Support

Friday was a day of tests at the New York Mercantile Exchange.The market pushed lower on the open to test support at $1.81 onlyto rebound in the hopes of knocking out resistance at $1.875.However, both attempts failed and the September contract was leftto close at $1.833, almost unchanged for the day.

Despite a stinging second quarter net income loss of $17.3million, or $0.07 per share, compared to last year’s second quarternet income of $74 million, or $0.30 per share, Union PacificResources noted the addition of Norcen Energy assets helped pushdiscretionary cash flow up 20% ($56 million) to $332 million ($1.34per share). Producing property volumes increased to nearly 2.8Bcf/d, a 72% increase over the same period last year. The drop innet income was a result of lower commodity prices, higherexploration expenses and interest expense from the Norcenacquisition, UPR said. Included in the company’s second quarterresults were a pre-tax gain of $26 million on the sale of DJ Basinproperties, a settlement of gas supply agreements which addedpre-tax income of $30 million and an $11 million pre- tax gain on aforeign currency exchange.

New York State Electric & Gas Corp. (NYSEG) voiced itssupport for legislation to give states authority to modifynon-utility generator contracts. Congressmen Gerald Solomon, AmoryHoughton (R-NY) and Edolphus Towns (D-NY) introduced HR 4183, whichwould clarify the Public Utility Regulatory Policies Act of 1978.Changes proposed are said to ensure just and reasonable costs forNUG power sold to utilities. State regulators would be permitted tomodify prices utilities are currently required to pay non-utilitygenerators so they do not exceed the market price of electricity atthe time of delivery. The legislation also would establish programsto monitor non-utility generators to ensure they continue to meetFederal Energy Regulatory Commission requirements.

A continuation of intense heat in the Eastern U.S. lentfundamental support to gas markets in the region Friday, keepingcash prices flat to slightly higher or lower for the weekend.Again, though, it was a case of “not so” in the San Juan Basin,Rockies and California. Although east-of-California markets sawhigh temperatures approaching or surpassing 100 degrees, a dearthof demand from the Golden State and the unrealized threat of an OFOon El Paso caused gas to back up into the San Juan-Blanco pool,resulting in a steep dive of nearly 30 cents. One source, whopicked up an early Blanco package at $1.78, about a dime down fromThursday, paid only $1.59 near the end of trading.

The Natural Gas Supply Association (NGSA) voiced its support forfuel- and generation-neutral nitrogen oxide requirements proposedby the Environmental Protection Agency (EPA).

Interstate pipelines said they support FERC’s proposedrulemaking calling for them to post the identities of theirmarketing affiliates and any name change information on theInternet as part of the Commission’s effort to better monitortransactions between the parties. But they took issue with theproposed requirement that they update the information within threebusiness days of any change.

Monday’s cash trading found support from record hightemperatures in the South and El Paso’s Blanco compressor stationoutage but were kept in check by softening futures prices. Mostspot market points managed modest gains of about 3-5 cents.Southwestern and Rockies points, however, logged gains of nearly adime.

Viking Gas Transmission, a partner in the Viking Voyageurpipeline expansion project, formally confirmed it has been unableto secure sufficient shipper support for the proposed expansion andis “reviewing its alternatives” on the project with its partners,TransCanada PipeLines and Nicor.

The gas industry might very well see another trading point inthe Garden City discharge facility of the Nautilus Pipeline. “We’vegot just about everybody connected that we initially planned to.We’re in negotiations with Columbia, and we’re finishing upnegotiations with Koch and ANR,” Nautilus President Bill Hastingstold NGI. Connections with Koch and ANR are expected this summer.Columbia also should be on line this summer, he said. A total ofseven pipeline interconnects are completed or planned right now.Currently, Louisiana Intrastate Gas, Acadian, Texas Gas, andCypress are connected. Trunkline has expressed interest, andTennessee also is in the vicinity of Garden City. “Sonat is alsovery interested, but the distance is prohibitive at the moment, andwe’re trying to work with that,” Hastings said. Ultimately, theNautilus terminus could see as many as 10 interconnects. Hastingswould not disclose Nautilus’ current throughput. “We havecommitments in the deep-water. We expect to be very close to fullin 2001. He alluded to gas processing capabilities but would notdiscuss plans.