Merchant Gas Storage Proposal Eyes Fast Track
The prospect for more liquid energy markets with stepped-up
intra-day deal-making is driving development of a second merchant
underground natural gas storage facility in northern California
with proximity to Pacific Gas and Electric's backbone transmission
system (Line 401), according to the Sacramento-based manager of
Western Hub Properties LLC.
The proposed $50-$100 million Lodi, CA, storage field about 20
miles south of Sacramento will file for California Public Utilities
Commission certification around Oct. 1, said Western Hub's Jim
Fossum, adding that it will seek a negative declaration regarding
environmental issues which he hopes will result in state regulatory
approvals by May, construction over next summer and start-up of the
facility by October 1999, about six months after the scheduled
start of a rival merchant underground storage facility, Wild Goose,
being developed 50 miles north of Sacramento by Canada's Alberta
Fossum said that depending on customer interest between now and
May, Western Hub may decide to double its injection and withdrawal
capacities to 400 MMcf/d and its working gas capacity to 12 bcf. He
said an open season will be held this November, running most of the
"The type of storage we are designing is different than exists
in California today," Fossum said. "The difference is that this is
very fast in and out. So the storage is used for daily balancing
and operational flow orders (OFO's that are increasingly a part of
the unbundled, restructured energy industry). We'll be able to
solve the problems for our customers-such as the electric
generators who are bidding hourly. If the price of electricity
suddenly jumps on a hot summer day, the gas will be available to
them and be replaced the next day.
"We are hearing particularly from the newly emerging electric
industry and gas marketers that there is a real desire for the kind
of storage that we are proposing."
Fossum indicated that Western Hub's plans complement PG&E's
new unbundled approach to transmission and storage under the
so-called Gas Accord in which the pressures for balancing and the
penalties for being out of balance are much greater.
"It is designed for that," Fossum said.. "It is not designed for
summer-winter seasonal storage. It is just too bloody expensive for
that. That is one-term service. We are not designing for one-term
service. We're designing for what's coming in the 21st Century,
which is no-notification nominations. Now we're down to daily
nominations-from three-day. Soon we'll be into intra-day
nominations in the new world. We can handle it."
Moving ahead with the project is not contingent upon having
contracts inked this year, said Fossum, noting that Western Hub is
negotiating with a number of prospective customers, include
merchant power plant operators.
Part of the construction will including building a
24-inch-diameter, 30-mile transmission pipeline to hook in with
PG&E's gas transmission operations. Fossum said "from the
beginning" that the utility has been very supportive of this
proposed project, which will involve building up to three
compressor units and drilling up to 10 new gas wells on the
property, an depleted dry gas field.
Richard Nemec, Los Angeles