Alliance Passes Environmental Test; On Track for 2000
The proposed transmission system of Alliance Pipeline L.P.
received a passing environmental grade at FERC last week, moving it
one step closer to becoming a major transporter of western Canadian
gas into the U.S. Midwest market. The 1.3 Bcf/d, 891-mile pipeline
project, which received a preliminary go-ahead a year ago, still
must obtain final approval from the Commission before beginning
Provided certain mitigation measures are met, the $1.3 billion
Canada-to-Chicago pipeline would have "limited adverse
environmental impact," FERC concluded in its final environmental
impact statement (FEIS). Key to its decision, it said, was the fact
that about 92% of the proposed pipeline (815 miles) would be
constructed adjacent to or within existing pipeline and power line
rights-of-way, and most of the facilities would be located in
sparsely-populated agricultural areas.
"This puts us firmly on track," Alliance spokesman Jay Godfrey
said. FERC's action firmed up a schedule that - following a
one-year delay due to a prolonged fight before Canada's National
Energy Board - calls for construction to start next spring. That
will be in time for completion and a start on deliveries in the
fall of 2000.
The project has received a draft Canadian version of FERC's FEIS
- the CSR or Comprehensive Study Report. Godfrey said Alliance got
no surprises. A final CSR is expected within a few weeks. Final
approval of the project's Canadian leg could come in October or
November, if the NEB works at its customary pace. Construction
approval may include special conditions requiring safety
precautions as a result of engineering disputes over Alliance's
plans to ship a high-pressure blend of liquids in vapor form for
processing by an associated plan for a new processing plant near
Godfrey said the Alliance consortium, now dominated by Canadian
and U.S. pipelines that bought out the founding producers, and the
shippers remain as eager as ever to see the new project built.
"The differential is still there. The impetus to get to Chicago
is still there." He was referring to a wide gap between gas prices
in western Canada and the Chicago market hub. While prices are
hovering around C$1.50 (US$1) per Mcf in Alberta, U.S. Henry Hub
prices are currently about US$1.75 and hitting around $2.35 in
futures contracts for the coming heating season.
TransCanada PipeLines, meanwhile, shows signs of accepting
construction of Alliance as a fact of life. In new evidence
presented to the NEB in support of its own, pared-down 1999 capital
program, it acknowledges "competition in natural gas transmission
out of the Western Canadian Sedimentary Basin and to the markets
served by TransCanada is significant and increasing as a result of
new physical competition from projects such as Alliance." The old
Canadian gas transportation mainstay notes the increased risk, but
"it is TransCanada's view that the pipeline will continue to be
utilized at a reasonable level provided that it has the flexibility
Canadian pipeline and producer representatives are committed by
a spring peace accord to a prolonged, thorough and co-operative
hunt for ways to put the old-guard transporters on an equal footing
with the new comers by simplifying and speeding up rate-making,
facilities additions and regulation.
The U.S. portion of the pipeline would extend from the
U.S.-Canadian border near Sherwood, ND, to the Aux Sable extraction
plant near Morris, IL, and onto the Chicago Hub near Joliet, IL,
passing through North Dakota, Minnesota, Iowa and Illinois.
Alliance also plans to construct about 982 miles of pipeline on the
Canadian side of the border to connect with the U.S. project.
The Commission said it examined the Northern Border Pipeline
Project and the now-defunct Viking Voyageur Gas Transmission
Project as system alternatives but found neither was
"environmentally preferable" to Alliance's proposal nor able to
meet the project's objectives. Given Alliance's plans to transport
1.3 Bcf/d of firm capacity, FERC said Northern Border would need to
"extensively modify" its project. Moreover, it noted Northern
Border would be unable to transport the ethane-rich natural gas
liquids that Alliance proposes to transport to the Aux Sable plant.
Viking Voyageur has been officially cancelled. As part of the FEIS,
the Commission adopted three minor variations in Alliance's route
aimed at "significantly" reducing the environmental impact of the
FERC said it also reviewed a Northern Border/Aux Sable Plant
System Alternative that would make use of Northern Border's
pipeline to transport gas from the Aux Sable plant to
interconnections with ANR Pipeline, Midwestern Gas, Natural Gas
Pipeline Company of America and Peoples Gas. The alternative would
require the construction of about 2.7 miles of 36-inch-diameter
pipeline to connect Northern Border's system to the Aux Sable plant
and a new 18,000 hp compressor station. Although it would be
"environmentally preferable" to the proposed portion of the
Alliance Pipeline that it would replace, FERC said "the
implementation of this alternative is beyond [its] control" since
it cannot compel Northern Border to build the facilities.
The proposed pipeline will be owned by a consortium of U.S. and
Canadian companies, including Fort Chicago Energy Partners (26%
interest), IPL Energy Inc. (21.4%), Westcoast Energy (18.5%), The
Coastal Corp. (14.4%), Duke Energy Corp. (9.8%) Unocal Canada Ltd.
(9.1%), and Williams Cos. (4.8%).
Susan Parker, Washington, D.C.; Gordon Jaremko, Calgary.