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RCA accepts pipeline settlement Regulatory Commission of Alaska issues bench order after hearing from parties in Kenai-Nikiski Pipeline dispute Kristen Nelson Petroleum News Editor-in-Chief
The Regulatory Commission of Alaska has issued authorizations necessary for the new Kenai Kachemak Pipeline to begin transporting natural gas. It has also approved a settlement agreement which allows that natural gas to be carried on the existing Kenai-Nikiski Pipeline.
A partnership of Kenai Peninsula natural gas producers Marathon Oil Co. and Union Oil Company of California built the Kenai Kachemak Pipeline, expected to begin operation as a common carrier pipeline by Sept. 1, to move natural gas from discoveries in the Ninilchik area on the peninsula north to connect with existing pipelines.
The existing Kenai-Nikiski Pipeline, through which that gas would need to move, has been exempt from regulation under Alaska's pipeline statutes, and Marathon, which owns most of that line, wanted to continue to operate it as a private carrier while it prepared an application to the commission for the pipeline to be regulated under the state's pipeline statutes.
Unocal objected, asking that the Kenai-Nikiski Pipeline be regulated under the state's pipeline statutes immediately. It was joined by Agrium U.S. Inc., which operates a fertilizer plant using natural gas as both feedstock and fuel, by Enstar Natural Gas Co., which distributes natural gas in Southcentral Alaska, by natural gas producer Aurora Power Resources and by NorthStar Energy Group Inc., which plans to develop a small gas field on the Kenai Peninsula.
Marathon, Unocal and Agrium reached agreement and filed a settlement with the commission Aug. 15. Marathon filed to operate the Kenai-Nikiski line under the state's pipeline statutes and Unocal agreed to file an application to operate its Swanson River pipeline as a common carrier to provide service which Marathon needs to move gas from fields in the Swanson River area.
The commission issued a bench order Aug. 21 at the end of a hearing on the settlement agreement approving an amended version of the settlement reached by the parties in the Kenai-Nikiski Pipeline dispute, and approving a temporary tariff as proposed in the agreement. Temporary rates only The commission approved temporary rates for the Kenai Kachemak Pipeline Aug. 18. Agrium and the state of Alaska protested the rates and operating conditions for the pipeline, and asked the commission to investigate the proposed rates.
Kenai Kachemak protested the inclusion of Agrium in the proceedings.
Agrium said it will be a major buyer — and potentially a major shipper — of the natural gas that will be transported on the Kenai Kachemak Pipeline.
The commission ruled that because Agrium is a major buyer of Cook Inlet natural gas, it may purchase gas shipped on the Kenai Kachemak Pipeline and the price it pays may be affected by tariffs on the line, so it meets the criteria in state regulations that those “with direct, substantial financial interests in pipeline rates should be allowed to intervene in pipeline rate proceedings.”
The state intervened as a royalty owner and there were no objections to the state's intervention in the proceedings.
The Kenai Kachemak line will carry gas from the G. Oskolkoff, Susan Dionne and Falls Creek pads at the Ninilchik natural gas unit north to connect with the Kenai-Nikiski Pipeline and a pipeline owned by Alaska Pipeline Co.
Because Kenai Kachemak is a new pipeline, the commission said it does not have a basis for setting rates other than those proposed, so it is suspending the initial rate, opening an investigation into the Kenai Kachemak tariff and setting temporary rates equal to the filed rates.
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