Furie, Homer Electric Assn. agree to amended gas deal

  • Production problems at Furie Operating Alaska’s Julius R platform in Cook Inlet prevented the company from making contracted gas supplies available this past spring. Furie, which filed for Chapter 11 bankruptcy protection in August, has agreed to a deal with customer Homer Electric Association amending their current gas supply terms. (Photo/Courtesy/Furie Operating Alaska)

Homer Electric Association members could soon see the benefit from a renegotiated natural gas supply contract that will save the Kenai Peninsula power cooperative more than $2.1 million.

HEA filed an amendment on Aug. 28 with the Regulatory Commission of Alaska to the gas sales agreement it signed with Cook Inlet producer Furie Operating Alaska in 2015.

The two-year contract ended Dec. 31, 2018, but HEA exercised a one-year option to continue the contract through this year. An option for gas in 2020 was not picked up.

The amendment, which has an effective date of May 24, calls for HEA to receive credit totaling $1.7 million for gas purchases through May 2019. The utility would see another $462,000 in gas price reductions for the 2.2 billion cubic feet, or bcf, of gas it expects to purchase from Furie through the end of the year.

Furie has had a rough 2019.

In January the small Texas-based producer started having methane freeze-up problems in the pipelines on the new Julius R platform it operates in the Inlet, which prevented Furie from delivering gas to its customers, HEA and Enstar Natural Gas, for more than a month to each last winter. By late June Furie had resumed gas production, but not at volumes sufficient to meet its commitments.

HEA Manager of Fuel Supply and Renewable Energy Mikel Salzetti said the $2.1 million in savings does not correlate to the premium it had to pay to find interim gas when Furie’s supply failed. The additional cost for the short-term supply was less than and unrelated to the $2.1 million credit, Salzetti said.

Furie is HEA’s only firm supplier.

Furie officials did not respond to requests for comment.

HEA’s decision not to pick up the 2020 option on its contract with Furie was made in mid-2018, before the recent supply issues, according to the RCA filing.

Salzetti said the utility just put out an RFP to Cook Inlet producers and found enough other supply options to go back out to the market.

On Aug. 9 Furie filed for Chapter 11 bankruptcy in a Delaware federal bankruptcy court. The filings claim the company has about $450 million in debt and its assets are valued at between $10 million and $50 million.

The company also cited $105 million in tax credits it is still owed by the State of Alaska.

Elwood Brehmer can be reached at [email protected].

09/18/2019 - 9:31am