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IID loses out on bid for natural gas field

May 02, 2001|By KELLY GRANT, Staff Writer

The Imperial Irrigation District's bid to purchase interest in a natural gas well field near Durango, Colo., was rejected, IID officials announced Tuesday.

IID's $175 million bid was one of the low offers, board President Andy Horne said in a telephone interview from Las Vegas this morning.

Horne did not know the amount of the winning bid but said it was "quite a bit more" than IID's.

Horne said it was his understanding there were several bids higher than $175 million for the natural gas supply that would have fueled local power plants for 15 years.

"Obviously, we're disappointed we didn't get the bid," Horne said.

The experience, however, was a valuable lesson for the board.

In preparing to make the bid, Horne said, the board learned a lot about gas availability, pricing and transportation, and it hasn't ruled out acquiring an operating interest in another gas well field.

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"The competitive bidding was uncomfortable for us," Horne said, adding the board may be more comfortable in the future because of this experience.

Most sellers of gas well field interests negotiate their prices with buyers, but in this instance the seller wanted a competitive bidding process, Horne said.

Being its first time bidding for interest in a well field, the board made a conservative bid. Also contributing to the conservative bid was the board's hired consultant forecasting a drop in gas prices.

Other forecasters say just the opposite.

One prediction Horne heard after making the bid indicated gas prices will double in the next few years.

It is common practice for IID to buy natural gas on the open market, but rising prices have led the board to consider other options.

While IID has enough gas to get through the summer, the board must find other means of obtaining gas when its supplier contract ends in September.

The board has two other options it is considering to assure a gas supply is available — signing five- or 10-year contracts with gas suppliers, Horne said.

When contracting, IID pays a predetermined price throughout the life of the contract regardless of market fluctuations.

The board prefers to sign short-term contracts so IID will not be locked into paying a price higher than the market, Horne said.

Last year, IID paid around $2 per million BTU for natural gas. This summer it will pay almost $8 per BTU.

This summer's price, held in place by contract, is significantly lower than open market prices. IID officials said natural gas prices have risen as high as $50 per million BTU.

Staff Writer Kelly Grant can be reached at 337-3441.

Staff Writer Darren Simon contributed to this story.

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