Fairbanks Natural Gas loses supplier, now looks to Enstar -
CONTRACT: Regulators OK a short-term move and weigh a 21-month deal.
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By Petroleum News
Published: October 3, 2006
Last Modified: October 3, 2006 at 03:22 AM
Fairbanks Natural Gas has gotten a temporary new supply of Cook Inlet gas for its 800 Interior customers after its previous contract expired as of Sunday.
State utility regulators on Friday approved an interim deal calling for Anchorage-based Enstar Natural Gas Co. to provide gas while the regulators consider whether to OK a 21-month supply deal between the two companies.
Enstar recently petitioned the Regulatory Commission of Alaska for an expedited approval to supply natural gas to Fairbanks Natural Gas, per an agreement the companies reached Sept. 26. The agreement would cover Oct. 1, 2006 through June 30, 2008.
Fairbanks Natural Gas had been getting gas from Aurora Power Resources or Aurora Gas, but that sales agreement ended Oct. 1. Aurora had told the Fairbanks company that it would stop deliveries because it is "not economic" to continue production.
Fairbanks Natural Gas provides gas to some 800 customers using Cook Inlet gas that the company liquefies at a Point MacKenzie plant and trucks north to Fairbanks. Enstar has provided transportation service for the gas to the liquefaction plant since 1999.
Because the Aurora deal was ending, "FNG has an immediate need for approximately 0.8 (billion cubic feet) per year of natural gas to supply its liquefaction plant and to serve its Fairbanks customers," Enstar told RCA in a Sept. 26 letter.
Enstar said it had an agreement only to transport gas to the Point MacKenzie plant, not to supply the gas itself.
Fairbanks Natural Gas argued that Enstar is obligated to supply gas because its liquefaction plant is within Enstar's service area.
Fairbanks Natural Gas told Enstar it needs Cook Inlet gas until North Slope gas is available.
Bradford Keithley of Jones Day, attorney for Chevron, told the commission in a Sept. 22 letter that Chevron made an offer to sell gas, an offer Fairbanks Natural Gas rejected.
Chevron subsequently sold the gas to the Agrium fertilizer plant at Nikiski, Keithley said. "By the time that FNG attempted to reopen those discussions following Aurora's notification this year that it would no longer provide gas, Chevron had already reached its sales agreement with Agrium."
Keithley noted that Enstar, in a Sept. 21 filing with the commission, suggested that one potential way for Enstar to provide gas to FNG would be "for Enstar to acquire additional gas from Chevron under its existing contracts."
If that occurred, Keithley told the commission, Chevron would have to examine the facts and its contracts to determine what its obligation would be.
If Chevron is obligated to provide additional gas to Enstar for Fairbanks Natural Gas, "the consequence will be that Chevron will need to reduce its deliveries over the coming year to Agrium below the levels previously contemplated."
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Daily News business editor Bill White contributed to this article. |
