With shipper contracts expiring in 2015, Alliance Pipeline Ltd. plans to develop receipt and short-haul services that take advantage of the pipeline’s location near developing gas shale plays in British Columbia and North Dakota, Alliance said. The new offerings will complement the pipeline’s “bullet line” service from Western Canada to Chicago, as well as provide hub services such as the Natural Gas Exchange and the Alliance Chicago Exchange project.

The timing coincides with the pipeline’s shipper contract renewal notifications, which were due by Dec. 1. The original 15-year agreements, which became effective in 2000, required shippers to give Alliance five years’ notice to extend their contracts for a minimum of one year beyond 2015.

Shippers representing about 8% of original contracted capacity have elected to extend their contracts to at least Dec. 1, 2016, Alliance said. These shippers have the option to continue extend their contracts annually. The remaining shippers have elected not to extend their commitments beyond 2015. The pipeline will remain fully contracted under existing firm contracts until Dec. 1, 2015, Alliance said.

“The decision of most the shippers to not extend post-2015 is not altogether unexpected given the nature of the existing contracts which are essentially offering a single service with bullet delivery of northern Alberta/British Columbia natural gas to the Chicago area,” Moody’s Investors Service said in a note Friday. “It was a contract which made sense 10 years ago but does not accommodate very well the changing landscape of the North American natural gas industry.

“While Moody’s views the nonextension of the transportation service agreements as a negative, (the weighted-average term is now down to about five years to maturity except for 40 MMcf/d contracted to Pecan Pipeline for an initial term of 10 years in 2010), the freeing up of capacity in five years will allow Alliance Pipeline to implement a different strategy for the pipeline.”

Alliance CEO Murray Birch said the pipeline’s management believes the line will continue to be fully utilized for many years. “Alliance expects to continue to be a low-cost and highly competitive transportation route to key Midwest and eastern markets, earning superior netbacks for Western Canadian producers,” he said. “Given our pipeline’s proximity to key developing shale resource plays, such as the Montney in British Columbia and the Bakken in North Dakota, Alliance’s capability to transport liquids-rich gas provides a significant competitive advantage.”

Alliance said it now will remarket capacity made available after 2015 and will enhance its offering with new services. “Over the next five years, Alliance plans to move from a single-service, single-toll export pipeline to a new multi-service business model, providing customers choice from a suite of transportation services,” the pipeline said.

“…[G]rowing liquids-rich gas supply from unconventional development and customer demand for new services present an exciting new opportunity for Alliance to transition to a multiservice, multimarket business model,” Birch said.