Pembina Pipeline Corporation Reaches Long-Term Settlement With Shippers on Alliance Pipeline; Launches New Transportation Service Initiative
Pembina Pipeline Corporation has announced that Alliance Pipeline Limited Partnership (“Alliance”), in which Pembina holds a significant interest, has reached a comprehensive and negotiated settlement (the “Settlement”) with its shippers and other relevant stakeholders (collectively referred to as the “Shipper Committee”) regarding the tolling structure for the Canadian segment of the Alliance Pipeline.
As part of this agreement, Alliance has formally filed an application with the Canada Energy Regulator (“CER”) to seek approval of the proposed Settlement terms. This milestone follows months of extensive consultations and collaboration with more than 30 member organizations represented within the Shipper Committee. In tandem with the Settlement filing, Alliance also revealed plans to solicit non-binding expressions of interest from the market for a new regional short-haul natural gas transportation service.
A Productive Collaboration: Statement from Pembina Leadership
Commenting on the achievement, Scott Burrows, President and Chief Executive Officer of Pembina, expressed satisfaction with the outcome of what he described as “complex, yet productive” negotiations.
“We are pleased after many months of complex, yet productive, discussions to have reached a negotiated solution with the Shipper Committee, consisting of over 30 members,” Burrows stated. “The negotiated tolls are competitive and will provide toll certainty to shippers. The Settlement is fair and equitable to Alliance and all shippers. We now look forward to a timely response from the CER.”
This resolution comes at a crucial juncture for Alliance Pipeline, especially after the CER issued a directive in November 2024 requiring Alliance to justify its current tolling framework or propose a new tolling methodology under the Canadian Energy Regulator Act. In that order, the CER also stipulated that the then-existing tolls would be deemed “interim” until a final resolution was approved and implemented. In response, Alliance and the Shipper Committee engaged in constructive dialogue over several months, ultimately culminating in the negotiated Settlement now under review by the CER.
Key Components and Benefits of the Settlement
The Settlement proposal introduces a number of structural enhancements designed to provide long-term toll certainty, improve alignment between Alliance and its customers, and enhance the overall competitiveness of the Alliance Pipeline. The major highlights of the Settlement include:
- 10-Year Term Commitment:
The new tolling arrangement will be effective for a 10-year term, commencing on November 1, 2025, and extending through October 31, 2035. This provides both Pembina and shippers with long-term stability and predictability. - Term-Differentiated Toll Structure:
The Settlement introduces a revised toll schedule with differentiated rates based on contract length. This includes the establishment of a new 10-year toll option and reductions in existing 1-year, 3-year, and 5-year tolls. Collectively, these revised rates (the “New Tolls”) are expected to reduce existing long-term firm tolls by an average of 14 percent on a volume-weighted average basis. - Fixed Tolls for Contract Duration:
Once implemented, the New Tolls will apply to all existing long-term firm service contracts and will remain fixed for the full 10-year duration of the Settlement period. This measure brings much-needed toll certainty to shippers over a sustained period. - Term Extension Incentive for Existing Shippers:
Under the Settlement, existing long-term firm service customers will be granted a one-time option to extend their contracts and take advantage of the new 10-year tolls. Alliance anticipates significant uptake of this option, potentially leading to a meaningful extension of the weighted average contractual term for the pipeline’s overall shipper base. - Revenue Sharing Mechanism for Interruptible Services:
Revenue generated from seasonal and interruptible transportation services—i.e., volumes transported in excess of the long-term firm capacity of 1.325 billion cubic feet per day (Bcf/d)—will now be shared 50/50 between Alliance and its firm and seasonal shippers. This change ensures stronger alignment of financial interests across all parties and preserves Alliance’s flexibility to equitably allocate available short-term capacity based on prevailing market demand. - Treatment of Interim Tolls and Cost Recovery:
The Settlement confirms that the interim tolls in effect since November 2024 will be made final and remain applicable through October 31, 2025. Notably, there will be no retroactive adjustments to tolls for the period during which interim rates were in place. - Continuation of ‘At-Risk’ Commercial Model:
Alliance will continue to operate under its existing ‘at-risk’ commercial model, under which its financial performance and ability to recover operating costs are contingent upon actual customer demand and the pipeline’s operational efficiency. This model encourages cost discipline and market-responsive service delivery. - Return of Recoverable Cost Variance to Shippers:
Alliance has also agreed to return approximately $95 million to shippers. This amount—classified as a recoverable cost variance—was previously recorded as a liability on Alliance’s balance sheet. The economic impact of this return to Alliance is minimal, limited primarily to foregone carrying charges that had accrued at a rate of 8.75 percent. Importantly, Alliance retains the ability to recover similarly categorized costs in the future through surcharge mechanisms permitted under the Settlement.
Broader Market Context and Forward Strategy
The filing of this Settlement with the CER marks an important strategic step for Alliance and its stakeholders, reinforcing the pipeline’s role as a key infrastructure component in Western Canada’s natural gas network. In addition to bringing greater contractual clarity and rate competitiveness, the Settlement enhances customer confidence and may help attract further long-term commitments.
Simultaneously, Alliance’s announcement of a new regional short-haul transportation service signals its intent to remain flexible and responsive to evolving market demands. This service, currently in the expression-of-interest phase, could enable customers to move gas more efficiently within regional markets while opening new opportunities for midstream value creation.
With the Settlement application now before the CER, Alliance and Pembina await regulatory review and approval. If accepted, the agreement will provide long-term stability for both the pipeline and its shippers and could serve as a framework for future tolling arrangements within Canada’s regulated pipeline landscape.
Pembina, through its leadership and partnership in Alliance, continues to demonstrate its commitment to constructive industry engagement, fair regulatory practices, and value-oriented service delivery. As the company looks ahead to 2026 and beyond, the alignment achieved through this Settlement reinforces its ability to balance shareholder value with customer satisfaction and regulatory compliance.