Rapid City, SD-based Black Hills Corp. is looking for a partner in its stalled multi-state utility natural gas reserves program, according to CEO David Emery, who raised concerns about future investments in Colorado during an earnings conference call with analysts Thursday.

While reporting a return to solid profitability for 4Q2016 and all of last year, Emery addressed Black Hills’ desire to re-apply with state regulators in a half-dozen states for the gas reserves program.

As he did on the company’s last quarterly call, Emery said Black Hills is examining its options for the gas reserves program, which was rejected last year by Colorado regulators, and said he expects something will be filed by the end of the second quarter this year if the company decides to reapply.

“We continue to believe strongly that a utility cost-of-service gas reserves program will provide long-term price stability and a reasonable expectation of long-term lower costs for customers while providing opportunities for increased earnings,” said Emery.

Coming off the Colorado Public Utilities Commission’s (PUC) rejection of the company’s gas reserves program proposal last spring, Emery expressed his unhappiness with a later decision by the regulators on the rate recovery for a gas-fired power generation turbine added to a generation facility at Pueblo airport. “We are cautious about making additional investments in the state, and we’re anxious to see how the [three-member] commission moves forward with its two new members.

“We’ll be watching that as we look at requests-for-proposal results and make the decision of whether or not we want to invest capital there; we certainly would like to, and we hope to get comfortable with doing so,” he said.

Emery reiterated Black Hills strategy for exiting the traditional exploration/production (E&P) business. “We’re driving the company more and more to be utility-driven,” he said. “We believe we have some expertise in some properties that could be extremely good, cost-effective assets for serving utility customer needs for years to come.”

Ultimately, if enough state regulatory commissions disagree with Black Hills, the company will have to make a decision “on what to do with those E&P assets,” Emery said. “We have made the decision that we are phasing out of the traditional E&P business into something that is more aligned with our utilities, so if we don’t get the cost decision we will have to decide what is the best way to transition out of the traditional E&P business.”

Emery said Black Hills “learned something” from more than 30 meetings with regulators in six states last year on the gas reserves program. If the company re-files, it will be related to specific gas reserves so regulatory staff members can better understand the specifics of the program in order to make a recommendation to regulators. Black Hills learned a lot about the questions and concerns of the regulatory staffs, “and that is certainly helpful for us as we re-think how we would apply again.” He thinks in a reapplication, specific gas properties will be included.

“It is important that they understand that we’re proposing that cost-of-service gas be part of a gas procurement portfolio for customers.”

Not re-filing is also an option, but “somewhat unlikely,” he said. “So while it is a possibility, it is a very unlikely one,” he said.

For 4Q2016, net income was $18.2 million (33 cents/share), compared to a loss of $14.2 million (minus 30 cents) for the same period in 2015. For all of 2016, Black Hills booked $73 million ($1.37) in net income, compared with a loss of $32.1 million (minus 71 cents) in all of 2015.