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Irwin puts some weight behind Enstar Natural Resources Commissioner asks regulators to approve amended contracts in order to allow utility to tackle longer-term issues Eric Lidji Petroleum News
The top oil and gas official in Alaska is asking state regulators to approve a pair of supply contracts between Enstar Natural Gas and two natural gas producers in the Cook Inlet.
“The State’s best interest is achieved if the Commission approves both of the proposed gas supply contracts,” Tom Irwin, commissioner of the Alaska Department of Natural Resources wrote to the Regulatory Commission of Alaska in a letter dated Dec. 11.
The RCA gave Enstar conditional approval on Oct. 31 for separate gas supply contracts with ConocoPhillips and Marathon. Enstar submitted amended contracts on Dec. 1.
Now regulators are considering whether or not the amendments are satisfactory. Enstar says the contracts need to be approved before the start of the year to avoid disruptions.
The amended contracts take a different approach to pricing Cook Inlet gas. Rather than use a cap specified in the Oct. 31 order, Enstar and the two producers created contracts based on the weighted average cost of gas, or WACOG, for all existing Enstar supplies.
Issue of RCA approval Enstar does not need regulatory approval to enter into a supply contract that lowers its weighted average cost of gas. But because Enstar has never exercised that provision of its tariff before, the utility wants the RCA to sign off on the amended contracts.
The parties in the case agree that Enstar has the right to approve contracts that lower its weighted average cost of gas, but disagree on whether the RCA should follow suit.
Chugach Electric Association asked RCA to “maintain the integrity of this docket by not accepting Enstar’s unsupported explanations and justifications” for the contracts.
The Attorney General’s office said if RCA accepted the amended contracts, the agency would have to “reconcile” its decision with the Oct. 31 order, which required price caps.
Although Irwin recommended approving the contracts, he showed some reluctance, too.
In his letter, Irwin wrote, “The WACOG approach is not a long term solution to Enstar’s gas supply requirements. Long term solutions must reflect the cost to find and develop the new resources that will be required to meet the public demand for gas supply.”
The Department of Natural Resources is not a party to the case over the contracts.
Chugach Electric does not believe enough evidence exists to prove that “the cost to find and develop the new resources” in Cook Inlet justifies an increase to local gas prices.
RCA is expected to rule on the amended contracts before the end of the year.
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