APC and HEX Clash Over Discretionary Gas Volumes in Cook Inlet

Alaska Pipeline Co., which supplies natural gas to Enstar Natural Gas Co., is in dispute with HEX, a Cook Inlet gas producer. The disagreement centers around discretionary gas volumes that APC says it needs for storage ahead of winter season. The issue arises from the interpretation of the 2016 Gas Sales Agreement (GSA), as amended.

According to Inna Johansen, APC's Vice President of Regulatory and Gas Supply, HEX has been selling gas within APC's right of first refusal threshold to a third party without offering it to APC first. This, she claims, is a violation of the GSA. Johansen demands that HEX reinstate daily deliveries of all available gas up to 15,000 mcf per day in excess of firm gas and provide a written accounting of undelivered O-ROFR gas.

HEX's chief commercial officer, Mark Slaughter, disputes APC's claims, stating that the company is misstating terms of the GSA. He argues that discretionary gas and O-ROFR gas are legally distinct and different under the agreement. Discretionary gas is purchased and sold at the sole discretion of both buyer and seller, while O-ROFR gas requires a formal notice by February 1 each contract year.

The dispute highlights the complexities of natural gas supply agreements in Cook Inlet, where multiple players are involved in the production and distribution of gas. The GSA, as amended, outlines specific provisions for firm and discretionary gas, as well as O-ROFR gas. The disagreement between APC and HEX may have implications for other companies involved in the region's gas supply chain.