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FERC last week upheld an administrative law judge’s partialinitial decision denying KN Interstate Gas’s (KNI) request to rollin the costs associated with the construction of its Pony ExpressLine and Kansas City Line.

Prices for the concluding weekend of February maintained thesoftening trend that had started earlier in the week, ranging fromflat to a little over a dime lower. And although swing gas tradedFriday for today’s flow only was flat at a few points, most sourcesagreed that the initial March aftermarket was trending downwardoverall from both bidweek indexes and weekend levels.

Industry merger and acquisition activity last week was a wholesale confirmation of two major trends: the convergence of gas and electricity operations, and consolidation. Two more of the nation’s largest diversified gas pipeline companies were snatched up by two major energy distributors. Sempra Energy (SRE) announced it is buying KN Energy (KNE) in a stock-and-cash transaction valued in the aggregate at $6 billion, a 24% premium to KNE’s recent stock price, and Dominion Resources said it is buying Consolidated Natural Gas Co. (CNG) for about $6.3 billion in stock, a 25% premium (see related story this issue).

For ninth time in the last 10 trading sessions, natural gasfutures were lower last Friday as sellers pressured theprompt-April contract to its life-of-contract low. No freshfundamental news was seen to lift the market, and as a result itfollowed the long-standing trend 3.1 cents lower to $1.628.

Fanning the flames of the convergence-consolidation bonfire,Dominion Resources (DRI) last week announced two plannedacquisitions that would add both wellheads and burner tips, not tomention assets in between.

Details were still somewhat sparse Saturday, but Northwest Pipeline was able to confirm that there had been a line failure on its pipeline near Stevenson, WA Friday night about 8:20 (PST). Personnel were immediately dispatched to the site to secure the area. As of press time Saturday, no injuries were reported and the cause of the incident was under investigation.

The Portland Natural Gas Transmission System (PNGTS) andTransQuebec &amp Maritimes Pipeline (TQM) held a ribbon-cuttingceremony last week at the U.S./Canada border to announce completionof the first high-capacity gas pipeline to serve northern NewEngland. Commercial operations, however, are not expected to beginuntil Saturday, March 6. And PNGTS probably will not betransporting its full certificated capacity of 178,000 MMBtu/duntil the end of the year, said spokesman John Flumerfelt, becauseseveral of the power plants and paper mills to be served by thepipeline are not complete.

Despite record earnings last year, Coastal Corp. CEO David A.Arledge admitted in January that 1999 would be a “challengingyear.” Coastal began to prepare for that challenge last week bystarting a corporate belt-tightening program that will include awork-force reduction.

It’s funny how an extra hundred million dollars will get your attention. That’s what the board of directors of Southwest Gas Corp. have to contend with in the form of an unsolicited proposal from Southern Union Co., after they already had signed off on an offer from ONEOK Inc.