Western

Gulf Canada Resources said it closed on a 50-50 partnershipagreement with KeySpan Energy for the operation of its natural gasmidstream business in western Canada. Cash consideration paid byKeySpan was $290 million (US$189 million) to Gulf plus a $100million (US$65 million) loan to the partnership. The cash willoffset significant charges Gulf took during the third quarterprimarily related to crude oil asset write-downs.

Coastal Corp. subsidiary Coastal Oil &amp Gas bought oil and gasassets of Conoco in the Uintah Basin of northeastern Utah and thePiceance Basin of western Colorado. The properties are in two ofthe most prolific gas basins in the Rocky Mountains. Provedreserves are estimated at 500 Bcfe, about 95% gas.

Western Gas Resources said the coal bed methane legislationpassed last week by Congress and forwarded to the White House forsignature should put its drilling operation in the Powder RiverBasin back on track. The company, along with partner BarrettResources, planned a massive drilling program in the basin thisyear that included drilling 400 wells and 500 more next year, butan appellate court decision forced the companies to put their planson hold.

For the first time in several trading days, there was nodivergence between Eastern and Western market directions Wednesday.It was up, up and away all around as nearly all points registeredgains of around a dime or higher.

The Pacific Northwest, historically a great corridor forshipping western Canadian natural gas to California’s burgeoningmarkets, is getting increasing attention for expansion ordevelopment of natural gas storage to fuel its own growth, whichhas averaged 5% annually in the 1990s. The region’s only twounderground storage facilities are in the midst of expansions, andenergy players within and outside the region are searching for newstorage prospects-under-and above-ground.

Customer-owners of three Michigan power co-ops – Great LakesEnergy Cooperative, Top O’Michigan Electric Co., and WesternMichigan Electric Cooperative – have approved a three-way merger totake effect next Jan. 1, creating the third largest Michigan-basedutility and the eight largest customer-owned power company in thenation.

Geographic price tendencies shifted going into the weekend.Western markets, which had been resisting the week’s overallsoftness earlier due to heavy cooling load andsupply/transportation problems, were being routed Friday,particularly at the California border. Meanwhile Eastern pricesfell by a nickel or less in most cases, with Appalachian pipes andNortheast/Midwest citygates flat or close to it.

The three largest gas utilities in western Pennsylvania(Columbia Gas of Pennsylvania, Equitable Gas and Peoples Gas) urgedcustomers to press Congress to restore full funding to the LowIncome Home Energy Assistance Program (LIHEAP). The three gascompanies began a letter writing campaign on behalf of customers,consumer groups and social service agencies. Elimination of LIHEAPwould impact thousands of customers in Pennsylvania, the utilitiessaid. Nearly 350,000 Pennsylvania families benefit from theprogram. The LIHEAP grant is applied directly to heating bills.Eligibility is based on family income and the number of householdmembers. LIHEAP, a federally-funded program, has been around fortwo decades, but its future was thrown into doubt last month whenthe House Appropriations Committee voted to eliminate the programin fiscal 1999, saving $1.1 billion. President Clinton hadrequested $1.4 billion for LIHEAP in his 1999 budget. Members ofthe U.S. House of Representatives will have another opportunity toconsider LIHEAP funding later this month.

With the exception of Western and Rockies delivery points,natural gas prices began the new week flat or leaning downward acouple of cents. There was support resulting from supplyconstraints in the San Juan Basin and forecasts for above normaltemperatures in the Rockies. However, cash prices for the rest ofthe country appeared to be held back by a weakening Nymex futuresscreen and moderate temperatures in major northeastern markets,sources said.