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Marathon Inks Deal with PEAK

Marathon Inks Deal with PEAK

Demonstrating the growing relationship between marketers and municipal gas companies, USX Corp. subsidiary Marathon Oil Co. (Marathon) announced a $52.8 million agreement last week to supply over 31 Bcf of firm natural gas to the Public Energy Authority of Kentucky (PEAK) for 10 years. Effective Nov. 1, Marathon will provide gas for PEAK through the Texas Gas Transmission pipeline system.

This represents the second time in two weeks that PEAK has announced a long term agreement. It signed a 10-year, $120 million deal with Unocal for 72 Bcf of gas in late October. Peak Chairman Gerald Ballinger cited protection from volatility in the market and reliable supplies as reasons for signing for so many years.

Bill Ryder, a Marathon Oil spokesman, indicated that the company is looking for more long-term agreements like this one. "This is our first long term arrangement with a public entity. We're not looking for a specific region, just where the business is."

Established in July 1998, PEAK is a joint action agency staffed by representatives of Carrollton and Henderson, KY. It was created to provide an economical and reliable supply of gas to municipalities that own and operate their own natural gas distribution systems.

Kentucky is not the only area where long-term contracts with municipals are occurring. Earlier this month Aquila Energy continued its involvement with public entities, signing with the American Public Energy Agency (APEA) to provide municipal members of the Nebraska Public Gas Agency (NGPA) with 91 Bcf over 12 years for $162 million, paid in advance. (See NGI, Nov. 9, 1998) It is becoming a popular practice for municipal organizations to issue bonds and buy long-term gas, since both bond interest rates and gas prices are attractive right now. Aquila signed its first deal last December, when, for $117 million, it agreed to provide the Municipal Gas Authority of Georgia with 20 MMcf/d of gas for 10 years.

John Norris

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