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Arizona Company Wants to Develop Gas Storage in Its Home State

Gas storage-starved Arizona could be getting up to 3-4 Bcf of salt cavern capacity if initial development plans of Tempe, AZ-based Pacific Texas Energy Services LLC come to pass.

Pacific Texas Energy Services, a division of Arizona-based Pacific Texas Corp., said it is proceeding with plans to develop a storage facility in Pinal County, AZ. Noting that the state relies heavily on gas for power generation, Pacific Texas said it is particularly vulnerable to gas supply shortfalls due to the lack of storage. Operators can rely on pipeline linepack to park and retrieve some gas, but that's about it, the company said. "There are no major underground gas storage facilities currently in Arizona."

Pacific Texas Corp. President Michael Owens told NGI that the company has selected a site for the potential project, but he didn't' want to say exactly where it is. "It's kind of in central Pinal County," he said. "Let's put it this way, the environmentalists would love to know where we are right now. The landowner is very particular that we don't name the area because they don't want a bunch of people tramping around their property or outside their fence line wanting to know what's going on inside their fence line."

Owens said the company relied in part on geological studies done by the University of Arizona to pick its site, which is in an area devoted mainly to ranching and farming, he said.

In April 2006 the Federal Energy Regulatory Commission (FERC) cited the scarcity of storage in the Southwest in granting El Paso Natural Gas a waiver of the Natural Gas Act certificate requirements to carry out drilling and testing activities to determine the feasibility of developing 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 that it purchased to develop a natural gas storage facility. At the time El Paso said that if development of a storage facility was 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. Owens said El Paso's plans targeted an area farther south of where Pacific Texas is planning its facility.

Four 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). Owens said the Copper Eagle site was "way north of us."

Arizona could improve its gas reliability and relieve some price concerns by developing storage in the state, both state regulators and private-sector utilities said late last year during a winter preparedness meeting of the Arizona Corporation Commission in Phoenix (see NGI, Nov. 5, 2007).

"Approximately 65% of natural gas in Arizona is used for power generation; power plants have regularly relied upon short-term interruptible interstate pipeline capacity and have not entered into long-term firm capacity contracts to meet their prospective needs," Pacific Texas said. "Often merchant power plants count on released or turnback capacity from other primary customers. This approach poses a risk to Arizona."

Last month Arizona's Salt River Project (SRP) said it had identified the need for up to 2,500 MW of new gas-fired generation capacity through 2020. "This need can be met in a number of ways, including new construction, power purchase agreements and ownership interests in existing or new generation facilities," the company said. SRP is the owner and operator of the gas-fired 1,225 MW Santan Generation Station in Gilbert, AZ. This plant and SRP's potential new plants could help support the salt dome storage his company wants to develop, Owens said.

The storage project could potentially be connected to the El Paso pipeline system as well as Transwestern Pipeline's proposed Phoenix Lateral (see NGI, Feb. 25).

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