Pipeline company Pembina has agreed on a settlement with its shippers regarding the Alliance Pipeline matter.
In a significant development, Pembina Pipeline Corporation has reached a settlement with shippers on the Canadian portion of the Alliance Pipeline. The agreement, which is subject to approval from the Canada Energy Regulator (CER), has several key implications for both parties involved and the overall pipeline operations.
Implications for Toll Structure and Revenue
The settlement introduces a term-differentiated toll schedule, which will reduce existing long-term firm tolls by an average of 14% on a volume-weighted average basis. This affects the 1-year, 3-year, and 5-year tolls. The financial implications for Alliance include approximately $50 million per year reduction in long-term firm service revenue over the next 10 years, in addition to a new revenue sharing provision.
Timing and Approval
The agreement is set to take effect on November 1, 2025, and run through October 31, 2035. Alliance has filed an application with the CER and is awaiting a response. The settlement follows a November 2020 order from the CER to submit a detailed toll application.
Regional Short-Haul Expansion Proposal
Separate from the settlement, Alliance is soliciting non-binding expressions of interest for a new regional short-haul transportation service. This initiative suggests a potential expansion of services beyond the existing framework, with the anticipated in-service date for the expansion being in late 2029. The expansion is expected to offer up to 350 million cubic feet per day of incremental capacity, providing transportation to Alberta's industrial heartland.
Alliance has initiated a feasibility study for the proposed expansion, but further discussions or financial details about the expansion were not provided.
Pembina Pipeline's stock is up 1.2% post-market, with the stock symbol for Pembina Pipeline remaining PBA, traded on the NYSE. The settlement was supported by a Shipper Committee consisting of more than 30 members in a vote on July 23.
[1] Source: Pembina Pipeline Corporation Press Release, July 23, 2021 [2] Source: Pembina Pipeline Corporation Investor Presentation, July 23, 2021 [3] Source: Alliance Pipeline Limited Partnership Press Release, July 23, 2021 [4] Source: Pembina Pipeline Corporation Investor Presentation, Q2 2021 Earnings Call, August 5, 2021 [5] Source: Canada Energy Regulator, Application A8401 for the Revised Toll Application for the Canadian Portion of the Alliance Pipeline, filed July 23, 2021
- The agreement between Pembina Pipeline Corporation and shippers on the Canadian portion of the Alliance Pipeline, which will affect the industry for the next decade, includes a term-differentiated toll schedule in finance, reducing existing long-term firm tolls by an average of 14% and leading to a significant reduction in long-term firm service revenue for Alliance.
- Beyond the settlement, Alliance is proposing a regional short-haul expansion, aiming to offer incremental energy capacity to Alberta's industrial heartland, initiating a feasibility study for the proposed expansion but offering no further discussions or financial details about the project.
