Message-ID: <18079280.1075852904565.JavaMail.evans@thyme> Date: Mon, 13 Aug 2001 19:52:23 -0700 (PDT) From: david.roensch@enron.com To: kimberly.watson@enron.com Subject: Southern Trails/Regent Power Plant Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit X-From: Roensch, David X-To: Watson, Kimberly X-cc: X-bcc: X-Folder: \KWATSON (Non-Privileged)\Watson, Kimberly\Inbox X-Origin: Watson-K X-FileName: KWATSON (Non-Privileged).pst Per our phone conversation this morning..... I know you are well aware of these happenings (Southern Trails disappointing CPUC decision and the KMI Sonoran pipeline to California) but I thought these two articles were timely. Since it sounds like the Southern Trails gas is getting stranded wouldn't it be great if we could give KMI some competion for the new Power Plant being proposed in the four corners area. Southern Trails might be willing to offload some of the system cheap following the outcome of the CPUC decision. You may or may not be aware, but TW was working with D. Hawkins at providing operating services of this Souther Trails system for Questar so we have pretty good info. on the Questar system (or Don does I would guess). Anyhow, I know the Southern Trails system has to be in close proximity to this proposed power plant. (If I am driving you nuts with this junk mail Kim, please let me know.) Southern Trails Disappointed by CPUC Decision; Decision Discourages Development of New Natural Gas Pipeline Capacity SALT LAKE CITY, Aug. 8 /PRNewswire/ -- Officials from Questar Southern Trails Pipeline Co. today expressed disappointment with the California Public Utility Commission's (CPUC) Aug. 2, 2001, ruling on Southern California Gas Company's (SoCal Gas) Residual Load Service (RLS) tariff. "The CPUC's proposed new peaking rate, while an improvement over SoCal's current RLS tariff, still does not level the playing field," said D.N. Rose, Southern Trails president and CEO. "It punishes customers who want to take partial service from a SoCal competitor, and it will discourage the development of new pipelines inside California." Under the CPUC's proposed new peaking rate, new gas-fired power plants wanting natural gas service from both SoCal Gas and a new competing pipeline will pay a higher rate for SoCal's service than captive customers taking service entirely from SoCal. In addition, new power plants would be subject to more restrictive balancing services than captive customers and would pay even more for interruptible service than California power plants in other parts of the state. Rose noted the previous RLS tariff was so punitive that not a single customer has taken service from a competing pipeline since the RLS was enacted in 1995. The new SoCal peaking rate, while not as onerous as the RLS tariff, will likely preserve SoCal's monopoly in Southern California. "The CPUC's peaking rate is anti-competitive," Rose said. "Neither PG&E (Pacific Gas & Electric) nor any interstate pipeline enjoys such protection from competition." Questar is seeking entry into the California market with its Southern Trails Pipeline project, which could deliver 120 million cubic feet of natural gas daily to Southern California. Questar purchased the former crude-oil pipeline in November 1998. The existing 16-inch-diameter pipeline runs about 700 miles from New Mexico, through Arizona, and into California, traveling through San Bernardino, Riverside, Orange, and Los Angeles counties to Long Beach. The project received both federal and state certification last year and has completed extensive environmental reviews. The eastern zone of the Southern Trails Pipeline, which extends from the Four Corners area to the California state line, is fully contracted. Questar expects to have it in service by mid-2002. Rose indicated that the future of the California section of Southern Trails is uncertain. While not abandoning efforts to put the pipeline into natural gas service, the company will be forced by the unfavorable CPUC decision to consider alternative uses for the California portion, including possible conversion to transport crude oil or other liquid petroleum products. Questar Southern Trails is a subsidiary of Questar Corp. (NYSE: STR), a $2.5 billion diversified natural gas company headquartered in Salt Lake City. Through subsidiaries, Questar transports natural gas through a 2,000-mile system in Utah, Colorado, New Mexico and Wyoming. The company also serves as the primary natural gas distributor in Utah, offering services similar to those offered by SoCal Gas and PG&E in California. Regent Energy Corporation and Millennium Energy Ventures Sign Power Generation Accord for 500 MW Plant Estimated at $250 Million Capital Cost HOUSTON, Aug. 9 /PRNewswire/ -- Regent Energy Corporation (OTC Bulletin Board: RGEY) ("Regent") today executed a contract with Millennium Energy Ventures ("MEVCO"), a private Houston-based venture capital and project development company (www.mevco.com ), to develop an electric plant with 500 MW generating capacity (estimated cost $250 million) on Regent's Horseshoe Gallup lease in San Juan County, New Mexico. Ownership of the project is 75% Regent and 25% MEVCO. Under the agreement, MEVCO will manage the permitting estimated at 6 to 9 months, and construction process, arranging the equity as needed for same. Regent will be prepared to give up 50% (total) of its 75% net for the financing, netting a 25% interest following the equity/debt financing. Further terms of the agreement provide that MEVCO will assist Regent in the acquisition of several gas fields in the Four Corners area, San Juan and Rio Ariba Counties of New Mexico, totaling an estimated 90+ Bcf and 20 MMcfpd current production. This production will be sufficient to power 100 MW of the power plant, with the remaining supply to be aggregated from other San Juan producers. Phillip Gennarelli, Managing Director of MEVCO said, "We are pleased to be involved in this project with Regent. The addition of more producing properties in the area that we bring Regent, coupled with Regent's Horseshoe Gallup holdings, which are in direct proximity with the existing Four Corners Power Plant and the route of the recently announced Sonoran Pipeline venture of Calpine and Kinder Morgan, will provide an unequaled opportunity for both companies." John Ehrman, President of Regent commented, "The additional production from producing properties which MEVCO is assisting Regent in purchasing, currently producing some $1.5 million per month in net operating income, coupled with the additional income through power generation helps Regent to maximize the location of our holdings in relation to the proximity of the existing power plant and transmission lines to key electricity markets in Los Angeles and other western markets. It is a good use of our surface lease, not related to the current proved mineral reserves of the lease." The producing oil and properties which MEVCO is assisting Regent in purchasing are in Regent's core area of the Four Corners region near Farmington, New Mexico. Regent will be required to finance the acquisition of the oil and gas proven producing properties under consideration. Recently, Regent announced that it was in the process of purchasing the interests of all remaining working interest owners in the field, a transaction expected to be consummated by the end of the third quarter 2001, giving Regent 100% ownership of the current minerals on the lease. For more information call Phillip Gennarelli at (713) 409-6888 or Cheryl Katzenstein at (281) 931-3800.