent years trying to convince shippers and then the Canada Energy Regulator (CER) to sell space on the Mainline under long-term contracts. Some Canadian oil producers objected, while companies with refineries were in favor of contracts. The CER rejected the plan in 2021.
The Calgary-base company’s rival, Canadian government-owned Trans Mountain, expects to complete expansion of its pipeline from the province of Alberta to the Pacific Coast late this year and has sold 80 per cent of that space under contract, giving it security during periods of spare pipeline capacity.
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Enbridge expects to submit an application for approval to the CER in the third quarter, with the expectation that the new toll settlement could be approved and implemented later this year. The new agreement covers 70 per cent of Mainline deliveries, with the remaining 30 per cent covered by a pre-existing agreement.
© Thomson Reuters 2023