Arizona could improve its natural gas reliability and price concerns by developing some gas storage in the state, both state regulators and the private-sector utilities said last week during a winter preparedness meeting sponsored by the Arizona Corporation Commission (ACC) in Phoenix. Some ACC members, however, questioned whether the utilities were doing enough to encourage the interstate pipelines or another source to develop the state's first gas storage.

"Despite the efforts of this commission the last four years, we still do not have any storage," said ACC Commissioner Kristin Mayes, who added that despite the commission's "unprecedented step" creating a commitment to pre-approval of qualifying new natural gas infrastructure, including storage fields, nothing has happened. She called the lack of gas storage Arizona's "Achilles heel" for energy.

Geology and economics both come into play, and a single utility will not likely get anything built, according to Dave Hutchens, vice president for wholesale energy at Tucson-based UniSource Energy and its UNS Gas operations. Ultimately, a consortium of utility and other energy interests is needed, Hutchens said.

"It seems to me like we have had a whole lot of talk [about storage] and not much action the last four years," Mayes said. "Every time we ask the utilities about this, they say they are talking to El Paso [Natural Gas] or someone else. It seems like 'we're talkin', we're talkin', we're talkin'.'"

Mayes asked if UNS Gas had offered to sign a contract to make a storage project happen. Hutchens replied that his company hasn't gotten to the point "where there is a viable project on the table, or we would have already been involved in it."

In April 2006, the Federal Energy Regulatory Commission (FERC) cited the scarcity of natural gas storage in the Southwest in granting El Paso Natural Gas a waiver of the Natural Gas Act (NGA) certificate requirements to carry out drilling and testing activities to determine the feasibility of developing new storage facilities in south-central Arizona (see NGI, April 10, 2006).

The El Paso Corp.-owned pipeline petitioned for the exemption so it could drill a test well on a 234-acre parcel of land in Pinal County, AZ that it purchased to develop a natural gas storage facility. At the time, El Paso said that if development of a storage facility is viable and demand for storage services exists, it would apply to FERC for a Section 7 certificate to build one or more gas storage caverns. It still has not happened for a variety of reasons.

Three years ago, El Paso ran into stiff local opposition and onerous state legislative proposals when it was trying to develop the 10 Bcf Copper Eagle Gas Storage project (see NGI, April 19, 2004).

"We really want storage in the state for reliability reasons," UniSource's Hutchens told the regulators.

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