Pipeline Profiles: Alliance Pipeline

Sources: Alliance Pipeline Limited Partnership, NEB

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The Alliance Pipeline began operations in 2000. It is unique among major Canadian gas pipelines because natural gas liquids may be left in the gas stream. The pipeline system draws from 52 receipt points, largely concentrated near the northern end of the system in northeastern B.C. and northwestern Alberta. Alliance transports liquids-rich gas to the Chicago market hub. Extraction of the natural gas liquids occurs at the Aux Sable facility located near Chicago.

In 2016, capacity at Zone 2 averaged 15.84 million cubic metres per day (0.56 billion cubic feet per day) and throughput averaged 12.35 million cubic metres per day (0.44 billion cubic feet per day). The average utilization of Zone 2 in 2016 was 79%.

Flows measured at Zone 2 are intra-Canada. The Zone 2 segment on the Alliance Pipeline includes all receipts upstream of the Blueberry Hill compressor station near Gordondale, Alberta.

In 2016, export capacity at Border averaged 46.61 million cubic metres per day (1.65 billion cubic feet per day) and throughput averaged 43.12 million cubic metres per day (1.52 billion cubic feet per day). The average utilization of Border in 2016 was 92%.

Flows measured at Border are exports. The Alliance Pipeline connects to the Alliance USA Pipeline at the Canada/U.S. border near Elmore, Saskatchewan.

The physical capacity of a pipeline is based on many factors such as the product(s) being carried, direction of flow, ambient temperature, pipeline compression, and maintenance work or other pressure restrictions. The operational capacity at each key point may also reflect contracts for transportation service, and supply and demand across the system. The actual physical capacity of the pipeline may be higher than the assumed operational capacity stated here.

Open data can be freely used, modified and shared by anyone for any purpose. The data for these graphs are available here.

Key Developments

Last updated: August 2016

Alliance began operations in 2000, supported by 15-year firm transportation contracts. In 2010, when the option to renew these contracts was triggered, few shippers opted to do so (contracts were renewed for just 8% of previously contracted capacity). Accordingly, Alliance developed its New Services Offering (NSO), which incorporated new services and tolling methodologies on the pipeline. Alliance applied for Board approval of the NSO in 2014. By the time the hearing was completed in April 2015, the pipeline was nearly fully contracted under the proposed toll framework. The Board approved the proposed firm tolls and new services, and granted Alliance some discretion in setting bid floors for seasonal firm service and interruptible service, and instructed Alliance to put any excess cash earnings into a reserve account. Alliance is to file a depreciation study for Board approval before it can make any distributions from that account.

Regulatory Documents

Last updated: August 2016

Tolls

Last updated: August 2016

Figure 1 shows the Alliance benchmark toll and the GDP deflator (normalized) for 2010-2015. The benchmark toll was nearly flat between 2010 and 2015. The tariff included an authorized overrun service under which shippers could move an additional amount of gas at very low cost when capacity was available.

Figure 1: Alliance Benchmark Toll

Figure 1: Alliance Benchmark Toll

Sources: NEB toll filings and NEB calculations

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This graph shows the Alliance benchmark toll as a solid red line and the GDP deflator as a black dashed line. The benchmark toll moved in line with the GDP deflator from 2010 to 2015.

Under the new toll regime, firm tolls decreased about 35% on 1 December 2015. However, shippers must pay for interruptible service if they want to move additional gas. The tollFootnote 1 dropped from $34.48/10³m³ ($0.84/GJ) to $23.61/ 10³m³ (0.58/GJ) for Zone 1 full path serviceFootnote 2.

Financial

Last updated: August 2016

Alliance Pipeline Limited Partnership (APL) has earned a return on equity of 11.26% each year since operations began. Return on equity was based on an approved baseline rate of 12.0% with an adjustment for cost overruns during construction. In December 2015, APL began operating under its NSO, and will report achieved return on equity in annual compliance filings to the Board. In addition, it is required to file other information with the Board on a quarterly basis. This information was provided for the month of December 2015. Previously, APL was exempted from filing quarterly surveillance reports with the Board.

APL’s financial ratios have improved in recent years, indicating greater ability to service debt payments. However, its credit rating was downgraded by DBRS in 2015 after the company signed new contracts with shippers, in part due to the lower shipper credit quality and shorter duration of contracts.

Table 1: Alliance Pipeline Limited Partnership
Alliance Pipeline Limited Partnership 2010 2011 2012 2013 2014 2015
Deemed Equity Ratio 30% 30% 30% 30% 30% 30%Table Note a
Achieved Return on Equity 11.26% 11.26% 11.26% 11.26% 11.26%
Interest and Fixed-Charges Coverage RatioTable Note b 2.25 2.21 2.29 2.41 2.58 2.75
Cash Flow-to-Total Debt and Equivalents RatioTable Note b 16.9% 18.0% 18.5% 21.2% 22.3% 27.4%
DBRS Credit Rating A (low) A (low) A (low) A (low) A (low) BBB

 

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