Enbridge modifies pipeline proposal to link oil sands with U.S. Gulf Coast

Gary Park

Enbridge is making another stab at creating a major link in what could eventually see oil sands production from Alberta delivered to the U.S. Gulf Coast.

Canada’s second largest pipeline company is holding a two-phase open season over the next month for the Spearhead project that was stalled in April when producers balked at proposed shipping tolls.

Enbridge bought 90 percent of the mostly idle, 650-mile Cushing, Okla., to Chicago pipeline from BP last year for $122 million, with plans to reverse the flow of the 300,000 barrels-per-day system and open the door to the Gulf Coast.

In its first attempt to strike a deal with shippers, Enbridge had reportedly proposed boosting tariffs from Alberta to Chicago by 5 cents a barrel from current rates of $1.50-$1.80 and imposing a 35 cents per barrel tariff from Chicago to Cushing.

Unable to sell its initial proposal, Enbridge took a time out to develop fresh proposals for shippers and producers.

The new open season gives potential shippers incentive rates in exchange for long-term volume commitments.

Prospective shippers will have until Oct. 7 to comment on the documents and give preliminary indications of volume commitments and from Oct. 12 to Nov. 5 to execute transportation service agreements.

Analysts such as William Lacey of FirstEnergy Capital view the Spearhead proposal as a good concept for Canadian producers, given the current crude price environment.