CINGSA hits legal trouble

Posted: Sunday, May 15, 2011

The Regulatory Commission of Alaska closed the docket on Cook Inlet Natural Gas Storage of Alaska's application for a certificate of public convenience and necessity last month, but that doesn't mean the project has a complete go-ahead.

The commission granted CINGSA the certificate, which essentially says that the project is for the public good, and denied Inlet Entities petition for reconsideration.

But now the project is embroiled in legal action.

CINGSA needs storage rights, mineral rights and royalty rights for the gas storage facility it is trying to develop. But a number of landowners and rights-holders refused the company's offers last fall.

In March, CINGSA filed a condemnation action asking the court to require certain rights holders to sell their rights and setting the price.

The necessary rights range from storage rights on less than an acre, for which the company offered $840, to mineral, storage and royalty rights on about a 43 acre property for a total of more than $65,000, divided among the various rights holders.

The largest party in the suit is Kenai Landing, Inc, which refused the offer on their three parcels, totaling more than 55 acres. Kenai Landing holds storage and mineral rights, while Wards Cove holds the royalty interest.

In addition to disputing the valuation, Kenai Landing has said that CINGSA did not undertake negotiations in good faith, court documents say.

Last week, a number of parties were delivered a summons, which notified them that if they don't file a motion to dismiss explaining their opposition, they would be bound by the court's decision without having input.

Among those parties was RJR Nabisco Realty, a New York company with some relation to the cracker company, which owns 50 percent of the mineral rights on more than 26 acres. Pacific Star Seafoods, which holds storage rights on much of the same acreage as RJR, was also part of the summons. Those are among the largest parcels for which the summons were granted.

Rights aren't the only contentious issue. The City of Kenai is also fighting a lawsuit over a permit it issued.

Kenai issued a conditional use permit for the project, which Vincent Goddard appealed. The city altered the conditions after hearing Goddard's appeal, but still gave CINGSA the needed permit. Now Goddard has appealed to the court, with Wild Pacific Salmon Inc. and Inlet Fish Producers Inc. also listed as appellants.

Both suits are before Judge Carl Bauman.

At stake in these suits is CINGSA's ability to inject natural gas into a mostly-depleted gas field in Kenai. Gas would be injected in the summer, when more gas is being produced than is needed to meet demand. That gas would be taken back out in the winter, when Southcentral demand usually exceeds the amount of gas being produced in Cook Inlet gas fields. CINGSA is a subsidiary of Semco Energy -- the parent company of Enstar.

The gas field is about 4,500 feet below the ground, according to documents CINGSA has filed.

Despite the legal action, CINGSA is moving forward on the projects. In its May monthly progress report to the RCA, the company said it has applied to Kenai for a building permit and is continuing site work.

The company asked the court to schedule a hearing on its condemnation suit this month. That has not yet been done.

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