NGI Staff Reports

The Interior Department’s Minerals Management Service (MMS) hasissued a final rule for determining royalties for natural gasproduced on Indian lands. Under the new rule, which was publishedin the Aug. 10 Federal Register, Indian leases would have theoption to either compute royalties on wellhead gas using apublished price index, continue using the existing gross-proceedsmethod for arms-length contracts, or use the current MMS benchmarksystem for non-arms-length sales. If gas is processed, Indiantribes then would adopt a “dual accounting” method under whichroyalties would be based on whichever has the greater value for gas- before processing or after processing. In most cases, it’s thelatter.

The Natural Gas Supply Association (NGSA) wasted little time inpicking successors to fill positions that were left vacant by thesudden departures of two staff members.

Mexico last Monday lifted its 4% tariff on natural gas importedfrom the United States, the Energy Ministry announced. This clearsthe way for expanded gas sales by U.S. companies into thefast-growing markets in northern Mexico.

El Paso Energy’s Tennessee Gas Pipeline and CNG’s CNG Transmission announced an open season for their joint venture, the Atlantic Alliance Project, which started last week and will extend to Thursday, Sept. 30. Shippers will be asked to submit binding precedent agreements for service commencing November 2001 as part of the open season.

Continuing the expansion beyond its core utility operations,FirstEnergy Corp. made a splash in the unregulated sector last weekwhen its energy services marketing arm, FirstEnergy Services,announced a management and supply deal with Republic TechnologiesInternational, Inc. (RTI), one of the largest producers of specialbar-quality steel products in the U.S. The deal, which is thelargest service agreement FirstEnergy has ever signed, couldproduce more than $1 billion in commodity and energy service salesover the span of the five-year contract.

Mitsubishi Motors Manufacturing of America (MMMA) announced itentered into a multi-year agreement with Duke Energy’sDukeSolutions Inc. last week to manage energy service forMitsubishi’s two-million-square-foot manufacturing plant in Normal,IL. Over the contract term, DukeSolutions will support up to $30million of energy expenditures for MMMA.

The Greenwood Commissioners of Public Works (CPW), the municipalorganization responsible for the energy needs for the city ofGreenwood, SC, said last week it has entered the market for a totalenergy provider. The CPW is searching for companies with tangibleassets to provide comprehensive energy supply services, includingpower supply and gas supply. Energy supply proposals may includealternatives ranging from full requirements service to thedevelopment of owned generating resources, the CPW said.

With just over a year to go before the new Alberta-to-Chicagolink, Alliance Pipeline, goes into service TransCanada PipeLinesand affiliate Nova Gas Transmission already are feeling the impactof the competition.

The proposed Southern Trails Pipeline from the Paradox Basin ofNew Mexico to Long Beach, CA, could be delayed three to six monthsbecause of additional environmental assessment work underway aspart the federal and state regulatory processes, according to aSalt Lake City-based spokesperson for Questar Corp., which boughtthe pipeline for $40 million last year from ARCO. Nevertheless, theconverted 700-mile pipeline should be bringing 120 to 130 MMcf/d ofgas into California by the end of next year at the latest.