NGI The Weekly Gas Market Report

A federal appeals court in Washington D.C. has dismissedchallenges by California regulators and other petitioners to FERC’sapproval of the the controversial contract arrangement that awardedDynegy Marketing and Trade more than 1 Bcf of turned-back capacityon El Paso Natural Gas.

Referring to herself as both a “conservationist and aconservative,” Interior Secretary nominee Gale Norton walked atightrope last week in an effort to persuade her Senate Republicanand Democratic inquisitors that, despite the heated controversysurrounding her nomination, she is the best choice for the job.

Power generators Duke Energy Corp. and Southern Co., which bothprovide electricity to some markets in California, reported highfourth quarter profits and continued growth through the year lastweek. And, despite concern that the generators won’t be paid forenergy they supplied to nearly bankrupt California utilities, bothsaid they would pursue payments from their customers if they haveto.

Florida may be at the center of another controversy between the two Bush brothers, but this time it won’t involve a recount, but rather states’ rights versus federal authority – federal authority that through the Clinton administration had favored and supported states’ rights to ban offshore drilling. This time, the brothers could be on opposite sides.

In what has to be a wilder ride than anything available atDisneyland’s soon-to-open new “California Experience,” theelectricity high jinx caromed all over the nation’s most populousstate last week. It included: rolling blackouts through northernCalifornia; enactment of crisis legislation, the most immediate ofwhich provides $400 million to the state water resources agency soit can buy bulk power for California; a last minute temporaryrestraining order by the California Public Utilities Commissionrequiring Pacific Gas & Electric and Southern California Edisonto continue supplying power to all their customers; variousfinancial downgradings and defaults; and suggestions for compromiseactions by outgoing FERC Chairman James Hoecker.

Building on the success it has enjoyed so far in its Bossiernatural gas play in East Texas, Anadarko Petroleum Corp. plans tospend nearly a third more in the region this year, almost $535million total, to expand its development program and increase itsexploration prospects.

Kinder Morgan, Inc. reported “a spectacular 2000,” with a 75%increase over 1999 and a 65% increase in fourth quarter earnings.In the fourth quarter KMI beat the consensus estimate of 41 cents ashare, coming in with earnings of 43 cents.

AEC Oil & Gas Inc. picked up its second group of Rocky Mountain assets last week, announcing its acquisition of the privately held Piceance Basin properties of Billings, MT-based Ballard Petroleum LLC. Ballard’s Mamm Creek field in northwest Colorado is estimated to be worth C$340 million (US$225 million), with 175,000 net undeveloped acres worth about C$35 million and a gas pipeline system worth C$31 million.

The 20% boost to exploration and production budgets this yearshould result in record results for offshore drilling, especiallythe Gulf of Mexico, according to drilling contractor Global MarineInc.’s annual Summary of Current Offshore Rig Economics — SCORE.In November and December 2000, GOM drilling increased 3.5%, andsoared 58.2% from a year ago. Worldwide, drilling was up 49.7% from1999.