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Canadian Regulators OK Alliance Pipeline Service Changes

The express pipeline into the United States for Canadian liquids-rich natural gas won approval Thursday for a service overhaul that already shows signs of keeping the route running at full capacity.

The National Energy Board (NEB) authorized Alliance Pipeline to implement changes that attracted bookings for nine-tenths of its capacity in contract negotiations held while the package went through regulatory review for the past 13 months.

The successful formula includes carriage of ultra-rich gas, shortened transportation contracts, and addition of a digital trading floor on the 3,719-kilometer (2,311-mile) conduit to Chicago from northern British Columbia.

The new regime replaces 15-year service contracts that enabled construction of Alliance as a producer-sponsored bypass of the Canadian pipeline old guard in 1999-2000. Work on the changes began in 2010, after about nine-tenths of the system’s subscribers turned down an offer just to renew the original arrangements when they expire Nov. 30, 2015.

The official, “nameplate” capacity of Alliance is 1.325 Bcf/d. But thanks to technology that enables carriage of ultra-rich gas, coupled with northern climate conditions that enhance the method, the system routinely averages about 1.5 Bcf/d.

The physical destination for the express export route continues to be a liquids extraction plant named Aux Sable, near Chicago. But the entire 1,560-kilometer (930-mile) Canadian half of the system is being turned into a supermarket of digital selling and buying called the Alliance Trading Pool (ATP).

Since starting up at the same time as Alliance, Aux Sable has processed more than 7.2 Tcf of gas and pumped out in excess of 12 billion gallons of liquid byproducts. Canadian exports fill most of the plant’s capacity for 2.1 Bcf/d of gas and 107,000 b/d. of liquids. Types of liquids carried as vapor in the gas vary, with the composition of the stream affecting the size and value of delivery batches.

In approving the service overhaul the NEB emphasized that the favorable response to Alliance’s new service menu demonstrated strong market support. The board also cited a notable absence of complaints against tariff and toll aspects except by a small minority of the original 15-year shippers that sought extensions of the simpler old contracts.

Alliance faces only mild counterparts, at worst, to the competition that has eroded traffic on older rival TransCanada Corp.’s natural gas Mainline from Alberta to Ontario, Quebec and export destinations in the U.S. Middle West and Northeast, NEB said.

As a result, the board set limits on Alliance’s ability to set prices on sales of periodic, temporary capacity surpluses and rejected a request for the system to be exempt from filing quarterly “surveillance” or performance reports to be posted for public viewing.

NEB said Alliance has been blessed by the location of its northern inlets in BC areas that have turned out to be among the richest combined gas and liquids fields in North America.

Production has been on the rise across the region within 40 kilometers (25 miles) of the pipeline’s route since it entered service in December of 1999, and the trend shows no signs of changing, the board said. A long lineup of slow-moving proposals for liquefied natural gas (LNG) export terminals on the Pacific Coast of BC shows no signs yet of posing risks of significantly or rapidly shrinking U.S. deliveries via Alliance, NEB said.

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