FERC upheld its March decision on remand in which it disclaimedjurisdiction over a four-mile, six-inch line of KN WattenbergTransmission LLC that serves two industrial customers in FortMorgan, CO. The Commission asserted jurisdiction over the lateralin a November 1997 ruling, but the U.S. Court of Appeals for theTenth Circuit remanded the decision two years later. Last March,FERC vacated its controversial decision upon acknowledging that theline met the qualifications for a Hinshaw exemption and, therefore,was subject to regulation by the Colorado Public UtilitiesCommission.
Piedmont Natural Gas has signed a formal agreement to purchase agas distribution system serving 5,100 customers in Gaffney, SC,from Atmos Energy for $5.8 million. Atmos operates its UnitedCities Gas subsidiary in the Gaffney area. Piedmont has announcedthat it will continue to maintain a local Gaffney office and retainexisting United Cities’ employees. The transaction is subject toregulatory approval and is expected to close by the end of theyear. Piedmont serves about 660,000 residential, commercial andindustrial customers in the Carolinas and in Tennessee. It is thesecond largest gas utility in the Southeast behind Atlanta GasLight.
Conectiv sold the southern regional division of ConectivServices, which is located in southern Delaware and easternMaryland, to the unit’s employees. Terms of the sale were notdisclosed. The southern division provided new construction,replacement, service and maintenance of heating, cooling, andplumbing services for residential and commercial customers. Themove continues Conectiv’s previously announced plan to exitbusinesses it no longer considers strategic, and seek a partner forits telecommunications business, and focus on its core mid-meritand power delivery segments. Earlier this year, Conectiv announcedthe sale of the northern and mechanical divisions of ConectivServices and the sale of its Conectiv Thermal joint ventures inCalifornia and Nevada. Conectiv is focused on two core energybusinesses: Conectiv Power Delivery, which provides energy serviceto more than one million customers in New Jersey, Delaware,Maryland, and Virginia; and Conectiv Energy, which includes powertrading and a growing portfolio of “mid-merit” power plants.
A new study by consulting firm John S. Herold, Inc. tracks theboom and bust cycles that have decimated the ranks of oil and gascompanies. “From Renaissance to Requiem to Rebirth,” a special oiland gas industry study authored by CEO Arthur L. Smith and VicePresident Aliza Fan, begins with stark statistics highlighting thedestructive impact that commodity price volatility has had on oiland gas companies over the past three decades. Smith and Fan pointout that of 82 oil companies followed by Herold in 1970, only seven(9%) survive today; of 157 companies followed in 1990, only 63(40%) are still in business. The 1998-1999 oil and gas wellheadprice meltdown was particularly brutal, dealing “body blows to allpetroleum producers and oil service providers; some staggered, somefell and many merged or were acquired.” At the same time, enormouscapital flows were withdrawn from the energy sector, as energyindustry weighting in the S&P 500 plunged from 26% in 1982 toless than 5% in early 2000. For a copy of the study contact TomBiracree at 203-847-3344 or firstname.lastname@example.org.
Evergreen Resources Inc., based in Denver, reports that itsproved reserves have increased 47% since year-end 1999 to 822 Bcfof natural gas as of Sept. 1. The increase follows the company’ssuccessful drilling program in the Rocky Mountains this year, andits $176 million acquisition of producing properties in the RatonBasin from an affiliate of Kansas City Power & Light Co. Thereserve estimate represents an increase of 263 Bcf over the Dec.31, 1999 estimate of 559 Bcf. About 153 Bcf of gas reserves wasattributed to Evergreen’s Sept. 1 purchase in the Raton Basin.Independent petroleum engineering consultants Resource ServicesInternational audited the estimate of reserves. In the first eightmonths of 2000, Evergreen drilled 73 wells, and the companyanticipates it will drill about 100 total in the basin before theend of the year.
Dallas-based Denbury Resources Inc. said that its projected 2001targeted production will be a company record of 25,000 BOE/d, a 24%increase from its anticipated average daily production this year.The production includes an estimated 17,000 barrels of oil a dayand 48 MMcf/d. CEO Gareth Brooks said the company “will exit 2000with a significant increase in our reserve and production base. Ifwe achieve our targets for 2001, it will be the second straightyear of 20% to 25% growth in base production at an expected cost ofless than $25,000 per daily producing BOE.” The company’s capitalbudget for next year is $100 million, geared toward more productionfrom existing fields and expanded activity in the Gulf of Mexico.
Grey Wolf Inc., headquartered in Houston, has signed a two-year$11.6 million contract with Burlington Resources Inc. for anultra-deep drilling Rig 558, which would be used to beginexploration and production in the growing Rocky Mountain area. Therig would be used for drilling in the Madden Deep Unit of Wyoming’sWind River Basin, with startup scheduled for second quarter 2001.Grey Wolf’s Rig 558 is rated at 4,000 HP, with a hoisting capacityof 2.5 million pounds.
Chevron, the Royal Dutch/Shell Group and Schlumberger havebecome equal partners in a new Houston-based company, OpenSpiritCorp., which will offer a standardized software infrastructure forthe energy industry. The initial framework was funded by OpenSpiritAlliance, a three-year-old collaboration of exploration andproduction companies and software vendors that studies ways tobetter develop, deliver and use E&P applications. OpenSpiritCorp.’s vendor-neutral and platform-independent applicationframework is expected to be available before the end of the year.Neil Buckley, former president of U.S. operations for Merak, adivision of GeoQuest, will serve as CEO. More information isavailable at www.openspirit.com.
Strategic Energy has announced a five-year Power SupplyCoordination agreement with The City of Pittsburgh to provide andmanage the electricity supply to city facilities as well as providerelated energy management services, including summary billing andassumption of energy price risk. Pittsburgh-based StrategicEnergy’s Power Supply Coordination Services will provide Citylocations with an initial 10.8% annual electricity savings plus thelikelihood for additional savings over the term of the contract.Pittsburgh City Mayor Tom Murphy said “we are anticipatingimmediate cost savings of more than $300,000 next year, and believewe will continue to see our energy costs drop.
As part of its house cleaning following its merger withConsolidated Natural Gas, Dominion Resources announced it hasagreed to sell to GE Capital Commercial Finance $948 million incommercial loans held by First Source Financial, a unit of itsDominion Capital subsidiary. The company agreed to sell DominionCapital to obtain regulatory approval for its $8.5 billionacquisition of CNG, which closed earlier this year. The transactionis expected to be completed in the fourth quarter. It marks a bigstep in Dominion’s effort to raise $1.5 billion in cash throughasset divestitures. “This transaction will enable Dominion toenhance the company’s debt structure and significantly de-leverageits balance sheet,” said Dominion CEO Thos. E. Capps. “It alsoadvances our long-term strategy to divest non-core assets and focusour resources on energy markets in the Midwest, Northeast andMid-Atlantic regions of the United States.” Chicago-based FirstSource Financial originated the loan portfolio after being acquiredby Dominion Capital in 1995. The portfolio includes loans made tomiddle-market companies for expansion, acquisitions andrecapitalization, and represents about half of First SourceFinancial’s total loan portfolio.
Constellation Power Source announced it will build one ofCalifornia’s first major power plants in more than a decade. TheHigh Desert Power Project, a $350 million, 750 MW power plant willbe built at the Southern California Logistics Airport in SouthernCalifornia’s Victor Valley. “The High Desert Power Projectrepresents an important step in meeting California’s criticalenergy needs,” said Constellation Power Source President Charles W.Shivery. “Leading up to this summer there was a growing gap betweenelectric generation supply and consumer demand in California whereconsumption of electricity has increased more than 22% in the pasteight years, and in-state power generation has remained nearly flatat under 4%.” Groundbreaking is expected to begin early next year,and the plant is scheduled to begin commercial operation in timefor the high electric demand season in the summer of 2003. HighDesert is the fifth merchant power plant announced this year byConstellation.
Southern Co., Alabama Municipal Electric Authority, FuelCellEnergy and Mercedes-Benz U.S. International started a field test ontheir Alabama Direct FuelCell Demonstration Project last week. Theproject, which was announced in February, will utilize FuelCellEnergy’s Direct FuelCellT stack. It will convert natural gas toelectricity that will feed the Mercedes-Benz production facilitypower distribution system in Alabama. In addition, the entire powerplant will be skid-mounted, making it easy to transport todifferent locations for additional demonstrations.
Henwood Energy Services announced its new online energy auctionweb site, TermDesk.com, has successfully completed natural gas andelectricity auctions with companies including Texaco and San DiegoGas & Electric. The auction allows large and small energyparticipants to buy and sell long term energy at competitiveprices. Different than other trading platforms, TermDesk.comemphasizes a longer term physical transaction, the company said.”We are kind of like the e-Bay of energy,” said Mark Reed,TermDesk.com’s director of Merchant Services. Launched in July,TermDesk.com has additional auctions scheduled throughout Octoberand can be located on the net at www.termdesk.com.
California regulators unanimously adopted a statewidere-examination of the state’s $220 million voluntary electricitycurtailment program among large energy users, an ongoing effortthat at critical times this past summer helped state energyofficials avoid the need to impose rolling blackouts. The programallows large customers to get price breaks in return for agreeingto be curtailed a set number of hours each year. State regulatorsand utilities hope it will “to assure reliable and reasonablypriced electricity, especially in the summer of 2001,” said LorettaLynch, president of the California Public Utilities Commission(CPUC).
Schlumberger Oilfield Services has completed the first phase ofits largest 4C seismic survey ever as part of the 4Sight Program, ajoint venture with Seitel. Schlumberger delivered its finalpoststack P-wave migration, and the initial survey, conducted about120 miles southeast of Galveston, will cover nearly 45 blocks ofWest Cameron using ocean-bottom cable vessels. The converted wavedata is expected to be delivered in December, imaging beneathprevalent gas clouds with the converted waves. The new data havehigher vertical resolution with better reflection continuity andfault definition than 3-D surveys, and Schlumberger’s David Meehsaid the success so far with the equipment has created “a surge ofinterest in 4C technology.”
AGL Resources Inc. has closed on its $533 million acquisition ofVirginia Natural Gas, more than two months ahead of schedule andprior to the start of the winter heating season. Completion of thepurchase from Richmond, VA-based Dominion was accomplished afterthe Securities and Exchange Commission granted its final approval.Dominion was required to divest the Virginia company, which servescustomers in the Hampton Roads region of southeastern Virginia, asa condition of its acquisition earlier this year of ConsolidatedNatural Gas. “The acquisition of Virginia Natural Gas represents animportant milestone for AGL Resources to extend our capabilitiesinto a promising new market,” said AGL Resources CEO and President,Paula G. Rosput. “Our new customers in Virginia can expect acontinuation of excellent customer service under the new ownership.AGL Resources successfully bid for Virginia Natural Gas andannounced the acquisition on May 8. Henry P. (Hank) Linginfelter, a17-year veteran of Atlanta Gas Light Company, will be the newpresident of Virginia Natural Gas.
Canada’s fuel cell industry got a charge last week when theboard of directors of Fuel Cells Canada inaugurated a privatesector, not-for-profit organization designed to offer services andsupport to developers. FCC, to be headquartered in Vancouver, hasproposed a five-year budget of C$26 million, largely funded by theCanadian government, to complement an additional five-year, C$30million request by the National Research council. Most of thebudget will support demonstration projects. Vancouver-basedMethanex said the new organization would push fuel cell researchinto the forefront, and help companies develop alternative fuels.Methanex produces and markets methanol, a leading fuel candidatefor many fuel cell applications. “We have been a strong supporterof the formation of Fuel Cells Canada through our early involvementwith other companies, universities and governments,” said MethanexCEO Pierre Choquette. Many of the “key players” in the fuel cellindustry are in Canada, said Choquette, and the new organizationwill “bring all these players and government together to advancethe commercialization” of the technology.
Things are skating along for the Atlanta-based IntercontinentalExchange, “The ICE,” which said last week that it has expanded itstrading platform to now include global crude and refined oilproducts. Natural gas and power are expected to slide into playbefore the end of the year. Trading in those markets was to beginimmediately. The Internet-based electronic marketplace was launchedin March by some of the largest oil companies and investmentbankers in the world, and began trading precious metals in August.Initial investors were BP, Deutsche Bank AG, Goldman Sachs, MorganStanley Dean Witter, Royal Dutch/Shell Group, SG Investment Bankingand Totalfina Elf. Continental Power Exchange also joined at thetime to provide trading technology and the management team. InJuly, six more energy partners, which had formed the Energy TradingPlatform Holding Company earlier in the year, purchased an interestin The ICE. The six companies, American Electric Power, AquilaEnergy, Duke Energy, El Paso Energy, Reliant Energy and SouthernCompany Energy Marketing, accounted for trading nearly 1 billionMWh of electricity and 42 Bcf/d of natural gas in North America in1999. In its first week trading precious metals, The ICE did 1.4million troy ounces of gold with a notional value of $270 million,and 27 million troy ounces of silver weighing in at an estimatedvalue of more than $130 million. There were no additional figureson the level of current trading. To learn more about the platform,visit the Web site at www.intercontinentalexchange.com.
Louis Dreyfus Natural Gas said it expects record reserveadditions this year and a rapid in crease in drilling during thefourth quarter compared to the historical lull that occurs late inmost years. Just in the last 45 days the company has closed fiveacquisitions, investing $35 million to purchase 45 Bcf of provedreserves. “The combination of solid results from both drillingactivities and acquisitions is expected to result in a recordvolume of proved reserves added this year,” said CEO Mark Monroe.”The previous record was in 1997 when we added a total of 358 Bcfeof proved reserves. Typically, we plan for somewhat reduceddrilling activity in the fourth quarter. This year, we haveincreased our drilling budget by $10 million to $220 million inorder to maintain a high level of drilling operations through theend of the year.” During the three months ended Sept. 30, thecompany completed 169 of 176 wells drilled in its Gulf Coast,Permian and Midcontinent regions. For the first nine months of theyear, 371 wells have been drilled with a 95% success rate.
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