alliance chicago exchange “ace”...

Alliance Chicago Exchange“ACE” Hub

Alliance Shipper Task Force (Operations Group)

Alliance Shipper Task Force (Policy Group)

May 17, 2011

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Forward Looking Statements and Information

Certain information contained in this presentation, including use of

the words “anticipate”, “expects”, and “expected to”, constitute

forward looking statements and information. Although Alliance

Pipeline believes that these statements are based on information

and assumptions which are current, reasonable and complete,

these statements are necessarily subject to a variety of risks and

uncertainties including, but not limited to, future operating

performance, regulation, economic conditions and fundamentals

affecting the oil and gas producing and marketing industries.

Should one or more of these risks or uncertainties materialize or

fail to materialize, or should underlying assumptions prove

incorrect, actual results may vary materially from those expected.

Agenda

1. Outage Update

2. ACE Hub Services – Project Update

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Outage Update

• The proposed 1-2 day fall outage to replace the separator at the ANR facility has changed.

• It has moved to the spring of 2012.

• This outage would require flow restrictions to ANR, Guardian and Vector.

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ACE Hub - Introduction

• The Alliance Chicago Exchange (“ACE”) initiative will offer market hub services, specifically:

� Title Transfer service – expanded

� Park and Loan (PAL)

� Interruptible Wheeling

• Existing UDEL notional pool will be renamed to the “ACE” Hub.

• ACE Hub will encompass the entire Alliance delivery header.

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ACE Hub - Objectives

• Key Objectives:

� Provide new service options to respond to changing market conditions

� Increase liquidity at market area delivery points

� Develop an active trading hub on the Alliance delivery header

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ACE Hub - Background

• Alliance plans to utilize its Chicago delivery header system to offer ACE Hub services commencing in late 2011.

� Eight delivery points are located within a 12 mile, 36-inch, header.

� Excess deliverability capability exists on the delivery header system.

• Contracted Capacity – 1,405 mmcfd

• Design Pipeline Capacity – 1,513 mmcfd

• 2010 Average Flow – 1,621 mmcfd

• Aggregate Delivery Point Capacity – 7,500 mmcfd

Channahon

Peoples

ANR

Midwestern

Nicor

NGPL

Vector

AUX SABLE PLANT

Alliance Delivery Header

Guardian

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ACE Hub

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Title Transfer Agreement (TTA)

• Transactions with other TTA’s or FT-1 shippers.

• Allows for delivery within ACE Hub or to a PAL contract.

• TTA transactions MUST balance daily.

• Supply provided via FT-1 Shippers.

• Non releasable.

• No fee.

• Parties interested in buying gas from an FT-1 Shipper at the ACE Hub no longer need an FT-1 contract.

• A TTA service agreement will provide secondary firm delivery rights within the ACE Hub.

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ACE Hub – Title Transfer

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• FT-1 shippers can deliver directly to a delivery point or title transfer in the ACE Hub.

• TTA shippers can title transfer in the ACE Hub and then deliver off the system.

Park/Loan (“PAL”)

• Rate Schedule PAL agreements will be energy based.

• Master service agreement for each type of PAL, available to any shipper that meets the credit requirements.

• Service offering is available for three types of PAL.

• Term PAL (Daily Reservation charge).

• Nom PAL (Usage charge).

• Auto PAL (Usage charge).

• Each PAL transaction is a separate Schedule to the PAL Service Agreement.

• Non releasable.

• PAL services are subject to availability of working line pack.

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Term PAL

Term PAL

• Flexible drawdown or payback within a mutually agreed upon term, specific quantity, and rate.

• Minimum of one day term.

• Term PAL will be made available by the Alliance Pricing Desk.

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Nom PAL

Nom PAL

� Specific quantity.

� One gas day to either fully park gas or fully draw on a loan, with payback occurring in a subsequent gas day.

� Biddable rate with awards made based on the highest daily rate offered in a nomination cycle in each of the four NAESB gas day nomination cycles.

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Auto PAL

Auto PAL

• End of gas day imbalance PAL.

• Pre authorized by shipper for transporter to nom on their behalf.

• Provides opportunity to manage late day market and/or supply cuts.

• Max rate usage charge.

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PAL Parking, Unloan

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PAL Loan, Unpark

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Interruptible Wheeling (“IW”)

• Rate Schedule IW agreements will be energy based.

• Master interruptible wheeling service agreement.

• Credit will be required.

• Receipts are subject to availability via physical delivery displacement.

• IW service allows a shipper to move energy off of one downstream interconnected pipeline within the ACE Hub onto another downstream interconnected pipeline.

• Facilitating a PAL transaction in the ACE Hub may also be performed under Rate Schedule IW.

• Non releasable.

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IW Wheeling Point to Point

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IW Wheeling Point to PAL (Park, Unloan)

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Tariff - Title Transfer

Title Transfer

� No change to title transfers as currently conducted by FT-1 shippers in U.S. Delivery Pool, or in U.S. Receipt Pool.

� New TTA service will expand the number of commercial parties available to conduct title transfers in the ACE Hub.

� Increased liquidity and flexibility.

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Tariff - Priority

Scheduling

� Scheduling priority for primary firm transportation (including AOS) remains unchanged.

� TTA deliveries treated as secondary firm.

� Interruptible Wheeling priority below IT-1.

� PAL priority below IW.

Curtailment

� No change to current priority.

� Reverse order of “scheduling” sequence.

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Tariff - Imbalances

Energy Imbalance

� No change to existing FT-1 tolerances or time line for FT-1 nomination adjustments.

� FT-1 imbalance held at U.S. Receipt Pool unless title transfer, or PAL transacted in ACE Hub during the same Gas Day.

� IT-1, IW, or TTA imbalance cleared through nomination adjustment or PAL transaction in ACE Hub.

� If Energy Imbalance not cleared, as required:

• Gas left on system retained.

• Gas owing charged at 150% of Chicago price.

• Net penalty revenue returned to shippers.23

Tariff - Creditworthiness

Creditworthiness

� No change to existing FT-1 creditworthiness policy.

� Creditworthiness for PAL and IW services established in similar manner.

• Shorter time frame consistent with IT-1 method.

• Credit limit established in advance similar to Capacity Release Approved Bidder’s List process.

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Tariff - Rates

• IW recourse rate derived from existing IT-1 recourse rate.

• PAL recourse rates based on competitive recourse rate analysis in Chicago area.

• ACE Hub filing will not impact FT-1 transportation rates.

� No change to FT-1 negotiated rate filed for January 1, 2011.

� No change to existing FT-1 recourse rate.

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Other Items…

• Alliance will establish a pricing desk function for receiving requests, agreeing to rates and entering into ACE Hub service agreements.

• ACE Hub Services are subject to FERC approval.

� FERC filing targeted for mid-June.

• Forecast 4th Quarter 2011 to begin ACE Hub Services

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Contacts

• Cathie Legge

� Manager, Customer Service

� 403-517-6585

� cathie.legge@alliancepipeline.com

• Brian Troicuk

� Manager, Regulatory Affairs

� 403-517-6354

� brian.troicuk@alliancepipeline.com

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