Canada-US natural gas line shut down

Alliance line to Chicago down due to hydrogen sulfide, which got into line following upset at Keyera plant in northwestern Alberta

GARY PARK

For Petroleum News

Confidence in the safety of energy pipelines out of Western Canada has again been rattled, with the focus this time on natural gas, not oil.

The Alliance pipeline to the Chicago area was shut down on Aug. 6 to dispose of dangerous accumulations of hydrogen sulfide.

The operating company - a joint partnership of Enbridge Income Fund Holdings and Veresen - said the 2,311-mile system will be closed for an “indeterminate amount of time” while it deals with the gas, which is poisonous, corrosive and flammable.

The pipeline, which has capacity of 1.6 billion cubic feet per day, draws its gas from northeastern British Columbia and northwestern Alberta and crosses Saskatchewan, North Dakota, Minnesota and Iowa before terminating in Illinois.

The gas got into the pipeline from a plant operated by midstream company Keyera.

Keyera said in a statement that there was a “brief operational upset” at its Simonette plant in northwestern Alberta, as a result of which gas “which did not meet gas sales specifications” entered the Alliance system.

Keyera said there was no danger to the public or the environment, adding it has offered assistance to Alliance and was working with its producer clients to “divert gas and find alternative solutions for their production until regular operations resume on Alliance.”

Alliance Vice President Daniel Sutherland said in a news release that the company’s “chief concern now is to ensure the safety of the public, employee and the environment. We are working to remove the H2S from the pipeline in a controlled and safe manner.”

He also apologized for the inconvenience to customers, who depend on Alliance for about 20 percent of gas needs in the U.S. Midwest.

TransCanada said it was evaluating opportunities to help customers at 27 stations that were affected by the shutdown.

Producers already struggling

SevenGenerations had previously announced plans to double its shipments on Alliance to 250 million cubic feet per day by the end of 2015.

Crew said it shut down all of its Montney production of 60 million cubic feet per day and NuVista said it suspended 32 million cubic feet equivalent per day.

Initially, prices at the Station 2 gas hub in British Columbia fell 80 cents per million British thermal units, while gaining 4.4 percent to US$2.79 at the CenterPoint Hub near Chicago.

AltaCorp Capital analyst Dirk Lever said the early indications suggest the outage is “more of a nuisance,” with most of the affected companies able to call on their insurance coverage.

But, given the low commodity price environment, “these things are expensive no matter how you look at them,” he told the Globe and Mail.

Sour gas accounts for one-third

There are more than 6,000 sour gas wells and almost 11,000 miles of operating sour gas pipelines in Alberta, with processing taking place at 250 plants.

An Alliance spokesman said the incident is the first for the pipeline since it was commissioned in 2000.

Keyera Chief Executive Officer David Smith told reporters his company has had “plant upsets from time to time,” adding he was unable to recall a situation where sour gas had been released into a sales pipeline.

He told the Calgary Herald that a number of “fail-safes” did not work as they should have with Alliance.

Regardless of the cause and how long the shutdown lasts, the incident provides further ammunition for opponents of proposed LNG exports from British Columbia, given the reliance on British Columbia and Alberta gas as feedstock for those projects.