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Vol. 9, No. 42 Week of October 17, 2004
Providing coverage of Alaska and northern Canada's oil and gas industry

Agrium asks Alaska regulator to declare Cook Inlet gas pipeline a common carrier

In second filing this year, Regulatory Commission of Alaska asked to investigate regulatory status of Cook Inlet Gas Gathering System

Kristen Nelson

Petroleum News Editor-in-Chief

Finding natural gas in Alaska’s Cook Inlet basin is just the first step: the gas has to be moved, by pipeline, to where it is needed. Agrium U.S. Inc., a major user of natural gas, argues transportation is complicated because not all Cook Inlet natural gas pipelines are regulated as common carriers.

Agrium, which owns the fertilizer plant at Nikiski and uses natural gas as both raw material and fuel, has been trying to get the Regulatory Commission of Alaska to regulate the Cook Inlet Gas Gathering System as a common carrier. Agrium failed in an effort earlier in the year to get the regulator to investigate whether the pipeline should be so regulated, and filed a new complaint Oct. 1, arguing that if the pipeline were regulated as a common carrier, it would be able to purchase gas from the west side of Cook Inlet, alleviating shortages which have forced it to operate the fertilizer plant at reduced capacity.

The commission in April turned down complaints by Agrium against Marathon Oil Co. Agrium had charged that Marathon failed to provide regulated service on the Cook Inlet Gas Gathering System failed to provide bi-directional service on the Beluga Pipe Line Co.

Dismissed ‘without prejudice’

The commission dismissed the earlier complaints “without prejudice,” saying that while it has “broad powers to regulate pipelines and pipeline carriers” and to protect the public interest, it opens “investigations only when there is good cause to do so.”

“A complainant is responsible for bringing us sufficient information from which we can make a reasoned judgment that an investigation is warranted,” the commission said. “Agrium did not make the necessary factual allegations.”

The commission said that Agrium “requested, in effect, that we elicit those facts, if they exist.” The commission said it declined to do so, finding nothing in the complaint “that would justify the cost of the requested investigation to the public and the parties against which the complaint has been brought.” Agrium’s complaint “fails to show sufficient good cause, and we dismiss it without prejudice.”

Second request for investigation

In its Oct. 1 filing, Agrium strives to present those facts.

It argues that the Cook Inlet Gas Gathering System, which runs up the west side of the inlet from Trading Bay to Granite Point and then crosses under the inlet to Nikiski, is part of “an integrated part of a total system of natural gas pipelines throughout the Cook Inlet.” It is “directly connected” to regulated pipelines on both the east and west sides of Cook Inlet, Agrium argues, and “is an integral part of the natural gas infrastructure” supplying natural gas to manufacturing concerns and public utilities.

In addition to “compelling public policy reasons” for the commission to investigate the regulatory status of the pipeline, Agrium told the commission it also “has a statutory duty to regulate CIGGS under both the Public Utilities Act and the Pipeline Act.”

The pipeline transports natural gas for public utility use in three instances, which gives the commission authority under the Public Utilities Act, Agrium said.

The state’s pipeline act gives the commission “regulatory authority over all common carrier pipelines … (and) Marathon and Unocal have operated CIGGS as a common carrier pipeline transporting natural gas to Agrium’s Kenai Plant for several years,” Agrium said, noting that “Agrium pays a ‘tariff’ to Unocal for transportation of natural gas through CIGGS under the 1998 Exchange Agreement between Marathon and Unocal as well as to Unocal for transportation of third-party natural gas.”

And, Agrium said, under the Pipeline Act, the commission “also has regulatory authority over a ‘total system of pipe,’” and the gathering system “delivers natural gas to both Beluga Pipe Line and KNPL as part of the integrated transportation of natural gas through the Cook Inlet,” and both of those are subject to the commission’s regulation.

Agrium also cites the Alaska Right-of-Way Leasing Act, which requires pipelines using state leased land to operate as common carriers. The exemption for pipelines like the Cook Inlet Gas Gathering System is for “so long as their original or present purpose and function remains unchanged,” Agrium said, telling the commission that the pipeline’s function “has changed substantially since 1972,” invalidating its original exemption from the Right-of-Way Leasing Act.

Expedited consideration requested

Agrium also requested expedited action by the commission, asking it to require responses by Oct. 15 and to decide whether or not to investigate by Nov. 1.

Agrium argues: “As a direct result of the lack of access to the gas pipeline infrastructure in the Cook Inlet region of Alaska, including CIGGS, Agrium has been forced from time to time to shut down one of its two processing lines and for the past two years has operated at substantially reduced capacity.”

Marathon has responded to Agrium’s request for an expedited response, but not yet to the complaint, telling the commission: “The abbreviated schedule requested is prejudicial to Marathon, and the commission should not allow itself to be rushed into initiating a costly investigation on the basis of Agrium’s erroneous legal theories and misleading factual allegations.”

Marathon said Agrium “does not identify any recent occurrences giving rise to some new emergency affecting Agrium.”

In late 2003, Marathon said, Agrium blamed its “gas supply problems” on Unocal’s failure “to meet its gas supply commitments to Agrium, not Marathon or Agrium’s ‘lack of access to gas pipeline infrastructure’ in Cook Inlet.”



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