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Amid oil price crisis, major energy producer says Canada’s largest pipeline system is ‘dysfunctional’

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Canadian Natural Resources is doubling down on its concerns about wasted space on Canada’s biggest oil pipeline, blaming a “dysfunctional” process as one reason for slashing its spending plans next year.

It follows complaints the company’s executive vice chairman Steve Laut made last month, saying current rules allow “certain players” to exploit the system by booking pipeline space they don’t need when capacity is tight. 

There are concerns these so-called air barrels mean less oil is reaching the market, resulting in lower prices for Canadian crude.

On Wednesday, Canadian Natural slashed its capital spending for 2019 by about $1 billion.

“Currently the lack of market access and a dysfunctional pipeline nomination process are creating industry challenges,” the Calgary-based company said in a release.

So-called “air barrels” are caused when oilpatch players or traders book more pipeline space than they physically need, resulting in leftover pipeline space. Alberta is desperate for any spare space right now.

Steve Laut, executive vice-chairman of Canadian Natural Resources Ltd., has called the pipeline nomination process ‘dysfunctional’ and said it’s contributing to low oil prices in Western Canada. (Jeff McIntosh/Canadian Press)

Because there is so much competition for pipeline space these days, pipelines can become overbooked, causing the pipeline company to then cut allocations across the board. Oil companies react by booking more space than they need, so that if there is an allocation cut they will still be able to ship all their oil.

Serious complaints

The Enbridge Mainline, running from Edmonton to Sarnia, Ont. and into the U.S. midwest, is the focus of concern that pipeline space is potentially being misused. Most pipelines allocate space based on long-term contracts, while the Enbridge Mainline divvies up space on a monthly basis. 

Analyst Samir Kayande, a director at RS Energy Group, said Laut’s recent complaints around a dysfunctional pipeline nomination process are serious. 

And he has his own questions about how the system is working.

Looking at National Energy Board data, he said Mainline pipeline flows in the third quarter of 2018 appear lower than in the second quarter “by just a little bit” — around 100,000 barrels per day.

A spokesperson for the Alberta led by Premier Rachel Notley said it’s ‘unacceptable if the process for booking pipeline space is resulting in producers having their oil turned back unnecessarily.’ (Jason Franson/Canadian Press)

“But of course we’re in a very tight market and so small differences in flows actually make a big difference in price,” Kayande said.

“The logical question we should be asking ourselves is: why are Enbridge pipeline flows down when there’s all this oil production everywhere and storage is bulging at the seams?”

Government priority

Alberta Premier Rachel Notley has said her government is examining the issue, something the provincial government confirmed Wednesday.

“We think it’s unacceptable if the process for booking pipeline space is resulting in producers having their oil turned back unnecessarily,” said spokesperson Mike McKinnon.

“We’re in close discussions with companies who are working to develop support for an industry-led solution to this issue and we’ll consider if any further actions by government are needed.”

In an emailed response to questions by CBC News, Enbridge said it is working with customers and the provincial government to maximize takeaway capacity out of the province, but said its Mainline system “is essentially full.” 

“There is no material capacity to be gained by changing the apportionment and supply verification procedures,” spokeswoman Tracie Kenyon said.

She said Enbridge’s nomination process is the result of customer consultation and regulatory proceedings, adding “it is a robust process, with a number of checks and balances.” 

For an industry facing an oil price crisis, every ounce of space is critical.

Increasing oil production, coupled with limited space on oil export pipelines, has created a backlog of oil in Western Canada. This oil glut has weighed heavily on the price of Alberta crude, most of which is sold into the U.S.

Past concern

Besides Canadian Natural, other companies have also raised concerns about air barrels, also known as over-nominations.

Devon Energy, for one, wrote to the National Energy Board in June stating its issues with over-nominations or the process of companies booking more space than they actually need. 

“Over-nominations inflate the demand for pipeline capacity and pipeline apportionment on the Enbridge Mainline and negatively impact the ability of producers to access pipeline capacity to sell their monthly oil production,” Devon wrote.

Pipeline company Enbridge says the Mainline system ‘is essentially full.’ (Kyle Bakx/CBC)

“Producers and other industry participants suffer significant economic harm every month as a result of ongoing over-nomination on the Enbridge Mainline.”

The issue of air barrels is not new, but is now under scrutiny due to financial pressure facing the oilpatch. 

“There can be people given space and they don’t necessarily use it,” said Dennis McConaghy, a former executive with pipeline firm TransCanada.

He said there is always going to be some elements of “gamesmanship” in the process of booking space on the Enbridge line.

“There is always some possibility that you will have an individual shipper getting an allocation of space and how they choose to use that allocation through the month can sometimes result in air barrels,” he said.

Enbridge tried to revise how it allocates space on its pipeline system earlier this year, but quickly scrapped the plan.

The company said in recent months it spoke to shippers about potential changes, but it “determined there is no consensus” on how to modify current procedures. 

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Do you know what kind of condo you’re buying?

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(NC) Condominiums can come in all shapes and sizes. But it’s important to know that not all condos are created equal when it comes to warranty coverage.

Whether you’re buying a condominium townhouse, loft-style two-bedroom or a high-rise studio, they are all classified as condominiums if you own your unit while at the same time share access (and the associated fees) for facilities ranging from pools and parking garages to elevators and driveways, otherwise known as common elements.

The most common types of condos are standard condominiums and common elements condominiums. The determination of how a condominium project is designated happens during the planning stage when the builder proposes the project and the municipality approves it.

When you’re in the market to buy, you need to know how your chosen condo is classified because it affects the warranty coverage under the Ontario New Home Warranties Plan Act. Standard condominiums have warranty coverage for units and common elements, but common elements condominiums only have unit coverage.

How could this affect you as the owner? If your condo complex has underground parking and, for example, there are problems with leaks or a faulty door, the condo designation will determine whether there’s warranty coverage.

If your unit is a standard condominium development, then the common elements warranty may cover the repairs. If it’s a common element condominium development, then repairs might have to be covered by the condo corporation’s insurance, which could impact your condo fees or require a special assessment on all the owners.

To avoid surprises, you should have a real estate lawyer review the Declaration and Description attached to your purchase agreement to be sure that you know the designation and boundaries of the unit you’re looking to purchase. Find more information on the types of condos and their coverage at tarion.com.

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5 savvy renovations to make your kitchen look like new

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(NC) The kitchen is the heart and focal point of any home. But if yours is looking a little tired, a few simple renovations can change the feel of the entire space.

Whether you’ve just moved in, have been meaning to update for years or are experiencing life changes, remember that a kitchen uplift doesn’t have to come with a huge price tag. These small-scale projects could be the change your kitchen needs:

  1. Brighten it up.Adding LED lights below your cabinets will brighten your backsplash and counter and provide a warm glow. Place your favourite containers below to act as focal points – those copper canisters that are hiding under the island and the marble coasters you couldn’t resist can now all be on display.
  2. Swap the old with the new.The backsplash is the first thing you see, so replacing it can be enough to give the space a whole new look. Try a unique shape or colour to change things up, like turquoise or patterned tiles, hexagon-shaped tiles or even a full slab of stainless steel.
  3. Rework what you have.People often think new cabinets are necessary for a kitchen reno, but a lot can be done with what you’ve got. Repainting the cabinets and switching out the knobs to chic new handles will do wonders for a makeover.
  4. Don’t hide away.Try adding some open shelving in an unused spot, such as above the sink or window, or next to the cabinets. Display your most beautiful dishes and add some decorative pieces to give the space a modern, airy feel.
  5. Add new materials into the mix.Changing the island to a butcher-block counter adds warmth and practicality.

Taking on a renovation can often feel overwhelming. But if you talk to your contractor about budgeting and spreading out payments through services like The Home Depot Project Loan, it can be easier than you think. The service allows you to finance any home projects, big or small and is available at locations across Canada.

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How to afford a home renovation that fits your life

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(NC) Changing seasons always bring about the desire to update our living spaces. But your life stage and budget can influence what kind of upgrades you can make. Here are some tips to get you started.

Assess the investment. The first step is to gauge how much value your investment will bring, whether you’re looking to sell or grow into a family home. A common misconception among home owners is that all renovations will increase a home’s value; unfortunately, this is not always the case. It’s always a good idea to strategically renovate the space to fit your life plan and goals.

Plan for both long- and short-term value. As a homeowner, it is important to assess what kind of value items can contribute to your life plan. Searching for products that are energy efficient, like an eco-friendly washing machine or water filtration system, can help you save on your monthly bills. A long-term investment, such as hardwood floors or bathroom tiles, can spruce up a living space for years to come. While sometimes this require a larger budget, the project can be both appealing to future buyers and stand the test of time in a family home.

Create a renovation budget. Once you have a clear plan, you’ll need to create a budget to align with your financial goals. Always ensure your budget includes any interest you’ll be paying. Ask multiple sources for competitive quotes.

Use a payment plan. For those high-ticket investment items, consider using a payment plan. Payment solutions such as The Home Depot Project Loan can help with bigger renovations. This allows you to stick to your budgeting goals while using a flexible payment plan to make larger purchases more accessible.

Use DIY to offset costs. In addition to using a payment plan, taking on a few safe and simple renovation projects yourself is an easy way to offset renovation costs. Your local hardware store can help source materials and provide helpful tips to make those do-it-yourself projects, such as refinishing cabinets or sanding old hardwood floors, a breeze.

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