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Vol. 13, No. 28 Week of July 13, 2008
Providing coverage of Alaska and northern Canada's oil and gas industry

RCA OKs Aurora/Enstar lawsuit settlement

Enstar says it will use net settlement proceeds of $10 million to reduce the gas cost adjustment that it charges its customers

Alan Bailey

Petroleum News

The Regulatory Commission of Alaska has issued an order approving the settlement between Aurora Gas and Enstar Natural Gas Co. over a lawsuit regarding Aurora’s suspension of its supplies of Moquawkie gas to Enstar.

“We find nothing in the Agreement that is objectionable on its face, and we received no comments adverse to the Agreement,” the commission said, referring to a settlement agreement that the two companies signed on April 18.

Aurora has said that it suspended gas supplies to Enstar from the Moquawkie field on the west side of Cook Inlet because those supplies had ceased to be economic under the terms of the company’s contract with Enstar. The contract provided for suspension of supplies in the event of the gas delivery becoming uneconomic, Aurora said.

But Enstar vehemently disagreed with Enstar’s position and sued for breach of contract. And in reaching a settlement in the subsequent lawsuit, neither company made any admission as to who was right or wrong.

Aurora pays $11 million

Under the terms of the settlement Aurora has agreed to pay Enstar about $11 million as compensation for the increased cost of gas that Enstar incurred up to May 2008 as a consequence of the loss of Moquawkie supplies. Enstar has said that it will use the net proceeds (approximately $10 million according to RCA) to reduce the cost adjustment that it charges to its customers. That cost adjustment reduction may amount to about 31 cents per mcf of gas in 2009, Enstar has said.

But RCA said that its order does not approve a direct refund from Enstar to Fairbanks Natural Gas for gas that Enstar has supplied to FNG’s liquefied natural gas plant at Point MacKenzie. Enstar would have to file a separate tariff amendment for the FNG supplies, the commission said.



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