The U.S. House in late July passed a bill that seeks to recover billions of dollars from producers that hold flawed deepwater oil and natural gas leases that were issued by the Interior Department in 1998 and 1999. The provision was inserted at the last minute in a farm bill, which the House approved by 231-191. It would force holders of the flawed 1998-1999 offshore leases to renegotiate their contracts with the Department of Interior or pay a “conservation of resources fee” in order to bid on future government leases. The fee mirrors one that the House passed during the first 100 hours of the Democratic agenda in January (see NGI, Jan. 22). But the fee was excluded from energy legislation the Senate passed last month. Senate Democrats, however, tried to impose an excise tax on oil and gas companies, which Republicans ultimately defeated (see NGI, June 25). The Senate is not expected to take up its version of the farm bill until after the August recess, but Republican opposition is already mounting to the fee insert. A farm bill “is not the right place to decide this issue,” said Sen. Pete Domenici of New Mexico.

Dallas-based EXCO Resources Inc., which moved to the public arena in February, is joining the move by other exploration and production (E&P) companies to form a master limited partnership (MLP). EXCO’s MLP would own a “substantial” portion of mature producing oil and natural gas properties in the Appalachian, East Texas, North Louisiana, Midcontinent and Permian Basin areas. Proceeds from the initial public offering (IPO) would be used to retire debt and provide working capital. The E&P, which had been privately held until February, now holds about 836,114 net acres in the United States. About 42% of its reserves are in the Appalachia area, with 25% in East Texas and North Louisiana, 16% in the Midcontinent, 9% in the Permian Basin and 7% in the Rocky Mountains.

Dominion has completed two separate sales of U.S. onshore natural gas and oil operations to a new subsidiary of Loews Corp. and to XTO Energy Corp. for a total of $6.5 billion. The two sales were announced in June (see NGI, June 11). HighMount Exploration & Production LLC, a newly formed subsidiary of Loews Corp., purchased Dominion’s operations in the Permian Basin, Michigan and Alabama for about $4 billion. Dominion in June agreed to sell the remaining 15% of its reserves, which total about 780 Bcfe, to Linn Energy LLC for $2.05 billion, which is expected to close in September (see NGI, July 9). Dominion is retaining its Appalachian assets, which include about 1 Tcfe of proved reserves.

NorthWestern Energy Corp. has filed with Montana state regulators to adjust utility delivery rates for electric transmission/distribution and natural gas storage, transmission and distribution, the company said last Tuesday. The utility seeks combined added revenues of $41.9 million.<> NorthWestern, whose sale to a Babcock & Brown Infrastructure Ltd. (BBI) unit was aborted late in July, is seeking increased rates to cover the cost of electricity and gas supply deliveries, along with a return on the utility plant and equipment throughout the state. Original book value of the utility infrastructure, with adjustments, is used to calculate what the rate coverage should be after deducting for depreciation and operating/maintenance expenses. Separately, the Sioux Falls, SD-based utility holding company had its current credit rating affirmed (BB+) and a “stable” outlook assigned from Standard & Poor’s Ratings Services (S&P). S&P said it based its assessment on NorthWestern’s debt totals ($730 million) last March 31. “The removal from [S&P’s] CreditWatch and rating affirmation reflect the termination by B&B Infrastructure Ltd. of its formerly pending $2.2 billion acquisition of NorthWestern,” said S&P analyst Gerrit Jepsen. This followed the rejection of the deal by the Montana Public Service Commission.

Aquila Inc. and Great Plains Energy Inc. last week filed required notifications for antitrust clearance for their proposed merger, saying the 30-day initial waiting period under the Hart-Scott-Rodino Act will expire on Aug. 27. In February it was announced that Great Plains would acquire Aquila in a stock and cash transaction valued at $1.7 billion plus $1 billion in Aquila debt. The deal was announced along with a proposed transaction by which Black Hills Corp. would acquire Kansas City, MO-based Aquila’s gas utilities in Nebraska, Colorado, Iowa and Kansas and its electric utility in southeastern Colorado for $940 million in cash and debt assumption (see NGI, Feb. 12). In April hedge fund Pirate Capital LLC sued to block Aquila’s deal with Great Plains, calling it a “sweetheart deal” (see NGI, April 23). That suit remains to be settled, but the hedge fund said in July in a Securities and Exchange Commission filing that it was in talks with Aquila. The merger partners also have filed their plans with state and federal regulators. <>The closing of the Great Plains acquisition is conditioned upon the sale to Black Hills. Aquila and Black Hills have filed the requisite state and FERC applications with respect to the proposed asset sale. Aquila and Black Hills also filed for antitrust clearance last week.

Avista Corp.’s outgoing CEO is resigned to the fact that 2007 will be a “repositioning” year for the company, which sold its money-losing energy marketing/trading unit and saw its utility operations hindered by a combination of adverse weather and regulatory lag impacts. Nevertheless, the Spokane, WA-based company reported profits for the second quarter of $14.2 million, or 26 cents/diluted share, compared with $13.5 million, or 27 cents/diluted share, for the same period last year. “This is a year of repositioning for our company, with a focus on the future of our utility operations,” said CEO Gary Ely, who previously announced that he will retire at the end of this year. Scott Morris, currently Avista’s COO, will become CEO on Jan. 1, 2008. In reporting decreased year-over-year six-month earnings results ($28.3 million, or 53 cents/diluted share, vs. $45 million, or 91 cents/diluted share, for the first half of 2006) and a decrease in the overall earnings estimate for this year, Avista’s CEO Ely said the most “significant event” so far this year is Avista’s sale of its energy trading/marketing business to Coral Energy Holding LP. “It lowers our corporate risk profile and should increase the stability of our earnings,” he said. <>While the third quarter is historically a loss-generating period for the company, Avista senior officials expect things to look up financially and operationally as additional hydroelectric power supplies to kick in for the fourth quarter.

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