CA Gets 2nd Merchant Storage Project, 3rd on the Way
With natural gas and power shortages looming, Western Hub
Properties won significant victory from California regulators, who
over-rode both internal opposition and vociferous local opposition
from nearby property owners to give conditional approval to a
proposed $80 million underground natural gas storage field in
The Texas-based firm's Lodi storage project is designed to have
12 Bcf of working capacity, with 400 MMcf/d injection and 500
MMcf/d withdrawal capacity. It includes a 35-mile transmission
pipeline that connects with Pacific Gas and Electric's backbone
line. It will be the state's second non-utility storage project,
following Wild Goose storage, which went into service last year.
Approval of the Lodi project is effective in mid-June. Western Hub
Properties also is formulating plans for a project similar to Lodi
outside of Bakersfield.
After postponing a decision, the California Public Utilities
Commission (CPUC) President Richard Bilas and another of the five
commissioners developed an alternative that gives "conditional"
certification to the project so it can proceed with development and
construction. To do so, Western Hub will have to comply with all
the designated environmental mitigation measures, obtain adequate
insurance and gain other state permits, including the State Lands
The Commission had been faced with an adverse preliminary
decision by an administrative law judge who recommended the project
not be built because it didn't meet local-need criteria. He found
no fault, however, with its environmental aspects.
Bilas said that while he supports "letting the market decide"
whether a project should be built and encourages competition in gas
storage, he "cannot support allowing competitors to use regulatory
loopholes to take advantage of private property owners. In my view,
this case comes precariously close to allowing that to happen."
Five local property owners --- one immediately adjacent to the
proposed project --- traveled to San Francisco to urge the
regulators to reject Western Hub's applications. They called the
company "very arrogant" in the way it treated local landowners and
argued that the project would "significantly adversely affect the
quality of life" in their community.
Western Hub officials have maintained that Lodi's unique
geographical location with proximity to key electric generating
plants will make it the state's only underground storage project
offering fast deliverability for power generation.
Meanwhile, Western Hub is eyeing a second potential storage site
near Wheeler Ridge, southwest of Bakersfield, where it is hoping to
help develop an important regional energy hub. A merchant storage
field of about the same size as Lodi in the Wheeler Ridge area
would be in close proximity to each of the four major gas pipelines
in the state and to the sites for several proposed gas-fired
merchant power plants --- one of them, PG&E Corp.'s La Paloma
plant, which began construction May 17, will be the state's largest
merchant plant (1,048 MW).
Western Hub anticipates moving through the state approval
processes quicker and having the project operational in the "next
two to three years," according to its California-based officials.
Western Hub California Project Manager Jim Fossum said Western
Hub owns some rights to depleted oil/gas properties in the Wheeler
Ridge area, which has a long history of fossil fuel exploration and
development covering much of the 20th Century. "We're working on
the engineering of it," he said, adding that he is not "free to
pinpoint precisely where [the proposed site] is located."
"We have already told people that we intend to be interconnected
with PG&E, Southern California Gas, Kern River and Mojave
pipelines," he said. "We intend to not only provide service to the
power plants in the area, but to the Las Vegas area and to the
power plants in Arizona."
Fossum said the expectation is that large customers in Nevada
and Arizona could store gas in California for the peak-load times
when they need extra supplies; take more than their normal loads
off the Kern River or Mojave interstate pipeline and "pay" for the
extra supplies out storage that would go to uses in California.
"On a hot summer day, a customer in Las Vegas may need more gas
but there is no capacity available because everyone else wants it,
too," Fossum said. "So the Nevada customer arranges to take extras
from Shell or Chevron [or one of the California-based customers]
and supply that gas back to them at Wheeler Ridge."
Richard Nemec, Los Angeles