Suncor Energy Inc. wants Canada's national energy regulator to explain why it's taking so long to give Enbridge Inc.'s Line 9 a green light to start up, after saying the delay is costing the oil sands producer millions of dollars.
Kris Smith, Suncor's executive vice-president of refining and marketing, is seeking a meeting with National Energy Board chairman Peter Watson to discuss the status of the Sarnia-to-Montreal pipeline, which has been stalled for months while Enbridge awaits the all-clear to begin deliveries on the system.
"We appreciate that the work of the NEB is to regulate in a way that considers all aspects of a project, including environment, social and economic factors," Suncor's Mr. Smith said in a letter addressed to Mr. Watson that was posted to the regulator's NEB website on Friday.
"While no specific timeline is provided in how long the NEB may require to review and approve an application of this sort, we believe it is important that you are aware of the high cost and negative economic impacts to our business, and by extension to those communities and provinces in which we operate, … as the time for a decision is ongoing."
The direct appeal by Canada's dominant oil sands producer to the top regulator is an unusual step that points to mounting frustration with bureaucratic delays the energy industry blames for holding up major infrastructure projects.
It also highlights a push by oil sands players to drive down transportation costs, as weak commodity prices squeeze margins and undercut the economics of shipping crude by rail – a trade that thrived amid the dearth of pipeline capacity.
About five months have passed since Enbridge submitted a so-called leave-to-open application for Line 9, a necessary step prior to beginning operations. The planned reversal would move up to 300,000 barrels a day of oil east and is viewed as a critical source of cheaper supplies for Quebec refineries owned by Suncor and San Antonio, Tex.-based Valero Energy Corp.
After a reversal of Line 9 in the 1990s, the plants are mostly captive to pricier foreign imports, although both companies have sourced cheap U.S. shale supplies by rail and by tanker.
Calgary-based Suncor, which holds rights to a third of the expanded pipeline's capacity, estimates cheaper Western Canadian oil delivered on the system could generate as much as $250-million in pretax cash flow a year – a "fairly significant impact for us," chief financial officer Alister Cowan said this month.
A number of multibillion-dollar pipeline proposals – including TransCanada Corp.'s much bigger Keystone XL and Enbridge's $7.9-billion Northern Gateway projects – have been sidelined as anxiety builds over potential ruptures and the impact of oil sands development on the environment.
In contrast to those projects, Line 9 was viewed by analysts and industry executives as a shoo-in because it utilized existing infrastructure. The project was approved more than one year ago after a series of contentious hearings culminated in the National Energy Board cancelling a final appearance in Toronto. It was then held up by regulators over deficiencies to Enbridge's safety plan. Those concerns were resolved in February, and En-bridge applied to start deliveries.
On Friday, company spokesman Graham White said Enbridge anticipates startup this month, but he said the timing is ultimately up to regulators. A spokeswoman for the NEB said the regulator is still assessing the project's safety, "There's no time limit on that review," Katherine Murphy said.
A spokeswoman for Valero in Montreal noted that the company, anticipating a swift approval process, made hefty investments in its 265,000-barrel-a-day Jean Gaulin refinery near Quebec City. "We invested, at the end, $300-million and we're still waiting for the line to start," Julie Cusson said.