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PG&E Signals Renewed Pipeline Interest in Three-Party NW LNG Plans

Signaling its full return to financial health almost two years after its utility emerged from Chapter 11, PG&E Corp. is eyeing a natural gas pipeline project in conjunction with a proposed liquefied natural gas (LNG) terminal along the Oregon coast. It would mark the return of the San Francisco-based utility holding company to a region it historically played a key role in as the operator of a major interstate gas pipeline from Alberta to northern California under its now disbanded National Energy Group (NEG).

PG&E, Williams' Northwest Pipeline, and Fort Chicago Energy Partners LP have proposed the pipeline to bring global LNG supplies to West Coast markets. PG&E would provide a third of the estimated $750-$850 million price tag for the 250-mile, 30- or 36-inch-diameter Pacific Connector Gas Pipeline. A company called Energy Projects Development in Coos Bay, OR, is Fort Chicago's local operator seeking the LNG terminal development.

The proposed pipeline, together with the proposed Jordan Cove LNG terminal in Coos Bay are intended to bring LNG to the West. Scheduled for completion in 2010, the project would provide alternatives to existing supplies from Canadian, Southwest and Rocky Mountain sources, which are increasingly being pursued to supply eastern U.S. markets.

The project promises to provide more gas-on-gas competition, which is expected to help bring down wholesale natural gas prices in the United States over the long-term, a San Francisco-based PG&E spokesperson said. At an estimated 1 Bcf/d of supplies from the Coos Bay LNG facility, the market in northern California could get a 20% increase in gas supplies, the spokesperson said.

PG&E has established a nonutility subsidiary, California Gas Transmission, to hold its one-third interest in the pipeline project.

The Pacific Connector would link the proposed Jordan Cove LNG terminal to Williams' Northwest Pipeline system near Roseburg, OR, and to the Tuscarora and PG&E gas transmission systems, both near Malin, OR. The Jordan Cove terminal and storage facility was proposed in August 2004 by Energy Projects Development LLC (EPD) of Evergreen, CO (see Daily GPI, Aug. 30, 2004). (Tuscarora is jointly owned by Sierra Pacific Resources and TransCanada, interconnecting with the TransCanada pipeline out of Alberta, which was formerly owned by PG&E, at Malin.)

The project's Oregon location enhances supply options for consumers in Oregon, Washington and throughout the Pacific Northwest. As proposed, the pipeline would be capable of delivering 1 Bcf/d to the Pacific Northwest and beyond -- including California and northern Nevada -- through the interconnecting pipelines. Today, virtually all of the supplies serving the Pacific Northwest and Northern California originate in the Rocky Mountains or in Canada.

The three-company partnership, whose members will hold equal interests in the project, will immediately seek regulatory approvals and market commitments for the Pacific Connector. It plans to begin environmental assessments along the proposed route in March. The group is targeting a Federal Energy Regulatory Commission application filing by January 2007.

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