|
RCA approves pipeline sales to Hilcorp Transfer of Marathon’s interests in four Cook Inlet area gas lines contingent on DNR’s approval of right-of-way transfers to Hilcorp Kristen Nelson Petroleum News
The Regulatory Commission of Alaska has approved transfer of Marathon’s interests in Cook Inlet area natural gas pipelines to Hilcorp Alaska, subject to approval of transfers of the rights of way by the Alaska Department of Natural Resources.
These transfers are part of the purchase by Hilcorp Alaska of Marathon’s assets in Cook Inlet, announced in early April, and expected to be complete by the end of the year. Hilcorp Alaska became a major oil and gas presence in Southcentral Alaska when it purchased Chevron’s Cook Inlet oil and gas assets in 2011.
On Nov. 7 Alaska Attorney General Michael Geraghty said the state and Hilcorp had agreed on a proposed consent decree resolving competitive concerns over Hilcorp’s acquisition of Marathon. The decree puts a price cap on natural gas sold for local use over the next five years and prohibits Hilcorp from selling gas for export as LNG unless all local gas supply needs are met.
The RCA Nov. 20 order covers transfer of Marathon’s interests in the Cook Inlet Gas Gathering System, the Kenai Kachemak Pipeline, the Beluga Pipe Line Co. and the Kenai Nikiski Pipeline LLC.
Comments received The commission said it received comments on the proposed pipeline transfers from Chugach Electric Association, Matanuska Electric Association and Enstar Natural Gas Co.
Chugach told the commission there could be benefits from having a single regulated owner of the four pipelines, because single ownership could lead to a single pipeline system which could result in increased operational efficiency resulting in reduced costs due to economics of scale, elimination of redundant costs and a streamlined regulatory process.
MEA said it supported the transfer of assets, but was concerned with a for-profit entity owning the four common carrier natural gas pipelines because of the possibility that single-entity ownership could constrict or restrict access for non-owner gas shippers. MEA also noted that Hilcorp Alaska would have to commit significant capital to maintain and operate the four lines to provide needed service to customers.
Enstar requested that the commission consider carefully all aspects of the proposed acquisition because approval of the pipeline ownership transfers would put four common carrier lines under the ownership of a company which would also be the predominant natural gas producer in the region. Enstar told the commission that Hilcorp Alaska would have little incentive to accommodate non-affiliated shippers on transferred pipelines and also noted that if the proposed transfers are approved the market for Cook Inlet basin natural gas would be further consolidated, resulting in decreased competition.
The commission said Marathon and Hilcorp Alaska filed a joint response to the comments and said Hilcorp Alaska stated it is fully aware of the importance of reliable pipeline transportation in Southcentral Alaska and also acknowledged its obligation to operate the four common carrier pipelines in a non-discriminatory manner.
Part of overall transaction In its discussion the commission said the acquisition of the four pipelines was part of an overall transaction which would enable Hilcorp Alaska to engage in planned exploration, drilling and development on or near properties it is acquiring from Marathon.
Hilcorp has told the commission it plans no changes to the operation or equipment of the four pipelines and that the transfers will not affect the tariff rates for the lines.
The four pipelines hold right-of-way leases from the Alaska Department of Natural Resources and Hilcorp Alaska has applied for approval of transfer of the ROW leases.
DNR has not yet issued a decision on those applications and the commission said it was making its approval of transfers to Hilcorp Alaska effective no earlier than the date DNR approves the transfer of the right-of-way leases and is requiring Hilcorp to notify the commission within five business days of receipt of approval of transfer of the right-of-way leases.
Marathon holds a 50 percent interest in the Cook Inlet Gas Gathering System, a 60 percent interest in the Kenai Kachemak Pipeline, a 100 percent interest in Beluga Pipe Line Co. and a 100 percent interest in Kenai Nikiski Pipeline.
Hilcorp previously acquired interest in the Cook Inlet Gas Gathering System and the Kenai Kachemak Pipeline as part of its acquisition of Chevron’s Cook Inlet assets, and will be 100 percent owner of all four lines once the transfer is complete.
| 