Competition Bureau challenges Keyera’s natural gas deal, says it could harm energy producers

Keyera's acquisition of Plains All American would enhance domestic energy infrastructure and energy security, support economic resilience and establish a strong cross-Canada NGL corridor, according to the company. Photo by David Bloom/Postmedia

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Calgary-based Keyera has proposed to buy Plains All American Pipeline L.P.’s Canadian natural gas liquids business along with certain U.S. assets for $5.15 billion.

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The acquisition would reduce competition at Canada’s “most important” natural gas liquids hub at Fort Saskatchewan, Alberta, the independent federal agency tasked to promote and protect consumers and businesses said on Tuesday.

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“Following an extensive investigation of the evidence, the Bureau has applied to the Competition Tribunal to challenge this transaction,” Anthony Durocher, an acting senior deputy commissioner at the Competition Bureau, said at a briefing.

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In a statement on Tuesday Keyera said it disagreed with the bureau’s “assertions and characterization” of the transaction, and that it intends to respond to the application. It also said that the “regulatory proceeding” does not prevent the company’s ability to close the transaction.

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“The transaction will strengthen competition across the basin and provide customers with improved access to key markets and greater flexibility in how their products are handled, transported and sold,” the company said.

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The matter will now proceed before a competition tribunal, a specialized panel that deals with competition law cases, where the companies can respond, Durocher said. The tribunal will determine next steps and timelines.

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Natural gas liquids play an important role in Canada’s energy system as they supply products used to heat homes, support agriculture and manufacture petrochemicals. They are byproducts of natural gas production.

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Before producers can transport or sell natural gas, they need to separate the liquids from the gas stream. To do that, they need fractionation services that convert these liquids into products such as propane, butane and condensate.

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Fort Saskatchewan in Alberta hosts major fractionation facilities and other infrastructure that makes it Canada’s primary hub for natural gas liquids processing.

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If the transaction were to go through, it would “eliminate Plains as an independent competitor at the hub and reduce the number of major integrated providers” from three to two, said Durocher.

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“That loss of competition matters,” he said.

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He said that the transaction would likely lead “to higher prices and less favourable contract terms” for producers that rely on these services.

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The bureau’s analysis concluded that the remaining competitors, which consist of just one other major provider and a small number of “significantly smaller firms,” will not be able to replace the departure of Plains as an independent competitor.