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NEWS BULLETIN

February 01, 2011 --- Vol. 17, No. 9February 2011

RCA approves CINGSA gas storage tariff

Just a month or so after approving a certificate of public convenience and necessity for Cook Inlet Natural Gas Storage Alaska’s planned Kenai gas storage facility, the Regulatory Commission of Alaska has approved an initial tariff for the facility.

In a final order issued Jan. 31 the commission said that it was approving the tariff because all issues raised during a tariff hearing had been resolved. Tariff approval is, however, subject to some adjustments to the tariff’s specification of the gas storage service area.

CINGSA is fast tracking the development of its facility to head off a potential Southcentral Alaska utility gas shortfall in the winter of 2012-13 and the company had asked RCA for tariff approval by the end of January — the company needs RCA approval of its facility and the tariff in order to be able to finalize precedent agreements for facility use by customers and to finance the facility construction.

During the RCA tariff hearing much discussion focused on the question of the cost of gas lost and unaccounted for, a cost traditionally passed through to gas consumers — it is impossible to completely eliminate any gas loss from a storage facility, so that relatively minor gas losses tend to be viewed as part of the cost of doing business. The parties involved in the hearing negotiated tariff language requiring RCA approval for the recovery of the costs of extraordinary gas losses and prohibiting the recovery of the cost of losses resulting from negligence.

However, Commissioner Paul Lisankie disagrees with the approval of the gas losses section of the approved tariff. CINGSA has not been sufficiently specific in stating what gas losses consumers would have to pay for, Lisankie wrote in a minority dissenting opinion.

Other concerns considered during the tariff hearing included the specification of the costs that CINGSA would be able to recover from its gas storage fees, and the manner of reconciling the facility’s initial fees, based in part on cost estimates, with subsequent fees adjusted to reflect actual costs.

In a separate order, also issued on Jan. 31, RCA approved the ability of Enstar Natural Gas Co., CINGSA’s largest customer, to recover gas storage fees from gas consumers — there had been some concern that RCA might approve the gas storage facility but at a later date limit Enstar’s ability to recover its gas storage costs.

ANS January production average down; daily level back to par

Alaska North Slope production was at 647,255 barrels per day on Jan. 1; by the end of the month it had almost reached that level again, peaking at 646,075 bpd Jan. 30, following shutdowns after a leak was found at Pump Station 1 on Jan. 8, and again mid-month for repairs.

January production numbers from the Alaska Department of Revenue’s Tax Division show normal production at the beginning of the month, followed by a steep decline after Alyeska Pipeline Service Co. shut the trans-Alaska oil pipeline down completely for four days beginning Jan. 8 and a shallower dip Jan. 15 when the line was shut down for almost two days for the installation of bypass piping.

Because of the extensive downtime, January average ANS production was 471,666 bpd, down 26.5 percent from a December average of 641,518 bpd.

BP Exploration (Alaska)’s Milne Point field had the largest percentage drop month-over-month, down 33 percent, with a January average of 17,999 bpd compared to 26,874 bpd in December.

The largest per-barrel drop was at the BP-operated Prudhoe Bay field, which averaged 233,259 bpd in January, down 101,670 bpd and 30.4 percent from a December average of 334,929 bpd.

The ConocoPhillips Alaska-operated Kuparuk River field had the second-highest per-barrel drop, averaging 101,999 bpd in January, down 27,324 bpd and 21.1 percent from a December average of 129,323 bpd.

The ConocoPhillips’ operated Alpine field averaged 70,358 bpd in January, down 16,288 bpd and 18.8 percent from a December average of 86,646 bpd.

The BP-operated Lisburne field averaged 23,824 bpd in January, down 8,221 bpd and 25.7 percent from a December average of 32,045 bpd. Northstar, also operated by BP, averaged 13,746 bpd in January, down 5,124 bpd and 27.2 percent from a December average of 18,870 bpd. The BP-operated Endicott field averaged 10,481 bpd in January, down 2,350 bpd and 18.3 percent from a December average of 12,831 bpd.

See full stories in Feb. 6 issue, available to subscribers online by 11 a.m., Friday, Feb. 4, at www.PetroleumNews.com

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