Having been regulated as a crude oil common carrier pipeline since the 1950s, in 2020, Enbridge proposed to switch its “Mainline” system to contract carriage with its major US PADD II refinery customers. Enbridge claimed that a switch to contract carriage would promote efficiency, accommodate shipper preferences, and possibly even raise the netback price of crude oil in the Western Canada Sedimentary Basin (WCSB).

Senior Managing Director Dr. Jeff D. Makholm prepared evidence before the Canadian Energy Regulator (CER) on behalf of Canadian Natural Resources, TOTAL E&P Canada Ltd., MEG Energy, and Shell Canada Limited. He concluded that Enbridge’s Contracting Application was unduly discriminatory in favor of various shippers at its downstream US destinations and harmful to the Canadian public interest.

The CER denied Enbridge’s application to switch to contract carriage on grounds that such a move would, in context, be unlawfully discriminatory. It held that the proposed tolling methodology could produce unreasonable returns and unreasonably exceed cost of service tolls on a sustained basis. It also found that Enbridge did not adequately deal with shippers’ contentions that its application represented an abuse of market power. The CER also rejected the evidence from Enbridge consultants that the contract tolls would be efficient, stating, “Dr. Makholm asserted that the illustrative uncommitted tolls…bear no relationship to any accepted Canadian or US cost of service methodology based on objective, known and measurable evidence. Rather, their computations proceed solely from a collection of subjective Enbridge assumptions.”

The case before the CER was Enbridge Pipelines Inc. RH-001-2020.