January 25, 2001 --- Vol. 7, No. 13January 2001

Objections filed to Enstar, Unocal gas contract up before RCA

A gas supply contract which Enstar Natural Gas Co. signed with Unocal last year has created a stir among other Cook Inlet gas suppliers. The Regulatory Commission of Alaska has received a number of objections to the contract and will hold a hearing. No hearing date has been set but a pre-hearing conference is scheduled for Feb. 23.

Enstar said in a letter to RCA that the contract provides that Unocal will supply Enstar's gas requirements beyond existing contract levels for 2004 and 2005 (beginning perhaps as early as 2003). Enstar told the RCA that Unocal has committed to spend at least $10 million exploring for new gas over the next two years.

The contract price would be set based on Henry Hub prices, with a floor of $2.75 an Mcf. The 2000 Cook Inlet gas contracts, based on 1999 oil prices, were about $1.60 an Mcf; the 2001 price has risen to $2.36 an Mcf based on higher oil prices.

Enstar told the RCA it believes the contract provides the necessary financial incentive for gas exploration in Cook Inlet.

The RCA has received objections from other gas suppliers and marketers in Cook Inlet: Marathon Oil Co., Phillips Alaska Inc., Chevron USA Inc. and Aurora Gas. Objections range from the price level set to assertions that other companies would be cut out of the gas exploration and sales market and would be forced to sell to Unocal because Enstar will be getting its gas from Unocal.

The RCA's Public Advocacy Section will be a party to the hearing and a hearing examiner, Paul Olson, has been named. The RCA said it will be looking at whether or not provisions of the proposed contract are in the public interest; whether a reasonably competitive procurement process was undertaken; and any impact the plan might have on long-term regional gas supplies.

Backbone urges state to look at all alternatives

Backbone released a study on gas development options at a press briefing Jan. 25, and urged Alaskans to look at what gas development alternative would be best for the state, rather than rushing to begin a pipeline to the Lower 48. The study, "Alaska's Gas, Alaska's Future," urges Alaskans to look beyond another pipeline boom and find an Alaska energy policy that will promote a natural gas industry in the state.

Christy McGraw said Backbone met in Talkeetna in September to consider pipeline routes. The study, which addresses both technical and public policy issues, grew out of that meeting.

Backbone members, including former Gov. Wally Hickel, Christy McGraw, Walt Parker, Malcolm Roberts and Mead Treadwell, along with Mike Metz, technical advisor to the Backbone report, compared the impact of the gas decision to the impact that development of Prudhoe Bay crude oil had on the state in the 1970s.

The study estimates 30-year revenues to the state from three major proposals: the Alcan Highway pipeline; the Mackenzie Delta pipeline; and a tidewater LNG project. LNG does best, at $7.21 billion to $18.38 billion; the delta pipeline would generate $5.41 billion to Alaska; the Alcan route $3.99 billion to $7.21 billion.

The goal, McGraw said, is to maximize revenues to the state and the study, she said, is a tool for Alaskans to learn about gas development options. She said that Backbone does not have funding to distribute the report and will be selling copies for $40. The group can be reached at [email protected]

Young introduces ANWR leasing bill

Rep. Don Young introduced a bill earlier this month in the U.S. House that would allow oil and gas leasing in a small segment of the coastal plain of the Arctic National Wildlife Refuge.

Introduced in the House Committee on Resources, H.R. 39 was filed without text initially. Yesterday text was inserted that is similar to an ANWR provision approved by the House and Senate as part of the Balanced Budget Act of 1995 and vetoed by former President Bill Clinton. Young is circulating a letter to House colleagues, requesting co-sponsors for the bill.

Senate Majority Leader Trent Lott, R-Miss., is leading the charge on the bill in the Senate. A similar bill will be filed soon in the Senate as part of an energy package by Sen. Murkowski, Cam Toohey, executive director of Arctic Power, told PNA Jan. 25. He has been holding off to see what the White House was going to do. President Bush has been very bullish about ANWR. He is not only supporting it but leading.

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