press release

Unocal Alaska, Enstar and HEA sign MOU for natural gas transmission pipeline feasibility study

The following news release was issued by the Homer Electric Association.

Homer, Alaska/Homer Electric Association (HEA) today announced a significant advance in the effort to bring natural gas service to the southern portions of the Kenai Peninsula.

Norm Story, General Manager, said Alaska Electric Generation and Transmission, Incorporated (AEG&T), of which Homer Electric is the primary owner, has entered into a Memorandum of Understanding (MOU) with Unocal Alaska (Unocal) and Alaska Pipeline Company, a subsidiary of ENSTAR Natural Gas Company (ENSTAR), to conduct a feasibility study to evaluate a natural gas transmission pipeline. The study will include analysis of gas supply and demand, natural gas market requirements, technical and engineering constraints, regulatory and financing issues.

The pipeline, as planned, would run south from the Kenai gas fields to the town of Ninilchik, then further south to Anchor Point, and ultimately to Homer. In the future this pipeline could transport and deliver natural gas from the southern peninsula to the existing industrial and residential customers on the Kenai Peninsula and the Railbelt. Spur lines would be constructed to serve individual customers and to pick up gas from other producing gas fields along the proposed route. The entire pipeline from Kenai to Homer would be about 75 miles long. The final project plan, scope and construction phases will be determined as part of the study. Capital cost for the entire system is estimated at $45 million dollars. Construction on portions of the project could begin as early as 2002.

The parties plan several public meetings to further inform the community about the project and gather feedback from members of the community.

HEA's Norm Story said, "This Memorandum is a way of formalizing our desire to work together and provides a framework for the project. We believe that by working together we have a far better chance of accomplishing the task than if one company works alone. The initial concept is for AEG&T to own the natural gas transmission line. ENSTAR would own and operate retail distribution spurs from the gas transmission line, and Unocal would be a shipper of gas on the system."

"These three companies have different areas of expertise. Unocal is skilled at finding and producing natural gas, ENSTAR at gas transmission and retail distribution, and AEG&T at utilizing natural gas for power generation on the Kenai Peninsula. Backed by Homer Electric's strong commitment to bring natural gas service to the Homer area, it becomes a winning proposal. We are pleased to be working on this project with Unocal and ENSTAR for the citizens of South-central Alaska. Although tremendous challenges are ahead, we will work hard to overcome those challenges."

"This pipeline would provide the Kenai Peninsula and greater Anchorage market with the lowest cost alternative for supplying clean burning, environmentally friendly natural gas for many years, and that's something for which we can all be proud."

Homer Electric Association is a member-owned electric cooperative that distributes electricity to about 26,000 customers on the Kenai Peninsula including the communities of Homer, Seldovia, Port Graham, Nanwalek, Sterling, Kasilof, Soldotna, Ninilchik, Anchor Point and Kenai, Alaska.

Unocal is one of the world's leading independent natural gas and crude oil exploration and production companies. At year-end 1999, Unocal had worldwide natural gas reserves of 6.6 trillion cubic feet, representing two-thirds of the company's overall hydrocarbon reserves. Unocal's net worldwide natural gas production currently averages 2 billion cubic feet per day. This includes about 1 billion cubic feet per day in North America, where Unocal is one of the largest independent natural gas producers.

ENSTAR Natural Gas Company distributes natural gas to about 105,000 customers in South-central Alaska, including a portion of the Kenai Peninsula. It is a division of SEMCO ENERGY, Inc. (NYSE: SEN), a diversified energy and infrastructure company that distributes natural gas to more than 350,000 customers combined in Michigan and Alaska. SEMCO ENERGY owns and operates businesses involved in gas engineering and quality assurance services, pipeline construction services, propane distribution, intrastate pipelines and natural gas storage in various regions of the United States. In addition, it provides information technology and outsourcing services, specializing in the mid-range computer market.

Contacts for further information: Sandra Ghormley, HEA (907) 283-583; Roxanne Sinz, Unocal Alaska, (907) 263-7623; Curtis Thayer, ENSTAR Natural Gas Company, (907) 264-3657.

Updated: December 2000