Enbridge, Fort Chicago to be Joint Owners of Alliance Pipeline

Two Canadian companies will be the 50-50 owners of the Canada-to-U.S. Alliance Pipeline with the sale, announced Thursday, of Duke Energy's 23.6% interest. Calgary-based Enbridge Inc. and Fort Chicago Energy Partners each will pay Duke an estimated C$203 million (US$137 million) to add an 11.8% interest each in the pipeline. The two also will acquire Duke's share in the Aux Sable processing facility.

The Duke share in Alliance will give Fort Chicago and Enbridge joint ownership of the pipeline system when the transactions close. Calgary-based Fort Chicago was formed for the purpose of holding shares in Alliance and the Aux Sable gas extraction and fractionation plant.With the transaction Enbridge and Fort Chicago will each own about 43% of Aux Sable.

Enbridge, a major Canadian pipeline owner and gas distributor, and Fort Chicago also will assume Duke's support obligation for Alliance Canada Marketing, for an aggregate payment from Duke of approximately C$19 million (US$12.8 million) to each Enbridge and Fort Chicago.

Duke Energy estimated it will receive a total of US$245 million as a result of the transactions.

Enbridge and Fort Chicago purchased El Paso Corp.'s and Williams' interests in the Alliance Pipeline and Aux Sable facility last October (See Daily GPI, Oct. 31, 2002)

The latest transactions, which are subject to regulatory approvals, are expected to close in late March or early April, except for a small portion of the Alliance pipeline which will be deferred until the fourth quarter, according to Enbridge.

The 36-inch diameter Alliance Pipeline extends nearly 1,900 miles from Fort St. John in British Columbia to Chicago, IL, and has the capability to transport 1.55 Bcf/d of natural gas. It was initially backed by a coalition of producers aiming at breaking TransCanada PipeLine's near monopoly on long-haul transportation East from Alberta for Canadian gas. The line started operations in December 2000 (see Daily GPI, Dec. 4, 2000).

The Aux Sable gas liquids plants is located in Chicago at the outlet of the Alliance pipeline system, and extracts gas liquids from Canada to meet the specifications required by downstream pipelines and gas distributors.

Alliance Canada Marketing holds long-term contracts for 75 MMcf/d of transportation capacity on Alliance. The capacity is used partially to provide service to a number of upstream producers and to supply the requirements of the Aux Sable plant for make-up gas and fuel.

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