Two preliminary underground natural gas storage projects in theWest, separated by more than 1,000 miles, are textbook examples ofthe fact that demand and market location alone are only part of thestrategic considerations for making new merchant storageeconomically viable.

Texas-based Western Hub Properties, which has fought off localNIMBY concerns and environmental challenges to move ahead with anew merchant storage project in the northern California town ofLodi, publicly announced some months ago it wants to develop asimilar project in the southern half of the state, south ofBakersfield, CA, near the important gas hub of Wheeler Ridge. Onthe surface, the geographical area is an excellent market locationsince it is the nexus for several major interstate and intrastatetransmission pipelines and proposed gas-fired generating plants,but Western is finding the challenges underground are keeping itfrom identifying an economically viable project.

Similarly, the two energy giants in the Pacific Northwest,PG&E Corp.’s National Energy Group, operating a majorinterstate gas pipeline out of western Canada, and Avista Corp.,based in Washington state, are teamed up to develop an undergroundstorage project in the southeast corner of Washington near theStanfield, OR, Hub. They are still a year away from filing for aFederal Energy Regulatory Commission certificate, officials saidthis week because a lot more geologic and seismic “explorationwork” needs to be completed before a viable project can beidentified.

In both areas, the need for the gas storage — principally forexisting and planned gas-fired power generation — is clear, andthe market access is clearly good, but the formation of theunderground landscape may yet prevent commercial storage projectsfrom being built. For now, the respective proponents are remainingoptimistic they can solve the underground puzzles.

“The challenge is purely figuring out just what is down there,and whether or not you are going to lose your gas some place,” saidJim Fossum, Western Hub’s California-based project manager. “Wethink we have better fields we have isolated. The work is positive.We just got a report this morning that looks like a thumbs up.”

Western Hub is using teams of reservoir engineers and petroleumgeologists for the field work, but ultimately Fossum and hiscolleagues must analyze the data. “It has to add up well enough soour financial backers will say yes,” he said Monday, still hopefulfor a project he first identified in May. “Land is not a problem,”said Fossum, noting that it is the ultimate geology under themostly privately held acreage that will make or break the project.

Similarly, the uncertainty concerning ultimate “closure” of thegas supplies in underground rock continues as PG&E and Avistaexpect another year of research and development before they knowwhether they have a go, and if so, what the characteristics(working capacity, injection/withdrawal rates, etc.) of the storageproject will be. “The evidence so far is good,” said a Spokane,WA-based Avista spokesperson, adding that it is still”preliminary,” however, and the companies have not made a finalcommitment to developing a storage project yet.

“We drilled a well last year just to see if there were domesthat we could produce a lot of water in at the depths we werelooking for, and based on that one well, we came away with prettyencouraging results. But it is not nearly enough to decide todevelop a site,” said Mike Hocking, PG&E’s engineering directoron the proposed storage project.

Other developers of underground gas storage in other regions ofthe U.S. expressed skepticism about the eastern Washington site,calling it among “the most difficult” types of surroundings becauseof the preponderance of basalt, several-hundred-million-year-oldlava flows. They caution that a storage field in this type of rockhas really never been done, and if one is completed, they say itmay end up being more like the existing aquifer storage project insouthwest Washington, Jackson Prairie.

Hocking said that the comparisons to Jackson Prairie can’t betaken too far because the geology in that part of the state — onthe western side of the Cascade Mountains — is very different.Jackson is shallower with sedimentary rock under sandstone typeformations.

“This is much different than Jackson Prairie,” he said, notingthat the basalt formations, in theory, should provide the cap thatis needed for a storage operation

Two of the keys are whether the gas can be securely containedunderground so it does not migrate away from the storage projectand how much volume ultimately can be stored and moved in and outof the field.

“Seismic analysis is pretty difficult in basalt layers likethis,” Hocking said. “We’re drilling and testing between two drillholes to quantify what the actual porosity and permeability are.

Although there is no history of oil/gas development in theimmediate area targeted for an underground storage operation,PG&E’s officials point out that 25 miles to the northwest is adepleted natural gas field that produced “billions and billions ofcubic feet” from the 1920s through the ’40s. In addition, SteveKnudsen, PG&E’s project development director, said the PacificNorthwest is experiencing a mini-boom with a lot of differentgroups looking for oil and natural gas finds in the region.”Historically, on and off there has been drilling in the PacificNorthwest.”

Richard Nemec, Los Angeles

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