Alliance Pipeline has not led to gas price relief

MILWAUKEE -- A massive new natural gas pipeline moving fuel from western Canada to the Midwest has so far failed to alleviate skyrocketing gas prices -- dashing analysts' early hopes that the pipeline would spell relief for customers.

The $2.6 billion Alliance Pipeline, based in Calgary, Alberta, started shipping 1.325 billion cubic feet of natural gas per day Dec. 1, Alliance spokesman Jay Godfrey said.

The 1,857-mile line runs from Fort St. John, in northern British Columbia, to a gas hub near Joliet, Ill. From there, the gas is shipped via connector pipelines to Midwestern states and eastern Canada.

The pipeline crosses Minnesota from near Wheaton in the west to near Albert Lea in the south. There are compressor stations in Olivia and Albert Lea, and offices in North Mankato.

Some analysts had hoped the increased supply would cut gas prices, said George Gaspar, an analyst with Robert W. Baird in Milwaukee.

"I guess the big hope was the pipeline was going to take the pressure off," Gaspar said. "It kind of shows how much gas is being used (that that hasn't happened)."

Gaspar said gas shortages as well as a cold snap affecting much of the United States have greatly increased demand.

"Since the day the pipeline opened, supplying gas to the site west of Chicago, natural gas prices are up 50 percent in the futures market," Gaspar said.

Natural gas prices in Wisconsin were up 100 percent this January compared to the same time last year, a report released Thursday by the state Department of Administration said.

Wisconsin consumers are paying about $11.33 per decatherm this month, up from about $5.62 per decatherm in January news, according to the report. A decatherm equals 1 million British thermal units.

Gaspar said electric power generators proposed all over the U.S. could create a yearly demand for 4 to 5 billion more cubic feet of gas.

Godfrey said relief may be in sight -- but not likely for another eight to 10 months as companies drill for gas and eventually ship it.

The Alliance spokesman said the pipeline has already stimulated a record number of gas wells being drilled in Western Canada, which could provide relief in the long term.

"There's a time delay between drilling, processing and shipping," Godfrey said. "With space to fill, there's reason to drill."

Alliance is one of two major pipelines in the region. The other is Great Lakes Gas Transmission, which runs 973 miles from Emerson, Manitoba to St. Clair, Mich. It crosses Minnesota from the northwest corner to near Carlton in the east.

Godfrey said both lines should have more gas to ship by next winter.

High natural gas and heating oil prices are expected to last through the winter.

On the Net:

Alliance Pipeline: www.alliance-pipeline.com

Great Lakes Gas Transmission: http://www.greatlakesgas.com