CANADA ENERGY REGULATOR

ENBRIDGE PIPELINES INC. CANADIAN MAINLINE CONTRACTING APPLICATION HEARING ORDER RH-001-2020

WRITTEN EVIDENCE OF INC. ("CENOVUS")

Q1. What is the business of Cenovus?

A1. Cenovus is a Canadian integrated oil and natural gas company, headquartered in Calgary, and is in the business of developing, producing and marketing crude oil, natural gas and natural gas liquids in Canada. We also conduct marketing activities and own refining interests in the United States (“U.S.”).

Q2. Please describe Cenovus’s crude oil production operations.

A2. Cenovus’s crude operations include in-situ projects in northern Alberta and conventional oil production in Alberta and , collectively producing over 460,000 barrels of oil equivalent per day.

Q3. What is the interest of Cenovus in this proceeding?

A3. Cenovus supports the introduction of firm service on the Canadian Mainline, by converting 90 percent of its available capacity to contract service, as proposed by in the Canadian Mainline Contracting (“MLC”) Application.

Q4. How does Cenovus currently utilize the Enbridge Mainline?

A4. Cenovus transports crude oil on the Enbridge Mainline to several key markets, including those in the U.S. Midwest and USGC.

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Q5. Are there issues or problems with the status quo as it relates to transportation on the Enbridge Canadian Mainline?

A5. Yes. It is no secret that there are issues respecting access to capacity on the Canadian Mainline, including chronic apportionment, which means that shippers may not be able to access the capacity they need, with certainty. As a significant producer-shipper of on the Enbridge Mainline, these issues can prevent Cenovus from maximizing the value of its production, including by reason of stranded downstream transportation.

Q6. Why does Cenovus support the introduction of firm service on the Canadian Mainline?

A6. Cenovus considers the Enbridge Mainline to be an important egress option for Canadian producers. However, it is clear to Cenovus that firm service is needed in order to better align monthly nominations with available capacity, and provide greater certainty of access to transportation capacity for shippers who value it most.

Firm service on the Mainline will provide the opportunity for greater utilization of available downstream capacity to which Cenovus has committed – such as on Flanagan South and Spearhead – in order to access higher value downstream markets such as the USGC, or via access to tidewater, on a regular and predictable basis.

Q7. How does the Enbridge proposal allow Cenovus to manage uncertainty?

A7. Enbridge’s proposed new service allows producers such as Cenovus to manage two types of uncertainty. First, the contract will provide committed shippers with the assurance that they will have access to a minimum amount of egress capacity (i.e. their contracted capacity), thus allowing producers to manage the uncertainty associated with Mainline capacity. Second, the contract will provide producers with assurance that they can transport their oil to major markets at a fixed toll, irrespective of overall market demand.

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Q8. Does the fixed toll aspect of the MLC proposal provide benefits to shippers, compared to alternative tolling methodologies? A8. Mainline Contracting allows a producer such as Cenovus to have toll and capacity access certainty for the period of its commitment, which will range from 8 to 20 years. As such, committed shippers will mitigate three types of risk, relative to the risk they would face if tolls were set under a traditional, pure common carrier cost of service-based method:  If Canadian Mainline costs increase they are insulated;  If demand for Canadian Mainline capacity decreases (such that cost of service- based tolls would increase) they are insulated; and  If demand for Canadian Mainline capacity increases (such that apportionment would increase) they are insulated.

Q9. Can Cenovus point to an example where having firm service was beneficial in eliminating uncertainty?

A9. Yes. Cenovus recently sold 345,000 barrels of crude oil to Irving Oil, which was delivered by marine tanker to the Irving in Saint John, New Brunswick via the Panama Canal. Specifically, Cenovus used its existing firm capacity on the Trans Mountain pipeline to ship the oil to the Westridge Marine Terminal at Burnaby, BC which was then loaded on an Irving-chartered tanker for ultimate delivery to Saint John. It would have been extremely difficult, and likely uneconomic, to execute this sale without firm service to the Marine Terminal.

Q10. Does Cenovus believe that the Enbridge proposal to introduce firm service in respect of existing Canadian Mainline capacity is appropriate?

A10. Yes. Cenovus does not believe there has ever been a finding by the CER/NEB that prohibits firm service because it was proposed for existing capacity, as opposed to new capacity. In fact, the NEB has stated that there is “no significant difference between existing and new capacity on a pipeline such that firm service should only be allowed for new capacity and not allowed for existing capacity” (at page 26 of NEB Reasons for

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Decision RH-2-2011). As such, Cenovus believes that the Enbridge MLC proposal to introduce firm service on existing Canadian Mainline capacity is appropriate.

Q11. Does Cenovus consider that setting aside 10% of available Canadian Mainline capacity for uncommitted use is appropriate?

A11. We do. For Cenovus, access to egress pipeline capacity is fundamentally a scale of certainty and efficiency: 100% contracted capacity provides the greatest certainty and efficiency; 100% spot capacity provides the least efficient and least certain outcome. The Enbridge proposal situates the Canadian Mainline appropriately on that scale. Q12. Has Cenovus considered whether the tolls and toll methodologies proposed by Enbridge are appropriate?

A12. Yes. Cenovus engaged Dr. Michael Webb of the Regulatory Economics Group (“REG”) to assist it in evaluating and assessing the information filed by Enbridge concerning its costs and its cost of service, including the responses to the Cenovus information requests for specific information concerning the Enbridge Application, the Additional Written Evidence of Concentric Energy Advisors and the Simplified Mainline Contracting Earnings Model. Q13. What conclusions has Dr. Webb reached?

A13. Dr. Webb’s conclusions are set out in his evidence, which is being filed concurrently. In short, his investigation and analysis reached much the same conclusions about the proposed Enbridge tolls as Concentric did: that in the majority of scenarios, the proposed MLC firm service tolls are superior to a weighted average cost-based toll, and the Enbridge MLC proposal - including the proposed tolls and toll methodologies - is not unreasonable and is in the Canadian public interest.

Q14. Does this conclude the evidence of Cenovus?

A14. Yes, at this time.

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