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Industry Briefs

High gas and oil costs as well as strong demand have prompted Praxair Inc. to inform its customers that the prices of its products will be increasing. The company told its industrial, medical and specialty gas customers in the U.S. and its helium customers worldwide that, effective immediately, prices will go up on oxygen, nitrogen, carbon dioxide, argon, helium, hydrogen and other products, except as otherwise permitted by the terms and conditions of customer contracts. "Throughout last year's disruptions due to hurricanes and interruptions in feed sources, Praxair maintained the highest level of reliability in the industry and provided our customers with the products they needed," said Jim Fuchs, president of Praxair's North American Industrial Gases business. "We are committed to maintaining this high level of performance in an environment of strong demand and increased costs." Praxair said the actions are being implemented in response to strong demand as well as continued energy, logistics and other operational cost pressures for all products. For helium, the high cost of crude gas and refined liquid purchases are additional factors. Praxair also advised customers in the U.S. of modified or additional regional charges for recovery of premium energy costs. Electricity and/or natural gas are the largest cost factors in the production of industrial gases. The company said it will raise prices 10% for bulk oxygen, nitrogen and carbon dioxide. Prices for argon, hydrogen and helium will go up 15%, and prices for cylinder rental fees will increase 5%. Praxair is the largest industrial gases company in North and South America and one of the largest worldwide, with 2005 sales of $7.7 billion.

The New York Mercantile Exchange Inc. (Nymex) announced margin decreases for its natural gas, Nymex miNY natural gas, Henry Hub swing swap, Henry Hub swap, and Henry Hub penultimate swap futures contracts, as of the close of business Thursday. Margins for the first month of the natural gas futures contract decreased to $6,500 from $7,500 for clearing members, to $7,150 from $8,250 for members, and to $8,775 from $10,125 for customers. The margins on the second to sixth months decreased to $6,000 from $6,500 for clearing members, to $6,600 from $7,150 for members, and to $8,100 from $8,775 for customers. Margins on all other months remain unchanged. Nymex said the margins for the first month of the Henry Hub swap futures and Henry Hub penultimate swap futures contract decreased to $1,625 from $1,875 for clearing members, to $1,788 from $2,063 for members, and to $2,194 from $2,531 for customers. The margins on the second to sixth months decreased to $1,500 from $1,625 for clearing members, to $1,650 from $1,788 for members, and to $2,025 from $2,194 for customers. Margins on all other months remain unchanged. Margins for the first month of the Nymex miNY natural gas futures contract decreased to $1,625 from $1,875 for clearing members, to $1,788 from $2,063 for members, and to $2,194 from $2,531 for customers. Margins on the second month decreased to $1,500 from $1,625 for clearing members, to $1,650 from $1,788 for members, and to $2,025 from $2,194 for customers. The exchange also reported that margins for the first month of the Henry Hub swing swap futures contract decreased to $1,625 from $1,875 for clearing members, to $1,788 from $2,063 for members, and to $2,194 from $2,531 for customers.

Enogex Gas Gathering LLC has agreed to sell its natural gas gathering assets in Kinta, OK, to a subsidiary of Hiland Partners LP for $93 million. The assets include 568 miles of gas gathering pipeline and 23 compressor units with current volumes of approximately 145 MMcf/d, all in eastern Oklahoma. "The sale of these assets comes after careful analysis and is part of our repositioning and growth strategy," said Danny Harris, COO of parent company Enogex Inc. "We expect this action to help us improve our long-term financial performance and position us to expand into other geographic areas of operation." The transaction is expected to provide an after-tax book gain of $34 million and is currently scheduled to close by the end of April. The transaction is subject to customary closing conditions and regulatory reviews.

In a rehearing decision last week, the Illinois Commerce Commission (ICC) reduced the annual base rate revenue increase granted to Nicor Gas to $49.7 million from $54.2 million. Nicor estimates that the shift of certain revenues and credits between base rates and the purchase gas adjustment rider will reduce its annual net revenue increase to about $30.2 million, compared to $34.7 million under a prior order issued last fall. Appeals of the original order have been filed by Nicor and other parties in the state appellate courts.

Moody's Investors Service last week cut its ratings on Dominion Resources Inc. and several subsidiaries, citing weaker than expected financial performance, higher than forecast leverage at the end of 2005 and increased business risk compared to a peer group of utility companies. Moody's cut Dominion's senior unsecured debt one notch to Baa2, the second-lowest investment grade ranking, from Baa1. The outlook is stable. Ratings on the senior unsecured debt of subsidiaries Virginia Electric and Power Co. and Consolidated Natural Gas Co. were cut one notch to Baa1 from A3.

In response to the Energy Policy Act of 2005, the Bureau of Land Management (BLM) has published changes to oil and gas regulations relating to lease acreage limits and lease reinstatements. A new set of regulations expands the types of lease holdings that are exempt from acreage limits and extends the time for companies to file a lease reinstatement from 15 months to 24 months. The reinstatement provision applies to leases terminated after Aug. 8, 2005. The Mineral Leasing Act of 1920 limits the amount of acreage a federal oil and gas lessee may hold in any one state to 246,080 acres and exempts certain types of acreage holdings from the leasing acreage limit. Section 352 of the Energy Policy Act expands the list of exempted acreage to include producing leases and leases committed to communitization agreements, in which oil and gas operators jointly administer multiple leases for operational and production purposes as if they were one. This section of the new energy law also exempts from acreage limits those leases for which royalty was paid in the preceding calendar year.

The BLM's Rawlins Field office in Wyoming issued a notice of intent (NOI) to prepare an environmental impact statement (EIS) and is conducting scoping for the Overland Pass Pipeline. The 750-mile, 20-inch diameter pipeline would run from Opal, WY, to Conway, KS, and would carry natural gas liquids. Williams Field Services filed the application for the right-of-way with the BLM. Of the 750 miles, about 78 miles would not be located near existing pipelines. The proposed route would follow the 1-80 corridor through southern Wyoming, mainly along the Southern Star pipeline route. It would traverse 143.3 miles of federally-administered land in Wyoming and Colorado and would cross the Flaming Gorge National Recreation Area and the Pawnee National Grassland north of Greeley, CO. The 45-day scoping period on the EIS concludes May 5. Open houses/public scoping meetings will be held April 17-20. Comments will be accepted until May 5 and can be submitted electronically to Overland_Pipeline_WY@blm.gov.

San Diego Gas & Electric (SDG&E), which serves 3.4 million California consumers using 1.3 million electric meters and more than 825,000 natural gas meters, has filed an updated proposal with the California Public Utilities Commission to install advanced meters for all of its customers by 2010. The commission is reviewing a similar proposal by Pacific Gas and Electric Co., and it has already granted that utility $49 million in pre-start-up funds (see NGI, Sept. 26, 2005). Both utilities also have begun pilot programs in various locations around the state. If SDG&E's program is approved, the smart meters, which would be installed beginning in mid-2008, could reduce system costs through meter-reader cost savings, earlier detection of outages, equipment monitoring and deferred construction costs related to reductions in peak usage.

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