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Marathon, Unocal dispute pipeline use Companies argue rights to ship gas through Kenai-Nikiski line Kristen Nelson Petroleum News Editor-in-Chief
Marathon Oil and a subsidiary of Unocal are partners in the new Kenai Kachemak Pipeline which will begin moving gas from the companies’ Ninilchik field to Kenai, Alaska, later this summer. But the newly discovered gas needs to move beyond Kenai, and Marathon is the sole owner of the 16-mile Kenai-Nikiski Pipeline, which conveys gas to the Agrium fertilizer plant and the liquefied natural gas plant at Nikiski, and to connection points with the line which runs into Anchorage.
On May 30 Marathon petitioned the Regulatory Commission of Alaska, asking the RCA not to change the status quo of the Kenai-Nikiski line, which is not currently regulated as a pipeline carrier. In 1971, Marathon told the RCA in its filing, the Kenai-Nikiski pipeline was owned 50 percent by Marathon and 50 percent by Unocal. The joint owners applied to the Alaska Public Utilities Commission in 1971 to exempt the Kenai-Nikiski pipeline from the certification requirement and other requirement, of AS 42.05 (Public Utilities and Carriers) because the pipeline was being used primarily to transport natural gas to Marathon and Unocal business operations.
Marathon told the RCA that effective Dec. 1, 1994, it became the 100 percent owner of the line, except for the northernmost 0.8 mile segment of the pipeline, which continued to be owned 50-50 by Unocal and Marathon. Marathon wants to move own gas Marathon told the RCA that it intends to move its own gas from the Kenai Kachemak Pipeline through the Kenai-Ninilchik Pipeline to its existing customers, the LNG plant, Enstar and the Tesoro Alaska Refinery. Marathon said the connection with the Kenai Kachemak Pipeline “will not involve any new sales contract or agreement, or any alterations of Marathon’s arrangements with its existing customers.”
Marathon said it has recently received inquiries from third parties about shipping gas on the Kenai-Nikiski line and “is concerned that such third party shipments could alter the regulatory status quo” of the Kenai-Nikiski line as determined by the 1971 regulatory order. Marathon said it may apply in the future for a certificate of public convenience and necessity authorizing the Kenai-Nikiski Pipeline “to operate as a pipeline carrier” under AS 42.06 (Pipeline Act), but “at the current time, Marathon will maintain its existing uses of KNPL.”
Marathon asked the Regulatory Commission of Alaska “to issue an order declaring that the intended connection of KNPL with KKPL … and Marathon’s continued use of KNPL to deliver its own gas to its existing facilities and customers does not require any further regulatory approval or action by Marathon.” Unocal asks for emergency relief Unocal objected and filed June 12 asking for emergency relief from the commission requiring Marathon to provide gas transportation on the Kenai-Nikiski pipeline. Unocal said Marathon has been transporting Unocal gas on the Kenai-Nikiski pipeline under a 1998 agreement, but has recently asked about terminating that agreement.
Unocal told the commission that Marathon’s conduct will impair Unocal’s ability to provide gas to Enstar under a contract approved by the commission in 2001 and, by this winter, limit Unocal’s ability to continue to deliver contracted supplies to Agrium.
“The longer range effect of Marathon’s conduct will be to limit or eliminate competition from other suppliers in the Cook Inlet sales market and, potentially, to limit competition in the exploration and production markets as well,” Unocal said.
The pipeline being built now, the Kenai Kachemak Pipeline, does not deliver gas to customers, Unocal said, but only to an interconnection point with the Kenai-Kachemak Pipeline and the Alaska Pipeline Co., a line used to serve Enstar. Unocal said Marathon has provided transportation services for Unocal gas “for a number of years” on the Kenai-Ninilchik Pipeline.
Unocal said that Marathon’s motion to the commission makes it clear that Marathon “intends to use KNPL to transport to market Marathon’s own share of the same southern Kenai production. … while at the same time foreclosing Unocal’s access to the pipeline for the same purpose…”
Unocal said the commission has the authority to require Marathon to transport Unocal’s gas and to make the Kenai-Nikiski Pipeline subject to the commission authority from which it was partially exempted in 1971 because it then carried primarily natural gas owned by the pipeline owners to facilities owned by the pipeline owners.
And, because the Kenai Kachemak Pipeline is expected to be in operation soon, Unocal asks for emergency relief, requesting that the commission issue by Sept. 1 an interim order denying Marathon’s motion, and requiring the Kenai-Nikiski Pipeline to transport Unocal gas. Unocal said that once the Kenai Kachemak Pipeline begins operation, Unocal will have significantly increased volumes of gas that it needs to have moved on the Kenai-Nikiski Pipeline.
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