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Southern Trails Stymied by SoCalGas Tariff

Southern Trails Stymied by SoCalGas Tariff

With focus shifting to natural gas prices and supply availability this fall and winter, a proposed conversion of the old 16-inch-diameter Four Corners oil pipeline to natural gas has run into a stalemate over a Southern California Gas Co. tariff that allegedly inhibits the new pipeline from signing up industrial loads in the southern half of the state.

As a result, the proposed 120-130 MMcf/d of new gas supplies, originally expected to be in play in California by now, would be available at the earliest in the third quarter of next year even though the project backer, Salt Lake City-based Questar Corp., has obtained federal approvals, including an environmental assessment for its 700-mile Southern Trails Pipeline.

All the preliminary engineering and planning work has been completed, but there won't be any conversion work of the idle oil pipeline until final resolution of the California tariff issue and an additional environmental assessment on part of the pipeline's route in the desert east of Riverside, CA, is completed, according to a Questar spokesperson. The pipeline terminates in the heavily industrialized port at Long Beach, CA.

"We're not going to get excited about placing any orders for compressors until we get these (California) regulatory issues resolved," the spokesperson said.

The interstate pipeline has not been able to line up any California customers for the converted line thus far, the spokesperson said, because of a SoCalGas "residual load service" (RLS) tariff, which requires customers to pay utility capacity charges for increments of supply they switch from the SoCal system to a competing pipeline. A California Public Utilities Commission administrative law judge is considering proposals from both SoCalGas and Questar for alternative tariffs that won't continue "to hang up our marketing efforts," the spokesperson said.

The tariff issue is "definitely the priority" for Questar, the spokesperson said. Questar is cool toward one of SoCalGas' alternate proposals, viewing it as too similar to the existing RLS. Another proposal by SoCal and one by Questar, itself, suggest a cost-based rate, which is what Questar alleges will allow the company to convert the pipeline and compete in the California market.

"Our proposal is not what SoCalGas has proposed; their's is sort of a scaleable approach, which we think still tries to keep competition from coming in," said the Questar spokesperson. "We support a cost-based rate that is truly based on the cost of providing service."

The same RLS rate had been the subject of discussions in the far-reaching SoCalGas settlement discussions last year and earlier this year as part of the CPUC's natural gas restructuring proceedings.

"Customers still look at the use of any other pipeline as punitive," the Questar spokesperson said. "They have to ante up to SoCal and pay another pipeline, too."

The other outstanding issue in California for Questar involves "a couple of issues" the company is working through with the State Lands Commission related to environmental aspects for a portion of the converted pipeline near an American Indian Reservation in the Palm Springs area about 120 miles east of Los Angeles. It involves less than 10 miles of the pipeline, according to the spokesperson.

Questar's $2.2 billion operation includes exploration and production in Wyoming and distribution in Utah and small portions of southeast Idaho and southwest Wyoming. It has about 700,000 retail customers, mostly all in Utah, and its interstate pipeline network will allow the converted Southern Trails pipeline to link with six interstate or distribution pipelines, including TransColorado Gas Transmission, Transwestern Pipeline, El Paso Natural Gas, SoCalGas, Pacific Gas and Electric and Southwest Gas Corp.

Richard Nemec, Los Angeles

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