Note:  Alliance announced an October 30 official in-service date for tariff 
services; however, they will be selling test gas in 
ramp up period.  Right now, these first deliveries are going into the ANR 
system because it is the only interconnect that is 
ready.

Alliance Delayed, But Deliveries Begin Ramping Up

After months of speculation in the industry, Alliance Pipeline confirmed 
yesterday full commercial service will be delayed nearly a month until Oct. 
30. When construction of the system was scheduled nearly three years ago, 
Oct. 2 was the target date for commercial service. 

However, the delay doesn't mean the market won't be getting any Canadian gas 
out of Alliance until the end of October. The pipeline opened one of its 
Chicago delivery valves last Thursday and started selling 50-100 MMcf/d of 
gas into the market. It intends to increase its sales each week eventually 
reaching its full 1.325 Bcf/d load prior to switching to commercial service 
on Oct. 30, said spokesman Jack Crawford. 

"We got Commission approval to actually sell our test gas. Right now I think 
we are dealing with three or four different marketers. Our initial deliveries 
right now are into the ANR system. That's because its basically the only 
connection that is ready, but over the next few weeks we expect they will all 
be ready to go and we will test them all. 

"I'd be surprised if it ends up being regular [volume increases of 100 MMcf/d 
each week] but that's kind of the game plan," said Crawford. "On Oct. 29 it 
will be Alliance selling [1.325 Bcf/d of] test gas, and on Oct. 30 it will be 
shippers nominating at one end and delivering at the other. The market may 
not see much of a difference. We obviously don't want to start charging our 
shippers until we have the confidence that all the systems have been checked 
out." 

The pipeline system is designed to deliver gas from producing regions of 
northeastern British Columbia and northwestern Alberta to the Chicago area 
where the line interconnects with the North American pipeline grid. 
Currently, more than 99% of the total pipeline system has been installed, 
including 14 mainline compressor stations, 37 receipt points in British 
Columbia and Alberta, and 7 delivery points in Illinois. Commissioning 
activities commenced in March, including the flowing of gas into the 
completed sections of line to purge air from the pipe. At present, 
approximately 95% of Alliance has been purged of air. This includes all the 
mainline portion of the system (1,857 miles) from near Gordondale, Alberta to 
the delivery section near Joliet, Illinois and 306 of 434 mile laterals 
receipt portion of the system. Additionally, 25 receipt point meter stations 
have been commissioned. Final commissioning activities are also being 
completed at 14 mainline compressor stations. To date, 6 Bcf of gas is in the 
commissioned mainline and lateral portions of the system, with the ultimate 
line pack targeted at 8 Bcf. 

Crawford said there were a variety of factors that contributed to the delayed 
start-up. "The rain in Saskatchewan delayed us a bit back in July, but we 
managed to catch up on the construction there in August. But it then meant 
that some of our commissioning didn't get going until a little bit later. 
Farther west in Alberta and BC in fact we've had a couple of rain problems. 
In particular, we have one relatively small but fairly long lateral that we 
haven't even been able to get on the right of way yet and that's because of 
rain. 

"Up in BC we've been having trouble with a directional drill of a creek on 
one of our laterals up there," he said. "We're likely to get approval to 
open-cut that creek, but that will take us probably the better part of a 
month. 

"On the downstream end, we had hoped to get more of our downstream 
connections right now. We are testing one, but some of the others aren't 
quite ready yet. We're ready, but they are not. Then of course there is a 
fairly complex interaction between the pipeline and the [Aux Sable liquids] 
plant. We haven't had a chance to work on that yet. So when you look at all 
of those things, the question was when could we establish a date when all 
this stuff would be done and we would be operational. We spent a fair amount 
of time with our shippers and they mentioned one other pipeline that was 
being delayed one day at a time drove them to distraction. We agreed we would 
pick one of three dates, all Mondays: Oct. 2, Oct. 16 or Oct. 30, and we just 
had to pick one that we felt confident in." 

Besides the timing of service, there has been another important question on 
the minds of many market observers. Will the gas Alliance ships come Oct. 30 
be incremental gas or gas that would have been flowing through TransCanada. 

"I don't think it's going to be purely either way," said Crawford. "Lots of 
guys are targeting for Nov. 1 to bring their new gas on to start the gas year 
so it all depends on how much shows up. It's not a big secret that we've had 
some wet weather and some of the drilling and completion work hasn't gotten 
done. That's likely to have some affect on it as well. That's a delay though. 
How long are people going to pay $6 for gas? Boy, people are going to have a 
lot of money for drilling and projects."
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