COLUMBIA SEEKS TO HALT HIGH COST GAS BUYS

Columbia Gas Transmission Corp. has identified for a U.S. bankruptcy court more than 4,1 00 wellhead gas purchase contracts it seeks to cancel. The subsidiary of Columbia Gas System Inc. said the contracts collectively make its gas sale prices noncompetitive. And it later may propose more contracts for rejection. Columbia Transmission has more than 5,000 gas purchase contracts.

Aug. 19, 1991

2 min read

Columbia Gas Transmission Corp. has identified for a U.S. bankruptcy court more than 4,1 00 wellhead gas purchase contracts it seeks to cancel.

The subsidiary of Columbia Gas System Inc. said the contracts collectively make its gas sale prices noncompetitive. And it later may propose more contracts for rejection.

Columbia Transmission has more than 5,000 gas purchase contracts.

It said contracts identified for the court in Delaware require the company to pay above market prices and take too much gas or are otherwise uneconomic. They were signed during periods of short gas supply under "vastly different regulatory conditions."

About 3,750 of the contracts earmarked for rejection are for production in the Appalachian basin, and nearly 400 contracts will allow the company to purchase gas at market responsive prices.

James P. Holland, chairman and chief executive officer of Columbia Transmission, said rejection of the contracts, which involve about 800 MMcfd of deliverability, will not impair the company's ability to meet its sales obligations.

It plans to meet customers' demands with gas purchased under remaining contracts, as well as from additional winter-only contracts to be signed this fall, underground storage, and the spot market.

Producers are being notified of an Aug.22 bankruptcy hearing at which the judge will consider whether the contracts should be canceled.

The court previously authorized Columbia Transmission to take only minimum volumes of gas under the contracts during August and to pay market prices for the volumes taken.

Columbia Transmission and its parent company filed July 31 for protection under Chapter 11 of federal bankruptcy laws (OGJ, Aug. 12, p. 41). They blamed the pipeline subsidiary's above market price gas purchase contracts for their financial hard times.