press release

Unocal, Marathon form new company to lead development of South Kenai gas pipeline

Anchorage, Dec. 11, 2001 - Unocal Alaska and Marathon Oil Company today said they have formed the Kenai Kachemak Pipeline LLC, which will be the primary developer of a new natural gas pipeline system on the southern Kenai Peninsula. The newly formed company intends to provide natural gas supplies to industrial customers and to utilities for distribution to residential and commercial users throughout south central Alaska.

The announcement follows a year-long conceptual study that also involved ENSTAR and the Homer Electric Association (HEA). The objective is to have the first phase of the pipeline between the Ninilchik and Kenai gas fields operational by the beginning of 2004.

"Our study shows that a pipeline system in the region is feasible; therefore Unocal and Marathon will move forward with detailed engineering and permitting," said Charles Pierce, vice president for Unocal Alaska.

"Marathon is pleased with the progress made by the study group. We look forward to working with Unocal to prove up the necessary natural gas reserves in our respective prospects and bring that gas to market as soon as possible," said John Barnes, manager of Marathon's Alaska business unit. "A significant portion of Marathon's capital spending next year in Alaska will be directed toward increasing natural gas resources that can be produced through the new pipeline." The ultimate capacity and route of the pipeline system is dependent on future results of gas exploration drilling on the Kenai Peninsula.

The current plan calls for the pipeline to be installed in phases between existing pipelines in the Kenai gas field and the Anchor Point area. A possible pipeline segment between Anchor Point and Homer has been proposed as a distribution line to be constructed and owned by ENSTAR. The route will essentially follow the Alaska Department of Transportation right-of-way easements along the Sterling Highway. Initial pipeline surveying of the route has already begun.

ENSTAR will provide support for the engineering, design and construction of the pipeline system and will likely play a role in the system's operation. ENSTAR is also expected to provide local gas distribution services in the service area.

"ENSTAR is a strong supporter of this critical project. It will provide additional gas supplies for our customers throughout south central Alaska," said Tony Izzo, president of ENSTAR. "The new pipeline system will also encourage gas exploration and development, as well as bring the benefits of clean and efficient natural gas to homeowners and businesses in the area."

Unocal noted that the Homer Electric Association and especially its general manager, Norm Story, plays an important role in developing the project. "HEA has been a strong proponent of the pipeline," said Unocal's Pierce. "Homer Electric will continue to work closely with Unocal and Marathon to help ensure that the project reaches a successful completion."

Story added, "Homer Electric remains excited about helping to move the project forward because it is very important to our members and the Southern Kenai community as a whole."

A public meeting to provide additional information and to solicit public feedback on the proposed route will be held at the Anchor Inn in Anchor Point on Dec. 13 from 5-7 p.m.

Updated: December 2001