The Canada Energy Regulator on Friday stopped Enbridge Inc from auctioning the right to send crude oil through its Mainline pipeline system, citing concerns about the “perception of abuse of Enbridge’s market power.”
The nearly 3 million barrel-per-day Mainline is North America’s largest pipeline system and carries the bulk of Canadian crude exports to the United States. Enbridge wants to switch to long-term contracts, instead of monthly agreements, a move that angered Canadian producers given the lack of pipeline space.
In its decision, the CER said Enbridge will not be allowed to offer contracted space on the Mainline to shippers until the regulator approves.
A number of producers, including Canadian Natural Resources Ltd and Suncor Energy , wrote the CER in August, urging the regulator to intervene and protesting the conditions offered by Enbridge. The regulator agreed, noting Enbridge’s control of much of the pipelines out of Western Canada and the lack of alternatives for oil shippers.
“The Commission has concerns regarding the fairness of Enbridge’s open season process and the perception of abuse of Enbridge’s market power,” the CER said.
“Enbridge remains committed to moving ahead with contract carriage on the Mainline and has strong support for our offering We will evaluate this decision and the next steps that we will take towards implementing contract carriage,” Enbridge spokesman Jesse Semko said in a statement.
Canada holds the world’s third-largest crude reserves but years of regulatory delays and environmental opposition have stymied development of new export pipelines, contributing to falling capital investment and slowing growth in the oil sands.
Enbridge negotiated with shippers for commitments on Mainline for 18 months before launching a two-month bidding period in August.
Canadian producers Cenovus Energy and Imperial Oil , as well as some large U.S. refiners, spoke out in favour of the Mainline overhaul, arguing it would give more certainty on shipping capacity.