CINGSA appeals decision on sales of gas discovery

KENAI — Cook Inlet Natural Gas Storage Alaska is contesting a revenue-sharing scheme that would allow it to sell 2 billion cubic feet of natural gas found in its underground storage facility if it gives 61.1 percent of the revenue to its client utilities.

CINGSA is appealing for the Alaska Superior Court to overturn a Dec. 4, 2015, decision by the Regulatory Commission of Alaska, the state entity that oversees public utilities.

The Regulatory Commission allowed CINGSA to sell 2 billion cubic feet of the 14.5 billion cubic feet of gas it had discovered while drilling a storage well in 2012 and keep 13 percent of the profits.

The rest would be divided among the four utilities that hold 20-year contracts to store gas in the CINGSA facility — Homer Electric Association, Anchorage’s Municipal Light and Power, Chugach Electric Association, and CINGSA’s sister company ENSTAR — according to the percentage of stored gas each owns.

CINGSA representatives had earlier argued before the Regulatory Commission that their company had sole property rights over the gas and could sell it as they wished, and later presented a scheme in which CINGSA split profits with its clients half and half.

The Regulatory Commission rejected both after hearing arguments from the client utilities that their investments in CINGSA storage contracts had made the facility — and the discovery — possible, and that the removal of the found gas would decrease well pressure required to extract stored gas, constituting a risk deserving a return in revenue from the gas sale.

CINGSA and ENSTAR spokesperson Lindsay Hobson said CINGSA would argue its original contention: that it has a right to all the revenue from the gas it found.

“We’re appealing on the basis of our litigation position, and our litigation position was 100 percent of the proceeds of CINGSA’s asset to remain with CINGSA as the property owner,” Hobson said.

CINGSA’s statement of points on appeal contends that in creating the revenue-sharing scheme it did, the Regulatory Commission “effectuated an unconstitutional taking without just compensation by ordering CINGSA to distribute to third parties proceeds of the sale of assets undisputedly owned by CINGSA” and that it did so “without reference to any law or legal principle.”

The appeal was filed Jan. 4 and initially assigned to Judge Catherine Easter, who was peremptorily disqualified after a motion by CINGSA attorney Matthew Findley. Alaska court rules allows a party to a lawsuit to disqualify a judge.

The case was then assigned to Judge Pamela Washington, who was similarly disqualified by a motion from ENSTAR attorney David Shoup. As of Jan. 26, the case is assigned to Judge Eric Aarseth.

Hobson said CINGSA had not estimated the value of the 2 billion feet of natural gas.

“Right now, with prices, it’s too speculative for us to say the value of something we can’t sell today,” Hobson said.

Reach Ben Boettger at [email protected].

Updated: 
01/27/2016 - 3:12pm

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