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California Storage Landscape Crowded with New Plays

With the economic viability of added underground natural gas storage in California already verified by utility and merchant developers currently pursuing proposals, state regulators later in October will hold a one-day hearing on a unique, urban-based storage project in the heart of the state capital, Sacramento. The California Public Utilities Commission (CPUC) will use the public input as part of its ongoing review and environmental assessment.

Separately, the CPUC is getting close to approving a major new independent storage project, Gill Ranch, a 20 Bcf capacity project in the northern end of the San Joaquin Valley west of Fresno. It is a collaborative project headed by a unit of Portland, OR-based Northwest Natural Gas and San Francisco-based Pacific Gas and Electric Co. (PG&E).

Rick Daniel, the president of Northwest Natural Gas Storage, told a gas industry meeting in Irvine last week that the CPUC should give the go-ahead for the project later in October, and in any event he expects to have the facility operating by August next year. The Gill backers will line up construction financing this fall and permanent financing next summer, Daniel to the LDC Gas Forum: Rockies & West conference.

"The project financing market for projects like this has returned," said Daniel, who said based on the market reception in California Northwest Natural's storage unit hopes to make Gill Ranch "the first of several storage ventures in the western United States and Canada. Under its original open season two years ago, Gill Ranch was 400% oversubscribed, he said.

Meanwhile earlier in October Illinois-based Nicor Inc.'s Central Valley Gas Storage LLC announced it was holding a nonbinding open season through Nov. 12 for firm service to begin on April 1, 2012 from an 8 Bcf storage facility currently in development in north-central California. The project is a high-deliverability depleted reservoir that is expected to provide negotiated multi-turn services based on prospective customer's requirements.

Central Valley is developing the facility north of Sacramento near the town of Princeton, CA, in Colusa County on PG&E's gas transmission system. Following an open season held in 2008, Central Valley has finalized certain binding market commitments for the project and recently filed an application for a certificate of public convenience and necessity with the CPUC in August. Central Valley said it anticipates issuance of the certificate in mid-2010 and expects to provide firm storage services by April 2012.

Moving forward, the CPUC's Oct. 27 hearing will deal with the request from Sacramento Natural Gas Storage for approval to construct and operate the storage facilities within the City of Sacramento and partly within an adjacent unincorporated area of Sacramento County, all of which is served by the Sacramento Municipal Utility District (SMUD), a countywide public power entity.

Sacramento Natural Gas Storage has a contract with SMUD, which relies on a lot of gas-fired generation. SMUD needs some of the space in the proposed 7.5 Bcf facility in the old Florin Gas Field under what is now a park and industrialized area in the south portion of the state capital (see NGI, April 20).

Unlike the other independent storage projects in Northern California that were developed under undeveloped former gas field properties, Sacramento Natural Gas Storage is having to obtain leases from hundreds of residential and other property owners. While many have signed up, there is still organized opposition in the community as residents raise concerns about safety and environmental issues.

So far residents living on a portion of the surface of the proposed 379-acre storage facility are voicing concerns. Jim Fossum, the project's president and 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, indicated to NGI earlier in the year that he was facing skeptical residents with concerns based on the 800-page draft environmental impact report that is circulating on the project.

Nicor's Central Valley unit senior officials, like many others in the industry, like the storage prospects in California. It has been actively testing the California market.

"As a result of our ongoing development efforts, which included drilling a test well in May of this year, we have a more complete understanding of the field's initial capabilities through core samples and are able to offer additional services to the California market," said Central Valley President Steve Cittadine. "We believe Central Valley's geographic location and service profile offers an excellent complement to new infrastructure being developed to serve West Coast markets and will facilitate more effective use of natural gas as renewable energy mandates take shape in California."

For information contact John Fortman at (630) 245-7845 or, or visit

The state's oldest merchant operator, Wild Goose Gas Storage LLC announced earlier in October that it has completed its 11 Bcf expansion of its facility in Northern California. Since acquiring Wild Goose three years ago, Alberta-based Niska Gas Storage US LLC has increased its capacity to 29 Bcf, and it is in the process of expanding the facility's injection and withdrawal capabilities, pushing injection from 250 to 450 MMcf/d, and the withdrawal capability from 450 to 700 MMcf/d.

Niska said the increases will be completed this winter, and longer term, the company has applied to the CPUC to expand Wild Goose's overall capacity to 50 Bcf, with injection/withdrawal rates at 650 MMcf/d and 1.2 Bcf/d, respectively. Niska President David Pope said with its Wild Goose facility it has the capability "to develop very low-cost natural gas storage capacity additions" to meeting increasing gas demand in California and elsewhere in North America.

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