Alliance Pipeline changed Canada's gas industry

Dec 04, 1998 01:00 AM

The C$ 4 bn Alliance Pipeline has reshaped Canada's natural gas industry. Construction of the pipeline recently won final approval.
Starting with its 1995 unveiling, the proposal to build the British Columbia-Chicago line became a cause celebre for the gas producers who backed it and a huge intrusion for the established pipeline firms, TransCanada Pipelines and NOVA, that opposed it.
"It did create a clash of titans between the TransCanada family and the upstarts, which we think is a healthy competitive dynamic," said Canadian Association of Petroleum Producers President David Manning.

Alliance, designed to ship 1.3 bn cfpd to Chicago from north-east British Columbia by late 2000, will be built across a vastly different Canadian energy landscape than the one that existed when it was first envisioned in 1992 by two gas marketers meeting over drinks.
As arguments raged that year over who should add pipeline capacity to California from Alberta to allay a gas glut and sagging prices, Glen Perry and his friend Steve Haberl sat down after work at the Elephant & Castle pub in downtown Calgary.
Perry, then a marketer with small gas seller Direct Energy Marketing, asked Haberl, Sceptre Resources' vice president of marketing, why no pipeline firms were proposing an express route to Chicago, the terminus of several pipelines.
Perry grabbed a cocktail napkin and a pen, sketched out a rough map of North America, then drew a straight line from north-eastern British Columbia all the way to Chicago.
"That was the initial idea. I must admit we were a little into our cups at that time, so we were dreaming dreams of grandeur," said Perry, now Alliance's vice-president of business development. "It kind of hit the harsh light of reality over the next couple of years as we tried to see if anybody was interested in it and basically the idea died."

By 1994, the industry again faced a gas glut. So in November, Perry, convinced conditions were driven by a lack of access to rich U.S. Midwest markets, bounced his napkin idea off Direct Energy President John Lagadin, who sent him to take another look along with old colleague Jack Crawford.
The men worked out the bugs inherent in engineering a previously unheard-of high-pressure, 3,000 km pipeline. Then, with 30 overhead slides under their arms, they trod about Calgary quietly selling the idea to executives at about 100 producers.
By the end of 1995, Perry and Crawford had signed up 22 of them to participate under the auspices of what was called the Northern Area Transportation Study and went public with the idea. They then met with NOVA, TransCanada and Westcoast Energy to present the proposition and invite them in.

Their reception was less than cordial. "They said, 'When you producers fail, you'll realise how tough pipelining really is," recalled Alliance Vice President Crawford. Westcoast would eventually join the consortium.
Producers, pipeliners and Alberta's government locked horns for more than two years over the right to build steel arteries and whether gas liquids could be exported in the same pipe as the gas. Complicating the procedure was a cherished home-grown petrochemical sector that had grown accustomed to cheap feedstock.
Tensions eased only last spring when competition was enshrined in a producer-pipeliner accord driven by TransCanada Chief Executive George Watson and producer association chairman Barry Jackson, who is Crestar Energy's chief executive.
In it, producers agreed to call off their opposition to TransCanada's now-completed take-over of NOVA's Alberta pipeline system in exchange for TransCanada and NOVA pledging to call off the dogs on Alliance at its epic National Energy Board hearing.

TransCanada now says it welcomes the competition and the efficiency Alliance will bring to the Canadian industry as it strives to sell gas into a market long served by gas producing basins in the southern United States.
TransCanada spokesman Gary Davis said the negotiated accord also signaled that regulators would likely apply a lighter hand to his industry because players proved they could work out differences on their own.

The Alliance consortium, which first included just producers and marketers, now includes pipeline and energy firms Enbridge, Fort Chicago Energy Partners LP, Coastal, Westcoast, Duke Energy, Unocal and Williams Cos..

Source: not available
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