The U.S. Department of Energy, four pipelines, and a synthetic gas producer have resolved a dispute over the lines' obligations to buy gas from the Great Plains coal gasification plant.
DOE supported construction and initial operation of the commercial scale demonstration plant near Beulah, N.D., with a $1.5 billion loan guarantee and assumed operation when the plant owner defaulted in 1985 after gas prices dropped.
DOE sold the plant to Dakota Gasification Co. (DGC) in 1988 for $85 million plus a share of future revenues. A $75 million reserve trust also was established.
DGC, a subsidiary of Basin Electric Power Cooperative, Bismarck, N.D., supplies wholesale power to member systems in eight states.
ANR Pipeline Co., Natural Gas Pipeline Co. of America, Tennessee Gas Pipeline Co., and Transcontinental Gas Pipe Line Corp. had agreed to buy gas from the plant at a price substantially above the market.
WHO PAYS WHAT
Under the settlement, the four pipelines are to pay market price for the gas and during 7 years make fixed demand payments to DGC that have a current value of about $360 million. The lines also are to reimburse DGC $37 million for past underpayments of gas and transportation charges.
After the 7 year period, DGC will receive the market price for its gas through the rest of the gas purchase agreements, which expire July 31, 2009. If the plant closes before 7 years, the lines will stop their demand payments.
DGC will pay DOE $25 million during 7 years in compensation for litigation and revenue sharing claims. DOE will recover the $75 million in the trust if the Federal Energy Regulatory Commission approves the settlement.
And, for 10 years starting Jan. 1, DOE will receive all gas sales revenues above a contractually specified cost of production. After 10 years, revenues above that figure will be split 50-50 between DGC and DOE, The settlement lowered the contract production cost value.
The three way deal resolves a 1990 lawsuit, due to go to trial in October, that DOE and DGC filed against the pipelines.
Copyright 1994 Oil & Gas Journal. All Rights Reserved.
