Demonstrating the growing relationship between marketers andmunicipal gas companies, USX Corp. subsidiary Marathon Oil Co.(Marathon) announced a $52.8 million agreement last week to supplyover 31 Bcf of firm natural gas to the Public Energy Authority ofKentucky (PEAK) for 10 years. Effective Nov. 1, Marathon willprovide gas for PEAK through the Texas Gas Transmission pipelinesystem.

This represents the second time in two weeks that PEAK hasannounced a long term agreement. It signed a 10-year, $120 milliondeal with Unocal for 72 Bcf of gas in late October. Peak ChairmanGerald Ballinger cited protection from volatility in the market andreliable supplies as reasons for signing for so many years.

Bill Ryder, a Marathon Oil spokesman, indicated that the companyis looking for more long-term agreements like this one. “This isour first long term arrangement with a public entity. We’re notlooking for a specific region, just where the business is.”

Established in July 1998, PEAK is a joint action agency staffedby representatives of Carrollton and Henderson, KY. It was createdto provide an economical and reliable supply of gas tomunicipalities that own and operate their own natural gasdistribution systems.

Kentucky is not the only area where long-term contracts withmunicipals are occurring. Earlier this month Aquila Energycontinued its involvement with public entities, signing with theAmerican Public Energy Agency (APEA) to provide municipal membersof the Nebraska Public Gas Agency (NGPA) with 91 Bcf over 12 yearsfor $162 million, paid in advance. (See NGI, Nov. 9, 1998) It isbecoming a popular practice for municipal organizations to issuebonds and buy long-term gas, since both bond interest rates and gasprices are attractive right now. Aquila signed its first deal lastDecember, when, for $117 million, it agreed to provide theMunicipal Gas Authority of Georgia with 20 MMcf/d of gas for 10years.

John Norris

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