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Alliance: Lack of Takeaway Capacity Not a Problem

Alliance: Lack of Takeaway Capacity Not a Problem

Some have speculated Alliance Pipeline might be hurt by FERC's move not to issue preliminary determinations (PDs) to four projects that would provide takeaway capacity for Canadian gas from Chicago to East Coast markets. But Alliance officials last week quickly dismissed that notion.

"First of all, we don't need to get the gas from Chicago to the East Coast," said Dennis Cornelson, president and CEO of Alliance Pipeline Ltd. Partnership. He and Alliance Vice President Jack Crawford noted there was room enough for both Canadian gas and Gulf Coast gas in the U.S. Midwest market. "The Midwest market relies to a very large degree on gas imported from the Gulf. Even with the additional Canadian gas, it's still a big net user of gas from the Gulf. So it [Canadian gas] really doesn't have to go anywhere else."

Even if none of the four projects - Independence, Millennium, SupplyLink and MarketLink - are built, Alliance could use the displacement capability of existing pipelines, such as Midwestern Gas, to get gas to the East Coast markets, Crawford said. Such pipelines would be able to significantly reverse their flows during certain times of the year. "So we've always said you don't really need [additional] pipeline capacity out of Chicago to handle Alliance," Cornelson told Daily GPI.

But he is confident new lines will be constructed. "The more I talk to people the more I believe Chicago is not only a market hub where a lot of pipelines come together...but it's also a future supply hub," Cornelson said. "I think it's only a matter of time before the market absorbs and fully understands the implications" of this. "Then I think at the right time there will be further pipeline expansion leaving Chicago."

FERC just wants the projects to be "further advanced" before handing out approvals, he noted. Even when Alliance, which recently began construction, was going through the regulatory process, the Commission made "very clear to us" that it wasn't going to rubber stamp every project. It told Alliance "don't count on us giving everybody in the world a PD so that everybody...can build a pipeline," Cornelson said.

"I think their general philosophy is 'show us the money'. [They're not going] to give you a blank check to go out and try to find the money," he noted. He said the Commission still must "grapple" with the issue of "whether or not they're [going] to allow pipeline players to take risks" by holding capacity on their projects. Cornelson thinks FERC should permit this.

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