New Gas Lines Eye Los Angeles Industrial Complex
Located less than five miles from downtown Los Angeles, the
industrial city of Vernon sits as an attractive trophy for one of
two proposed natural gas interstate pipelines. The business-focused
local government is finishing construction of a new municipal gas
distribution system that will compete with Southern California Gas'
existing network. By next year, there will be duplicative gas
distribution systems operating.
Although no one will officially confirm negotiations, it is
obvious that both Questar's Southern Trails line, a planned
conversion of an interstate oil pipeline, and the proposed southern
expansion of Kern River Pipeline's existing system are targeting
Vernon. It's a city with less than a dozen residential energy
customers and more than 900 commercial and industrial business
operators that collectively represent a 38 MMcf/d gas load and a
$54 million annual electric bill paid to municipal utilities. Some
of its industrial sites are ripe for future cogeneration or
merchant power plants. The city leaders boast that Vernon
represents "one of the most cost-effective manufacturing centers in
the U.S. with the lowest utility bills in the region."
A Questar spokesman said conversion of the 700-mile formerly
Arco oil pipeline, which runs primarily between northwestern New
Mexico's Paradox Basin and Long Beach, CA, is moving along on
schedule for start of gas service in mid-2001. Upon completion, the
pipeline's capacity will be 120-130 MMcf/d. He refused to name
specific customers, but noted Questar has signed one contract and
negotiations are ongoing with all other potential customers
identified from an open season held late in 1998. Questar filed a
request with FERC March 9 to change the project to an "at-risk"
status, meaning it is foregoing the process of proving a minimal
customer base in favor of having its shareholders take the risk
that it can sign up the needed load to make the pipeline
Kern River also would not say if Vernon is among the 1 Bcf/d of
interest the interstate pipeline company received during its recent
open season. "At this point there is nothing to report," said
Kern's Jennifer Pierce, noting that there is "lots of interest"
from what she characterizes as numerous potential customers in
Southern California. Pierce also said that Kern is offering "term
differential" rates for interstate transportation into California
as a means of sweetening their offers to prospective customers.
Vernon is in the third phase of a four-phase construction
program begun in 1997 at the urging of several of the city's large
manufacturers who were unhappy with existing gas utility rates for
transportation. In total, the city will operate 41 miles of
distribution pipe and five miles of steel mainline. "We believe we
have planned for not only current loads but significant growth in
the future," said Dick Sweeney, gas operations manager for the
Vernon utility. "The industrial customers asked us to develop the
natural gas system, but it would be a little premature to have
contracts yet since we're not operational yet. I know several of
these industrial customers are under other contracts right now, and
they will have to fulfill those obligations before they sign
anything with us."
Richard Nemec, Los Angeles
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