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CINGSA settlement proposed, opposed Issue is native gas discovered at Cannery Loop after field converted to natural gas storage; RAPA, Tesoro are not in agreement KRISTEN NELSON Petroleum News
Cook Inlet Natural Gas Storage Alaska and customers with firm storage service contracts - Chugach Electric Association, Enstar Natural Gas and Homer Electric Association - have told the Regulatory Commission of Alaska they have agreed to settle all issues raised by a proposed CINGSA tariff revision.
The parties to the agreement have requested that RCA accept the stipulation, telling the commission they believe it “is in the public interest and consistent with controlling law.”
However, two parties to the proceeding - the Office of the Attorney General, Regulatory Affairs and Public Advocacy Section and Tesoro Alaska - have not agreed to the stipulation, and the commission is thus requested to accept the stipulation “as a contested settlement.”
CINGSA and the FSS customers who are partners to the settlement told RCA it has the authority to accept a contested settlement after holding a hearing to determine if the contested settlement is in the public interest and consistent with controlling law.
Municipal Light and Power, another FSS customer, has not taken a final position.
The issue arose when CINGSA, in the course of drilling a well at the storage facility, found natural gas not developed when Marathon was producing from the Cannery Loop field.
This gas, referred to as “native gas” to distinguish it from the natural gas pumped into the reservoir for storage, is estimated to amount to 14.5 billion cubic feet.
CINGSA has told the commission that most of the native gas will be required to maintain contractual injection and withdrawal rates, but that it will be able to sell up to 2 bcf of the native gas.
At issue is who benefits from that sale.
The agreement The stipulation submitted to the commission by CINGSA provides for the sale of 2 bcf of gas in place to Chugach, Enstar, Homer Electric - and ML&P if it so elects. That would allow “these customers an immediate increase in their gas in storage while avoiding transportation and injection charges.” The stipulation also provides what it describes as “an equitable division of sales proceeds from any CINGSA gas sales,” including a 50 percent sharing of proceeds from the sale of the 2 bcf between CINGSA and its FSS customers. The FSS customers would also get a total increase in storage capacity of 2 bcf. There would be “a clear and transparent procedure to govern any further sales” of excess native gas by CINGSA and a commitment from CINGSA to seek oversight by RCA should it discover any additional native gas.
The stipulation requests that the commission accept it as a contested settlement, noting that the parties have considered their positions, “the risk and expense associated with further litigation” and the public interest, and “believe it is in the public interest to resolve the narrower questions contemplated by this contested settlement rather than the broader questions raised by the proposed tariff changes” which CINGSA submitted.
The stipulating parties request that any hearing on the stipulation be limited to the terms of the stipulation and say they believe rights of the non-settling parties are protected by a hearing on the stipulation. If the stipulation is accepted, CINGSA will withdraw its proposed tariff revision. If the commission rejects the stipulation the rights of non-settling parties will be protected because procedures on the proposed tariff revisions will go forward.
RAPA objections The Office of the Attorney General, Regulatory Affairs and Public Advocacy Section, has petitioned the commission to allow it to conduct discovery and for a RAPA witness to present response to the contested settlement agreement. RAPA has also asked that a hearing date be rescheduled and the statutory deadline extended.
RAPA told the commission that the proposed settlement “raises issues and claimed facts that are beyond” the scope of the docket and are not addressed in any prefiled testimony, such as an increase in the contracted maximum storage quantity from 11 bcf to 13 bcf and the use of 2 bcf of that maximum storage quantity by Enstar, Chugach, ML&P and Homer Electric. Those issues were raised for the first time in the contested settlement agreement, RAPA said, and RAPA has not had the opportunity “to test these claimed facts and issues in discovery or prefiled testimony.”
Tesoro objections Tesoro has told the commission that the found native gas was already paid for by the FSS customers because the well which found the native gas was “designed and drilled as an integrated component of CINGSA’s development of the storage service facilities for the purpose of providing gas storage capacity with injection and withdrawal deliverability,” a well which CINGSA continues to use for ongoing storage services.
Tesoro also said the drilling costs for the well were borne by the FSS customers and are included as part of CINGSA’s capital investment in its existing rate base. The company argues that discovery of the native gas was incidental to CINGSA’s development of its storage facilities and is a part of its gas utility operations, the costs of which “are paid for by the FSS Customers and have been included in CINGSA’s cost of service.”
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