Northern Natural Gas Company et al.; Notice of Summary Settlement on Kansas Ad Valorem Tax Refund Matters on Northern Natural Gas Company's System

In the matter of: GP98-5-000, GP98-8-000, GP98-12-000, GP98-14-000, GP98-20-000, GP98-22-000, GP98-24-000, GP98-26-000, GP98-30-000, GP99-15-000, GP99-16-000, GP99-17-000, GP99-18-000, SA98-8-000, SA98-10-000, SA98-16-000, SA98-18-000, SA98-20-000, SA98-22-000, SA98-32-000, SA98-33-000, SA98-35-000, SA98-37-000, SA98-38-000, SA98-40-000, SA98-42-000, SA98-48-000, SA98-49-000, SA98-51-000, SA98-53-000, SA98-56-000, SA98-60-000, SA98-61-000, SA98-64-000, SA98-65-000, SA98-72-000, SA98-76-000, SA98-80-000, SA98-83-000, SA98-91-000, SA98-92-000, SA98-93-000, SA98-97-000, SA98-101-000, SA99-4-000, SA99-5-000, SA99-6-000, SA99-18-000, SA99-23-000, SA99-26-000; Mobil Oil Corporation, OXY USA Inc., Amoco Production Company, Anadarko Petroleum Corporation, Union Pacific Resources Company, Kansas Natural Gas Inc., Bill C. Romig, ONEOK Resources Company, Barbara J. Wilson et al., Burlington Resources Oil & Gas Co., Strohls, Strohls, Kansas Independent Oil & Gas Assn., Ensign Oil & Gas Inc., Helmerich & Payne, Inc., Midgard Energy Company, Riviera Drilling & Exploration Co., Dale Schwarzhoff, Sally L. Bone, Kaiser—Francis Oil Company, Pioneer Natural Resources USA, Inc., Lee Banks, d/b/a Banks Oil Company, Pickrell Drilling Co., Inc., John W. Lebosquest, Hummon Corporation, Leo B. Helzel, Graham-Miochaelis Drilling Company, Kansas Petroleum, Inc., Benson Mineral Group, Inc., First National Oil Company, Louis & Bruce F. Welner, R. J. Patrick Operating Company, Pickrell Drilling Company, Inc., John O. Farmer Inc., Edwin A. Cornell, Hummon Corporation, Trees Oil Company, Beren Corporation, Broadhurst Operating Limited, Partnership No. 2, Broadhurst Operating Limited Partnership No. 3, Ralph Howard, Inc., Eastman Dillon Oil & Gas Assoc., IMC Global, Inc., Continental Energy, Questa Energy Corp., Argent Energy, Inc., Harken Energy Corporation, Chevron U.S.A. Inc., Atlantic Richfield Company, Texaco Exploration and Production, Inc.

Published here is a summary of the settlement filed by Northern on November 20, 2000. The settlement addresses Kansas ad valorem tax refund matters on Northern's system.

Pursuant to Rule 602(c)(1)(ii) of the Rules of Practice and Procedure of the Federal Energy Regulatory Commission (Commission), 18 CFR Section 385.602, Northern Natural Gas Company (Northern) hereby submits an Explanatory Statement with respect to the Stipulation and Agreement of Settlement (hereinafter Settlement). This statement is a summary only. The terms of the Settlement are authoritative as to the intent and the agreement of the parties.

This Settlement is intended to facilitate and expedite the Commission's implementation of the decision of the United States Court of Appeals for the District of Columbia circuit in Public Service Company of Colorado v. FERC, involving the refund of Kansas ad valorem taxes on Northern's system. In Public Service, the court upheld the Commission's decision that producers must refund certain Kansas ad valorem tax reimbursements that were collected in excess of the maximum lawful prices (MLP) for first sales of natural gas under Title I of the Natural Gas Policy Act of 1978. On September 10, 1997, the Commission issued an order implementing Public Service. The September 10 order established procedures and timetables for producers to make refunds to the pipelines, and for the pipelines to flow the refunds through to their customers.

To comply with the September 10 Order, Northern sent Statements of Refunds Due to producers in November 1997. Subsequently, Northern received additional information affecting the refund liability of individual working interest owners. As a result, Northern has made various revisions to its original Statements of Refunds Due. many of the working interest owners have challenged Northern's Statements of Refunds Due in formal filings with the Commission, raising a number of issues, including headroom (i.e. whether the price paid by Northern and the tax reimbursement, taken together, exceeded the applicable MLP), the allocation of refund claims among working interest owners, the uncollectability of royalty related refunds, and other objections.

This Settlement is a reasonable means of helping resolve the difficult Kansas ad valorem tax refund matters currently before the Commission. This Settlement will eliminate the need for more lengthy proceedings, either formal or informal. Approval of this Settlement will provide relief to small producers, reduce the administrative burdens on the Commission, its Staff, Northern, first sellers and numerous interest owners and intervenors, of litigating countless proceedings before the Commission that involve many complex issues. All parties, as well as the public interest would benefit from the termination of numerous petitions for relief under Section 502(c) of the NGPA pending before the Commission.

Exhibit No. 1 contains the Deceased Estates and Bankruptcies. Exhibit Nos. 2 and 3 contain lists of large producers and small producers, respectively, who have a refund obligation pursuant to the settlement and have paid on or before December 1, 2000. Exhibit No. 4 contains a list of small producers with total refund claims of less than $50,000. No further action is required if a Small Producer under $50,000 accepts this settlement. Parties may access these exhibits through the Commissions's website at www.ferc.fed.us or contact the Secretary's Office at 202-208-0400.