Oregon Utility Commission Approves NW Natural and Encana Oil & Gas (USA) Inc.′s $250 Million Natural Gas Transaction
Northwest Natural Gas Company (NYSE:NWN), dba NW Natural, and
Encana Oil & Gas (USA) Inc., a subsidiary of Calgary-based Encana Corp. (NYSE,
TSE: ECA), today announced that the Public Utility Commission of
Oregon (OPUC) issued an order approving NW Natural′s investment in a
joint venture to develop gas reserves on behalf of its Oregon customers,
effective May 1, 2011.
Under terms of the joint venture agreement initially announced on Feb.
25, 2011, NW Natural and Encana will develop natural gas reserves in the
Jonah Field in Wyoming, located north of Rock Springs. NW Natural will
invest in the reserves on behalf of its customers, and the investment
will be placed in the company′s rate base.
Last week a settlement agreement between NW Natural, the staff of the
OPUC, the Citizens′ Utility Board of Oregon (CUB), and the Northwest
Industrial Gas Users (NWIGU) was filed with the OPUC. A workshop was
held on April 22nd in front of the OPUC commissioners to
present the settlement and the parties′ support of the transaction. The
commissioners adopted the settlement, finding that NW Natural′s decision
to enter the agreement is prudent.
'This agreement and the commission′s order represent a lot of hard work
by a lot of parties over a short period of time, and we are pleased the
commission approved the transaction,? said NW Natural President and
Chief Executive Officer Gregg Kantor. 'This is a terrific outcome for
both customers and shareholders.?
'This is a landmark agreement and regulatory step that we believe will
open the door for future upstream investment by utilities seeking price
stability for their customers ? transactions that are backed by utility
ratepayers and supported by regulators as prudent investments. As a
leading producer, Encana has heard end-users′ requests for structures
that provide long-term price security, and under this agreement, we are
able to achieve both our customer′s goal and efficiently advance the
development of a portion of the Jonah field,? said Renee Zemljak,
Encana′s Executive Vice-President, Midstream, Marketing & Fundamentals.
The gas reserves are expected to provide a portion of the company′s
long-term gas supplies for customers over a 30-year period. During the
first 10 years of the investment, the company expects to receive
approximately 58 billion cubic feet (Bcf) of natural gas, or 8-10
percent of its average annual requirements for utility operations.
Over the life of the investment, the company expects to receive
approximately 93 Bcf of gas at an average all-in cost of approximately
$5.15 per dekatherm. The anticipated net present value savings to
customers are expected to be more than $50 million over the life of the
investment.
Under terms of the agreement with Encana, NW Natural will pay
approximately $45-55 million a year, for a five-year period, for a total
investment of about $250 million, which will cover expected drilling
costs in exchange for working interests in certain sections of the Jonah
Field. The sections include both future and currently producing wells.
Under terms of the order, NW Natural will be allowed to recover expenses
related to the transaction through the company′s annual Purchased Gas
Adjustment mechanism (PGA) in Oregon, including the deferral mechanism
for gas costs. It will also file a general rate case in Oregon by Dec.
31, 2011.
As part of the settlement approved in the order, within-year variances
from annually forecasted production costs and volumes will be subject to
the PGA′s normal commodity cost sharing mechanism in Oregon, up to a
specified cap. Depending on the sharing percentage selected as part of
its annual PGA in Oregon, at the 80/20 customer/shareholder sharing
level, a maximum of $2 million per year (whether positive or negative)
of within-year variances will be passed through to shareholders on an
annual basis, and a maximum of $1 million per year at the 90/10 percent
level.
The order can be found on the OPUC web site at: http://apps.puc.state.or.us/edockets/orders.asp?ordernumber=11-140.
About NW Natural
NW Natural (NYSE:NWN) is headquartered in Portland, Ore., and provides
safe, reliable, cost-effective natural gas service to about 674,000
residential, commercial, and industrial customers through 15,000 miles
of mains and service lines in western Oregon and southwestern
Washington. It is the largest independent natural gas utility in the
Pacific Northwest. The company has approximately $2.6 billion in total
assets. The company operates and owns 16 Bcf of underground storage
capacity in Mist, Ore., and also operates the designed 20 Bcf Gill Ranch
underground storage facility in California, in which it owns a 75
percent undivided interest. Together, NW Natural and its subsidiaries
currently own and operate underground gas storage facilities with
designed storage capacity of approximately 31 Bcf in Oregon and
California. Additional information is available at www.nwnatural.com.
Forward-looking Statements
This report, and other presentations made by NW Natural from time to
time, may contain forward-looking statements within the meaning of the
U.S. Private Securities Litigation Reform Act of 1995. Forward-looking
statements can be identified by words such as 'anticipates,? 'intends,?
'plans,? 'seeks,? 'believes,? 'estimates,? 'expects? and similar
references to future periods. Examples of forward-looking statements
include, but are not limited to, statements regarding the following:
plans, objectives, goals, strategies, future events, investments,
estimated gas reserves, volumes and supplies, customer savings, rate
recovery, continued drilling, project costs, future benefits of the
project, commodity costs, financing, financial positions, performance,
regulatory actions or approvals, and other statements that are other
than statements of historical facts.
Forward-looking statements are based on our current expectations and
assumptions regarding our business, the economy and other future
conditions. Because forward-looking statements relate to the future,
they are subject to inherent uncertainties, risks and changes in
circumstances that are difficult to predict. Our actual results may
differ materially from those contemplated by the forward-looking
statements. We caution you therefore against relying on any of these
forward-looking statements. They are neither statements of historical
fact nor guarantees or assurances of future performance. Important
factors that could cause actual results to differ materially from those
in the forward-looking statements are discussed by reference to the
factors described in Part I, Item 1A 'Risk Factors,? and Part II, Item 7
and Item 7A 'Management′s Discussion and Analysis of Financial Condition
and Results of Operations? and 'Quantitative and Qualitative Disclosure
about Market Risk? in the company′s most recent Annual Report on Form
10-K and in Part I, Items 2 and 3 'Management′s Discussion and Analysis
of Financial Condition and Results of Operations? and 'Quantitative and
Qualitative Disclosures About Market Risk,? and Part II, Item 1A 'Risk
Factors,? in the company′s quarterly reports filed thereafter.
All forward-looking statements made in this report and all subsequent
forward-looking statements, whether written or oral and whether made by
or on behalf of the company, also are expressly qualified by these
cautionary statements. Any forward-looking statement speaks only as of
the date on which such statement is made, and the company undertakes no
obligation to update any forward-looking statement, whether as a result
of new information, future developments or otherwise, except as may be
required by law. New factors emerge from time to time and it is not
possible for the company to predict all such factors, nor can it assess
the impact of each such factor or the extent to which any factor, or
combination of factors, may cause results to differ materially from
those contained in any forward-looking statements.
Northwest Natural Gas Company
Investor Contact:
Bob Hess,
503-220-2388
bob.hess@nwnatural.com
or
Media
Contact:
Kim Heiting, 503-220-2366
kah@nwnatural.com
