Non-affiliate marketers and producers are concerned that KochGateway Pipeline’s proposed new auction process for itsinterruptible storage service (ISS) and its parking and lendingservice (PAL) will discriminate in favor of the pipeline’smarketing affiliate.

The auction as proposed would “perpetuate” marketing affiliateKoch Energy Trading’s (KET) “dominance and position as thepreferred customer of Koch,” said Indicated Shippers, whichincluded Amoco Production, Amoco Energy Trading, BurlingtonResources Oil & Gas, Chevron U.S.A. Inc. and Marathon Oil[RP00-359].

The group asked FERC to prohibit KET from bidding for PALcapacity on the Koch pipeline, except to the extent that KETacquires the capacity in the secondary market. Such a ban isnecessary without “adequate safeguards” in place to protectnon-affiliate customers against the “undue preferences beingaccorded KET.”

If the Commission should decide against a “complete bar” onKET’s participation in the PAL auction, the marketers and producersrequested that Koch be required to modify its auction procedures toallow non-affiliate shippers to bid first on the PAL packages.

Also, “to ensure that the reserve or minimum price for bids isnot the result of non-arms’s-length negotiations between Koch andits affiliates, the minimum price should not exceed the lesser ofone cent/MMBtu or a percentage (say 30%) of an existing pricespread(stated in terms of a per MMBtu rate),” Indicated Shippersnoted.

Additionally, Indicated Shippers said they failed to understandwhy an auction for ISS capacity was necessary. “ISS isinterruptible and scheduled daily based on price. Thus, theauctioning of ISS appears meaningless unless Koch intends to changeits service priorities by granting a higher priority to ISS awardedpursuant to auction procedures.”

Remington to Sell S. Texas Properties for $17 M

Remington Oil and Gas Corp. will sell some of its non-operatedproducing properties in South Texas for $17 million. TheDallas-based independent said last week that the properties arelocated in Nueces, Starr and Victoria counties, and the sale isexpected to close in August.

“This sale allows us to aggressively pursue more operatedopportunities, strengthen our balance sheet and still deliver atargeted 18% to 20% increase in production volumes for the yearover 1999 levels,” said CEO James A. Watt. “Additionally, we willmaintain our inventory of other South Texas prospects, which weanticipate drilling later in 2000.”

The sale is expected to allow the company to redeploy itscapital to more operated projects in the Gulf of Mexico offshoreshelf, and in Mississippi. Increasing the number of operatedproperties was a major goal of the company, according to Watt.

So far this year, Remington has operated three successfuloffshore drilling projects, and expects to operate two additionaloffshore exploratory projects in the second half of the year. Italso plans to install two operated production platforms this year.

As a result of the central Gulf of Mexico lease sale held inMarch 1999, Remington acquired nine operated blocks, which itexpects to begin drilling next year. In Mississippi, the companycurrently is operating one exploratory well and expects to begin asecond operated exploratory well before the end of this month. Mostof its operations are located in the onshore and offshore regionsof the Gulf of Mexico.

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