COLUMBIA SEEKS TO HALT MORE GAS PURCHASES

Columbia Gas Transmission Corp. has asked permission of the federal bankruptcy court in Delaware to reject an additional 532 natural gas purchase contracts it deems noncompetitive. Columbia Transmission Vice Pres. Leslie Strand said the contracts involved were not included in the 4,141 above market price contracts the bankruptcy court allowed his company to reject last August (OGJ, Sept. 2, p. 40). They were not included because they did not require gas purchases during summer months.

Nov. 11, 1991

3 min read

Columbia Gas Transmission Corp. has asked permission of the federal bankruptcy court in Delaware to reject an additional 532 natural gas purchase contracts it deems noncompetitive.

Columbia Transmission Vice Pres. Leslie Strand said the contracts involved were not included in the 4,141 above market price contracts the bankruptcy court allowed his company to reject last August (OGJ, Sept. 2, p. 40). They were not included because they did not require gas purchases during summer months.

"Beginning in November, however, these contracts will require gas to be purchased at above current market prices," Strand said.

In addition, Columbia Transmission and parent Columbia Gas System Inc. last week filed a joint application with the court to extend to March 28, 1992, from Nov. 28, 1991, the initial deadline for filing plans of reorganization on an exclusive basis.

The companies cited the size and complexity of the proceedings as the main reasons for the extension.

They said the cases are further complicated because they involve the reorganization of a regulated public utility holding company, and that presents "an extensive and perplexing array of questions" of fact and law not normally found in Chapter 11 bankruptcy cases.

CONTRACT REJECTIONS

All of the contracts being rejected are related to a negotiated settlement reached earlier this year resolving a class action suit a group of producers, led by Enterprise Energy Corp., filed against Columbia in 1985. Under terms of the settlement, Columbia Transmission agreed to pay $30 million to resolve pre-January 1991 claims by producers that they were underpaid $118 million for their gas.

Half of this payment went into an escrow account prior to Columbia Transmission's filing last July 31 seeking protection under Chapter 11 of the bankruptcy code. The remaining $15 million is due next March.

Columbia Transmission is asking the bankruptcy court for authorization to comply with the settlement's terms.

The filing points out that the settlement payment represents a percentage of the claims that is substantially less than what other unsecured creditors can expect to receive under any future plan of organization.

The company said it was rejecting the contracts because it has determined that, based on current market conditions, the gas is higher-priced than gas available from other sources.

Strand said that as a result of its previous rejection of above market price contracts, Columbia has filed with the Federal Energy Regulatory Commission to reduce its commodity sales rate to $2.85/MMBTU from $3.70/MMBTU.

He said that the company will continue to review other contracts for possible rejection.