Enbridge to settle on new Mainline tolling plan by summer, CEO says

Enbridge Inc. expects to settle on a new tolling plan for its Mainline pipeline system this summer, the Calgary-based company said Friday.

The pipeline giant said it is consulting with industry about two potential options after its proposal to fill Canada's largest oil pipeline network through long-term contracts was rejected by the Canada Energy Regulator in November.

One scenario being advanced is an incentive rate-making agreement that may be similar to the Competitive Toll Settlement (CTS) agreement that expired on June 30, 2021, Enbridge chief executive Al Monaco said on a conference call with analysts Friday.

The other option is a cost-of-service application. Enbridge will be ready to submit an application for one of the two proposals for regulatory approval in the latter half of the year, the company said.

"The goal is to land on which option works best for our shippers and make sense for us," Monaco said. "As we've seen, shipper consensus is tough to achieve."

Enbridge's Mainline is Canada's largest oil pipeline system, moving over three million barrels per day of petroleum products to market. The pipeline provides about 70 per cent of the total oil pipeline transportation capacity out of Western Canada.

The pipeline's demand has exceeded capacity over the past few years, so Enbridge had applied to enter into long-term contracts for 90 per cent of the Mainline system's capacity.

Enbridge had argued firm contracts would give customers more predictable access to the pipeline, but some Canadian oil producers argued the proposed change would worsen the existing capacity constraints and could lead to lower oil prices.

In rejecting the proposal in November, the Canada Energy Regulator concluded Enbridge's proposal would dramatically change access to the pipeline. It said certain companies would benefit from long-term stability, but others would lose access to the pipeline.

Monaco told analysts Enbridge is "equally comfortable" with either an incentive agreement or a cost-of-service agreement. Right now, the company is collecting tolls consistent with what was in place under the CTS agreement when it expired in June, and will continue doing so until a replacement commercial framework is selected and implemented.

Ultimately, said Monaco, what oil shippers want given the difficulty building new pipeline capacity in Canada is certainty and the ability to move barrels at low cost.

"Everybody's been through the wringer on this over the last almost three, four years," Monaco said. "Toll certainty, but just generally certainty commercially for our customers is important, as it is for us. So everybody wants to move forward, I think."

Enbridge Inc. reported its fourth-quarter profit rose compared with a year ago.

The company says its profit attributable to common shareholders totalled $1.84 billion or 91 cents per share for the quarter ended Dec. 31. The result compared with a profit of $1.78 billion or 88 cents per share in the same quarter a year earlier.

On an adjusted basis, Enbridge says it earned 68 cents per share for the quarter compared with an adjusted profit of 56 cents per share in the final three months of 2020.

Analysts on average had expected an adjusted profit of 76 cents per share, according to financial markets data firm Refinitiv.

Enbridge says it's going ahead with a US$400-million plan to modernize compressor equipment in Texas that will increase safety and reliability of the system and reduce associated greenhouse gas emissions.

It will also spend US$100 million to expand its Texas Eastern system to provide additional capacity to meet U.S. northeast demand for natural gas.

On the call, Monaco repeated his view that North America is facing an "energy crisis" due to demand driven by economic recovery as well as a significant shortfall in recent years of investment in both conventional and renewable energy projects.

"Not surprisingly, that brings energy shortages, higher fuel costs and, of course, inflation as you're seeing, which challenges competitiveness and economic growth," Monaco said, adding Enbridge is bullish on the outlook for traditional oil and gas, given current supply and demand conditions.

"Before the crisis, our view was that conventional energy will grow at least through 2035, and what's happening today just reinforces that view."