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Western Infrastructure Expansion on Target

While there are still signs of a slowed economy, for the most part major natural gas infrastructure projects in the West are still on target, albeit on a slightly smaller scale or delayed timetable, according to comments last week from executives for El Paso Natural Gas and Kern River Gas Transmission Co.

El Paso's Ruby Pipeline from the Rockies to the Oregon-California border is moving ahead in a 50-50 partnership with a unit of General Electric Corp., but at a reduced size initially from 1.5 Bcf/d to 1.2 Bcf/d, according to Craig Coombs, business development director for El Paso Western Pipeline in Colorado Springs, CO. Coombs called the project "carbon neutral" based on how it is being built and will be operated, but mostly because of carbon offsets that El Paso is buying.

"We'll be in service by March 2011," said Coombs, noting that assuming timely regulatory approvals, construction on compressor stations could begin in February next year and on the pipeline in the summer next year.

Todd Kremer, Kern River director of business development, speaking on the same panel with Coombs at the LDC Gas Forum: West & Rockies conference in Irvine, CA., said his interstate pipeline was "ready to react to the market" once it turns around, for bringing more supplies west from the Rockies and longer term a major expansion of its existing pipeline into California. However, in response to questions, Kremer said a recent nonbinding open season on a proposed 287 MMcf/d expansion drew insufficient interest and will be put aside until some time next year.

Kern River is moving ahead with its two looping projects through the Wasatch Mountains in Utah and near Las Vegas in Nevada that will accommodate added supplies for NV Energy, starting service in November 2011.

"We think any additional expansion out of the Rockies will be a 'market pull' as opposed to a 'producer push,'" Kremer said. "Expansion now ongoing consisted more of a producer push for the expansion. We expect a period of full market growth, and the electric generation market will lead the way."

He said the most significant question without a clear answer is when production in the Rockies will be equal to takeaway pipeline capacity. By the end of next year is one possibility. "If production went down significantly in just one year [2008-09], it can go back up just as quickly," Kremer said.

"The point is, Kern River is ready to react as soon as the drilling comes back, or when markets are willing to step up."

In response to a question about Kern's June nonbinding open season on a proposed expansion within California, Kremer said it received "some market interest, but we didn't have enough interest to proceed with a project of that size, but since there was some interest, right now we are looking at what things we could do, such as make it smaller, to proceed with the project.

"I think we have to go back internally and try to determine what it would take for an expansion of a smaller size. Perhaps we would go out with another nonbinding open season, but I don't see it in the immediate next few months."

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