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Pipeline settlement before regulatory commission Agrium describes Cook Inlet pipelines as inefficient and largely unregulated Kristen Nelson Petroleum News Editor-in-Chief
Unocal will be able to move natural gas from the new Kenai Kachemak Pipeline on Alaska’s Kenai Peninsula through the existing Marathon-operated Kenai-Nikiski Pipeline. But that may be only one Cook Inlet pipeline issue that needs to be resolved.
Marathon Oil Co., Union Oil Company of California and Agrium U.S. have reached a settlement of issues related to regulation of the Kenai-Nikiski Pipeline and its connection with the Kenai Kachemak Pipeline, and submitted the settlement for approval to the Regulatory Commission of Alaska. The commission said the settlement, reached Aug. 15, includes an agreement by Marathon that the Kenai-Nikiski Pipeline will be regulated under the Alaska Pipeline Act and an agreement by Unocal to file an application to provide transportation on the Swanson River Pipeline under the same act. The Kenai-Nikiski Pipeline has been exempt from regulation under the pipeline act.
Unocal has also agreed that if the proposed initial tariff for the Kenai-Nikiski does not exceed 15 cents per thousand cubic feet, it will not oppose an initial rate filed by Marathon, nor will it oppose initial terms and conditions of service so long as they are substantially similar to terms and conditions of service for the Kenai Kachemak Pipeline.
Agrium and other parties to the proceeding may participate in dockets for initial rate and terms and conditions for the Kenai-Nikiski Pipeline.
A hearing was set for Aug. 21. The settlement expires Aug. 22 if not approved by the commission. Byzantine structure There may be more Cook Inlet pipeline issues for the commission to resolve.
In a July filing on the Kenai-Nikiski Pipeline, Agrium U.S. Inc. told the commission that Cook Inlet natural gas resources “are becoming scarce and may even now be too scarce to meet peak periods of demand.” These pipeline issues are before the commission now, Agrium said, partly “because with scarcity comes the need for a greater and more flexible access to pipelines with reasonable rates and terms of service.”
In the past, an abundance of gas concealed problems with “an inefficient and largely unregulated pipeline transportation system” in Cook Inlet.
“Today,” Agrium told the commission, “the Byzantine structure of private commercial transactions in the Cook Inlet are failing to meet the demands for efficient transportation of natural gas.”
The company said issues raised by the Kenai-Nikiski Pipeline “are endemic” to Cook Inlet, and it urged the commission to resolve these issues “in a comprehensive fashion to ensure a proper framework for related regulatory issues that will inevitably follow.”
Agrium uses natural gas as feedstock at its fertilizer plant in Nikiski. Kenai Kachemak service to begin soon Marathon told the commission in May that it might in the future apply for a certificate of public convenience and necessity authorizing the Kenai-Nikiski Pipeline to operate as a pipeline carrier, but said that it currently used the pipeline to ship only its own natural gas. Unocal objected, asking how it was to move natural gas coming through the new Kenai Kachemak Pipeline if it could not move it through the Kenai-Nikiski line.
As a term of the settlement, Marathon has filed to operate the line as a pipeline carrier, and is also seeking a temporary certificate to provide service until it receives a permanent certificate, allowing it to move gas for third parties when the Kenai Kachemak Pipeline system is ready to begin operation.
Under the temporary certificate Marathon would transport natural gas for Unocal, Agrium and others requesting service beginning Sept. 1 or the date the Kenai Kachemak line begins moving gas, whichever is earlier.
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