Regulatory Delay Forces Alliance Out on Big Financial Limb
Backers of Alliance Pipeline Project are going out on a big financial limb by spending heavily to advance the proposed new Canadian export route to Chicago while still awaiting approval from the National Energy Board. Alliance president Dennis Cornelson reported the international consortium of pipelines and producers has spent about C$200 million (US$145 million) to date. But to keep the project moving quickly enough to fulfill its schedule, the group "will have to double that by the time regulatory approvals are obtained."
Cornelson added "this will represent one-third of the total required equity." The C$4 billion (US$2.9 billion) project is being financed 30% with equity and 70% with debt under an arrangement recently concluded with a banking syndicate. While gas producers hold two-thirds of Alliance's initial capacity of 1.3 Bcf/d, a series of sponsorship shuffles have put 75% of the ownership in the hands of pipelines. They include IPL Energy, Westcoast Energy, Coastal Corp., Duke Energy, Mapco and the transmission arm of the Unocal family.
An April settlement, between warring Canadian pipeline and producer factions on new rules for civility in competition, speeded up the hearings, which ended May 20, but not enough to retrieve Alliance's lost time. The pipeline still will be delayed by one year until November 2000.
Alliance currently predicts all the regulatory paperwork will be done on both sides of the international border before the end of this year, including final formal "facilities releases." Pipe production began this month and will continue through the spring of 2000, racking up big bills through the regulatory waiting period. The schedule calls for a winter start on lateral feeder lines, right-of-way clearing and river crossings and mainline construction next spring.
Gordon Jaremko, Calgary
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