Northwest Natural Gas Co and Encana Corp have signed an agreement to invest in a joint venture to develop gas reserves that will provide long-term supplies for NW Natural's Oregon utility customers over a 30-year period.

During the first 10 years of the joint venture, NW Natural expects the volume of gas produced to provide approximately 8-10 percent of the company's average annual requirements for its utility customers. These gas reserves come from the Jonah Field in Wyoming, located north of Rock Springs.

Under terms of the agreement, NW Natural will pay approximately $45-55 million a year, for a five-year period, for a total investment of about $250 million, which will cover expected drilling costs in exchange for working interests in certain sections of the Jonah Field. The sections include both future and currently producing wells.

NW Natural estimates the gas reserves will save Oregon customers more than $50 million on a net present value basis over the life of the agreement. The Jonah Gas Field is considered to be one of the 10-largest gas fields in the U.S. with over 2 Trillion cubic feet equivalent (Tcfe) of proved reserves.

An application hearing with the Public Utility Commission of Oregon (OPUC) has been filed and is likely to occur in late April, with an expected effective date of May 1, 2011. If approved, NW Natural's expenditures for the gas reserves, cost of capital and associated operating costs will be included in rates on an annual basis.

The company intends to finance the joint venture with internal cash flows and other long-term financing as necessary.