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Locked In - Enbridge Poised for Success Following Mainline Tariff Settlement as TMX Startup Looms

It took a while, but Enbridge and shippers on its 3.2-MMb/d Mainline system have finally reached an agreement in principle on a new tolling agreement that will lower per-barrel rates on the mammoth crude oil pipeline network between Western Canada and the U.S. Midwest — and also help ensure that Enbridge will earn a healthy rate of return on its largest asset. Assuming the Mainline Tolling Agreement (MTA) is approved by Canadian regulators later this year (and that’s seems to be a safe bet), the new rate structure should also help the Mainline system retain the vast majority of its crude volumes, even as it faces new competition from the Trans Mountain Expansion (TMX) project, which will provide 590 Mb/d of additional pipeline capacity from Edmonton, AB, to the British Columbia (BC) coast starting sometime next year. In today’s RBN blog, we discuss the MTA and what it means for Enbridge, shippers and TMX.

Some may disagree, but we’d argue that Enbridge’s Mainline system (orange lines in Figure 1) is among North America’s most underappreciated midstream assets. Largely under the radar, its platoon of pipelines (Lines 1, 2, 3, 4, 5, 6, 7, 11, 14, 61, 62, 64, 65, 67 and 78 and 93) reliably transports more than 3 MMb/d of heavy, medium and light crude oil (and some NGLs) from the Western Canadian Sedimentary Basin to terminals in Minnesota, Wisconsin, Illinois, Indiana, Michigan and Ontario. From there — on other pipelines, many of them also owned by Enbridge — the crude flows to other terminals and refineries across a broad swath of real estate between Quebec and the Gulf Coast.

For example, from Flanagan, IL, crude can continue on either the Flanagan South or Spearhead pipelines (parallel dark pink and light pink lines; both owned by Enbridge) to the Cushing, OK, crude hub, and from Cushing to Freeport, TX, on Enbridge and Enterprise Products Partners’ jointly owned Seaway pipeline system (dark blue line). Also from Flanagan, crude can flow south on Enbridge’s Southern Access Extension Pipeline (light blue line) to the Patoka crude hub in south-central Illinois –– Patoka being the northern terminus of the recently reversed Capline pipeline (yellow line). And, crude can flow east to Montreal on Enbridge’s Line 9 (red line).

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