Daily GPI

Its prior ruling basically putting the Kansas ad valorem taxcontroversy to rest was based on two incorrect factual assumptions,the U.S. Court of Appeals for the D.C. Circuit conceded last week.But despite the errors, the court said the thrust of its opinionremains the same — Kansas producers owe refunds to customers whopurchased gas in the early 1980s at prices that, because theyincluded the tax, were above the maximum legal limit.

Thanks to a new deal with CMS Energy’s Panhandle EasternPipeline Co., three FirstEnergy gas turbines in Defiance, OH, willenjoy a 15-year supply of gas. The agreement, announced yesterday,makes FirstEnergy Panhandle’s seventh power plant customer. Neitherthe volumes nor the financial terms of the transaction weredisclosed.

Bolstered by its completed merger with Sonat Inc., El PasoEnergy said yesterday that diluted earnings per share (EPS) rose20% to $1.80 last year, up from $1.50 in 1998. During the fourthquarter, when the Sonat deal was finalized, the company postedearnings of $295 million or 48 cents/share, versus $229 million, or33 cents, during the year-ago period.

The Southwest-Oneok merger may be cancelled, but spurned suitorSouthern Union is still proceeding with plans to sue Southwest andothers, the company said yesterday.

Pennaco Energy, the largest leaseholder and most active operatorin the Powder River Basin in Wyoming and southeastern Montana,reported that its gross gas production out of the basin has reached46.1 MMcf/d and is expected to increase rapidly now that newpipeline infrastructure is in place. This promising coal-bedmethane play, which took the national spotlight last year, isexpected to be one of the fastest growing areas in the RockyMountain region over the next decade.

LG&E Energy has reached a settlement with the Springfield,IL, City Water, Light, and Power Co. (CWLP) over a dispute stemmingfrom the city’s default on a 1998 electricity options contract. TheSpringfield City Council approved the $16.6 million settlementduring a special meeting Saturday following an agreement lastTuesday with representatives from Springfield, just days before thecase was scheduled to go to trial before U.S. District Judge JohnG. Heyburn in Louisville, KY. “We are pleased to settle this matterin a very favorable manner for our company. It clearly sends amessage that we will aggressively pursue parties who do not honortheir contractual obligations to us,” said Paul W. Thompson,LG&E Energy’s senior vice president of energy services. Pricesfor power spiked in the summer of 1998 as demand for powerincreased in the Midwest due to intense heat. CWLP did not honorits commitments with LG&E Energy Marketing (LEM) and laterattempted to argue that the contracts were void because the utilitydid not have the proper authority under Illinois law to enter intothem. Those defenses were argued before Judge Heyburn last Novemberand he ruled in LG&E Energy’s favor in certain summaryjudgement proceedings.

More favorable operating conditions allowed Texas Eastern to cancelMonday the OFO for its M-3 market zone that began a week earlier (seeDaily GPI, Jan. 19). All M-3 OperationalBalancing Agreements that were suspended are back in effect, Tetcosaid, and storage nominations may be restored to pre-OFOlevels. However, a restriction on IT gas sourced upstream of M-3 anddelivered there is still in effect. Due-shipper imbalance gas may betaken in all zones again, Tetco said, as long as it is scheduledproperly and taken evenly through the rest of January. Downstreamaffiliate Algonquin similarly canceled Monday the Critical SystemWarning it had posted Jan. 17 (see Daily GPI, Jan. 19), but left in place restrictions onmainline forward hauls for Authorized Overrun gas, interruptibleservices and due-shipper makeup gas.

The retreat of Northeast citygates from last week’s lofty levelswas still under way Monday, but the rate of decline was slowing.Otherwise, except for softening at Rockies and PacificNorthwest/western Canada points and moderate firmness at Midwestcitygates; flat to slightly lower pricing dominated the west of themarket.

After trading within a wide, 20-cent trading range Friday,natural gas futures were noticeably quiet yesterday as little inthe way of either fundamental or technical information was seen topropel prices in either direction.