By Robert Tuttle
In the past, shippers would have been forced to pay more when oil demand and volumes on the pipeline were lower. The provision “shields shippers from throughput risk which, in current circumstances with decreased oil demand and declining volumes on the Mainline, would have otherwise resulted in a significant toll increase under the previous negotiated settlement,” Jesse Semko, a company spokesman, said in an email.
Enbridge discussed the toll changes with companies that ship on the lines in the middle of May before submitting them to the Canadian Energy Regulator, Semko said.
Lower demand for oil from U.S. refineries has made exporting Canadian crude less economic. The price difference between Canadian heavy oil in Alberta versus the U.S. oil hub of Cushing, Oklahoma, is about $4 a barrel, according to NE2 Group pricing.
That’s too narrow a difference to cover the cost of most oil shipments on Enbridge’s pipeline system at current tolls.
Too Many Pipelines
For years, Canadian oil producers struggled with a shortage of export pipelines. Since the coronavirus pandemic and the drastic decline in output, Canada has gone from having too few pipelines to too many. Mainline volumes are expected to be down by 300,000 barrels a day this year, according to Enbridge.
The Mainline includes several pipelines that carry light, medium and heavy oil from Alberta to Superior, Wisconsin, where they link to pipelines running into eastern Canada and South to pipelines connected to the U.S. Gulf Coast.
Enbridge’s toll increases weren’t matched by other pipeline operators. The Federal government-owned Trans Mountain Pipeline running from Alberta to the Vancouver area cut rates for shipping light crude from Edmonton to Sumas, British Columbia, by 32% on May 1. TC Energy Corp. plans to keep rates to Texas unchanged for uncommitted shipers starting July 1 on its Keystone pipeline after lowering them April 1.
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