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Mediation next step for Agrium

Company continues searching for ways to get natural gas

Posted: Thursday, May 26, 2005

Looking for tools to access more natural gas on the west side of Cook Inlet, Agrium will enter a mediation session today with inlet gas producers and the state of Alaska on whether to regulate a pipeline key to obtaining additional gas for its operations.

Involved parties chose to select and pay for the mediator, according to Regulatory Commission of Alaska documents.

The Cook Inlet Gas Gathering System, or CIGGS, is a pipeline owned by Marathon Oil Co. and Unocal Corp. and is unregulated, meaning the pipeline is privately owned and the use of it is controlled by the owners.

If it becomes regulated, there would be a mechanism for other producers to deliver gas using that pipeline.

In its second attempt in two years, Agrium filed a petition with the Regulatory Commission of Alaska to regulate CIGGS, which would allow other gas producers to ship their gas through this pipeline.

The RCA is a state agency that regulates public utilities and common carrier pipelines.

Agrium spokesperson Lisa Parker said Agrium wants this pipeline regulated so it can purchase gas from other producers on the west side, such as Aurora Gas.

"We would like the mediation to be successful," Parker said.

Currently, when Agrium wants to purchase gas from the west side of the inlet, it needs permission to have the gas delivered through CIGGS.

Marathon and Unocal declined to comment for this story because the issue is still under consideration.

However, speaking generally, Marathon supports any effort that promotes natural resource development in Cook Inlet, said Marathon spokesperson Paul Weeditz.

Parker said regulating the gas line would allow producers to deliver gas via CIGGS instead of through a pipeline system that travels through Turnagain Arm. She added that if the gas travels the long way through Turnagain Arm, then Agrium is purchasing odorized gas. This type of gas is only usable in part of the plant, she said.

Agrium is slated to close its North Kenai fertilizer plant later this year unless it can secure additional gas for its plant.

The first petition to regulate CIGGS was filed by Agrium two years ago, but it was rejected by the RCA. The second one was filed last fall and is still being considered.

Agrium, Unocal, Marathon, Enstar, Aurora Gas LLC and the state of Alaska will participate in the mediation.

The RCA ruled April 22 that CIGGS is subject to regulation.

Last week the RCA granted Aurora interim access to CIGGS so it can send gas from the Nicolai Creek Unit, a gas field on the west side of the inlet, through the pipeline. This ruling was a temporary ruling until parties involved in negotiations could work out a final commercial agreement for usage of the pipeline.

"Access to the CIGGS pipeline is absolutely critical to the future development of badly needed gas reserves in Cook Inlet," said Scott Pfoff, president of Aurora.

Involved parties still need to work out additional issues regarding CIGGS.

Parker said the parties hope to resolve the issue through mediation within 60 days. Mediation allows parties to resolve the issue without going through the regulatory process, she said.

If successful, a document with the terms of the agreement will be signed by all parties, Parker said, adding that the RCA then needs to approve it.



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