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Push Comes to Shove - Will Crude Shippers Soon Need to Commit to Enbridge's Mainline System?

Up in Canada, there is finally a regulatory timeline for reviewing Enbridge’s long-standing proposal to revamp how it allocates space — and charges for service — on the company’s 2.9-MMb/d Mainline. But the plan to convert the largest crude oil pipeline system out of Western Canada from one whose space is 100% uncommitted and allocated every month to one with 90% of its capacity locked in via long-term contracts remains controversial, especially among producers. Plus, the world has changed in the past few months. Oil sands and other production in Alberta and its provincial neighbors is off sharply in response to pandemic-related demand destruction and low oil prices, and the always-full Mainline has been running at well under 90% of its capacity lately. Further, the Trans Mountain Expansion and Keystone XL projects — competitors to the Mainline in a way — have progressed this year, making shippers wonder whether to lock in capacity on the Mainline if TMX and KXL’s completion may be imminent. Today, we begin a short series on the prospective shift to a contract-carriage approach on the primary conduit for heavy and light crudes from Western Canada to U.S. crude hubs and refineries.

Last year, in a four-part blog series on Enbridge’s Mainline recontracting plan — then still under development — we said that the midstream company’s largest crude oil pipeline system (orange lines in Figure 1) accounts for a staggering 70% of Western Canada’s total export-related pipeline capacity. The system’s parallel Lines 1, 2, 3, 4 and 67 transport a variety of heavy and light crudes from Edmonton and Hardisty, AB, to Clearbrook, MN, and Superior, WI. From there, other Mainline pipes move crude to Flanagan in north-central Illinois (Line 61), the Chicago area (Lines 6, 14 and 64), Michigan (Lines 5 and 78) and Ontario (Lines 5, 78, 7, 10 and 11).

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