Oneok Inc. CEO Larry Brummett and Oklahoma CorporationCommission (OCC) Chairman Bob Anthony sparred last week overwhether a 1993 gas purchase contract of Oneok subsidiary OklahomaNatural Gas (ONG) has been found to be fair to ratepayers. Asthings stood Friday, Anthony was all but calling for aninvestigation of the contract.

The 10-year contract between ONG and Tulsa, OK-based DynamicEnergy Resources is said to be worth about $175 million and runsuntil January 2004, Anthony said. The commissioner said thecontract specifies gas will be sold at whichever of three pricingprovisions is most attractive to the seller. One provision is spotprice plus 40 cents. Another specifies a flat price of $2.78/Mcf,and the third is a weighted average cost of ONG’s supply portfolio,including the cost of old and expensive gas contracts, Anthonysaid. “You might ask yourself why would anybody sign a contract topay more than the market price for 10 years,” Anthony said.

When he asked Brummett the same question in the courtroom,Anthony said the CEO couldn’t answer it. “We are in the process ofassembling information on that right now,” Oneok spokesman RogerMitchell said of Anthony’s concerns about the supply contract. “Ourintention is to try to put this thing to bed. One commissioner iscreating the issues associated with this.”

The contract has garnered much suspicion because of DynamicEnergy. Dynamic’s owners, Eugene and Nora Lum, have pleaded guiltyto federal campaign finance and tax violations. Rumors havepersisted that the ONG contract was somehow related to the Lums’illegal activities, despite what Oneok calls repeated findings tothe contrary. The company pointed to a 1996 investigation by thestaff of the OCC’s Public Utility Division that concluded theDynamic contract did not harm ratepayers and there was no evidenceof impropriety.

Anthony pointed out that a staff investigation is not the samething as a commission ruling that the contract is prudent andproper. “A commission ruling regarding the prudence of the contracthas never been made.

“I think the commission has a legal and constitutionalresponsibility and duty to be sure that charges to consumers underthe contract are reasonable and prudent.”

Brummett chided Anthony about a 1997 letter in which Brummettchallenged the commissioner to reveal any evidence of wrongdoing byONG. The company said Anthony has yet to respond to the letter.Anthony said that is not true and that he did respond in hisconcurring opinion approving the merger of Oneok and WesternResources, which was filed Oct. 1, 1997. “The public still deservesto know why ONG would give corrupt political operatives fromout-of-state a contract to sell about $175 million of natural gasover a ten-year period when the principal owner had no gasreserves, had no experience in the natural gas business, andfurthermore once had even testified she suffered from a memorydeficiency.”

Last week OCC commissioners voted to release appendices to the1996 OCC staff investigation report. The documents had beenrequested under Oklahoma open records laws by three separateparties. They contain information on the Dynamic contract as wellas other ONG gas supply agreements. Anthony said Oneok hadmaintained it had no objection to releasing the information but wasconcerned about liability it would have to suppliers for disclosureof the information. The commission sought consent for the releaseof the information from 24 parties who had contracts with ONG.Anthony said eight gave permission to release the information;seven raised no objections; and the others did not respond.

Brummett also last week told the commission that continuingspeculation about the Dynamic contract’s propriety are jeopardizingthe $1.8 billion merger of Oneok and Southwest Gas.Joe Fisher,Houston

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