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California's Latest Gas Storage Project Eyes 2010 Start

Assuming environmental clearances and local land-use permits are obtained this summer, California's latest natural gas storage project, slated for an industrial area in the southeast corner of Sacramento, can be developed in six to nine months and be operating as a 7.5 Bcf capacity facility by the summer of 2010, the head of the privately funded project told NGI Friday.

"The actual construction of the project is a piece of cake," said Jim Fossum, president of Sacramento Natural Gas Storage, a proposed facility at the depleted Florin Gas Field under what is now a park and industrialized area about six miles south of the state Capitol Building (see NGI, April 20).

Backed by a unit of Wells Fargo Bank and private equity funds from Denver and New York City, the Sacramento storage project is awaiting a final environmental review from the California Public Utilities Commission (CPUC), which Fossum hopes to have in hand this summer. Shortly after that he thinks the project will receive a land-use permit from the Sacramento City Council, which he said includes a majority of members that have expressed support for the storage field.

Fossum said there is only one council member who has expressed outright opposition to the project, as has a homeowners group. "We have about 550 property owners' leases signed, and that's about 75% of all the leases we need," said Fossum, who noted that Sacramento's mayor also supports the project.

Construction, which will involve about 200 jobs and $1 million in revenue to the city of Sacramento, will include building a compressor station and 30-mile pipeline to connect to a transmission line owned by the storage project's anchor customer, the Sacramento Municipal Utility District (SMUD). The SMUD pipeline in turn is interconnected with Pacific Gas and Electric Co.'s backbone transmission system in Northern California.

There are also five wells to be drilled, along with separate injection and observation wells, said Fossum, who estimated that the facility will need about 15 permanent employees to operate. The storage operations will have a 100 MMcf/d injection capacity and 200 MMcf/d of withdrawal capability.

Sacramento Natural Gas Storage isn't planning an open season. It has a 20-year contract with SMUD for 4 Bcf of the facility's capacity. The storage operators are in discussion with potential other short- and long-term customers, but the project is feasible with only the SMUD contract, Fossum said.

Fossum is a former project manager for Texas-based Western Hub Properties, which built the Lodi Underground Storage Project in an abandoned gas field south of Sacramento and then sold it to its current operators. He seemed undaunted by skeptical area residents who have raised concerns based on the 800-page draft environmental impact report that the CPUC is circulating on the project.

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