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Urban Gas Storage Project Rejected in California

The California Public Utilities Commission (CPUC) last week rejected by a 3-2 vote a long-standing proposal to develop an idle dry natural gas field into a 7.5 Bcf capacity underground storage project beneath a residential community in Sacramento.

Backers of Sacramento Natural Gas Storage LLC had a contract with the Sacramento Municipal Utility District (SMUD) to be the project's anchor customer, but Commissioner Mike Florio, who led the move for denial, said the municipal utility's demand for the storage was not enough to override safety concerns because of its location. State regulators in June noted gas storage needs but had come to no agreement about the storage facility (see NGI, June 11).

The project was originally recommended for approval by an administrative law judge, but it drew two alternative decisions from Florio and Commissioner Timothy Alan Simon, who supported going ahead with the project. The project drew its share of local opposition (see NGI, March 19), which was in evidence again Thursday with more than two dozen residents expressing mostly negative opinions at the CPUC meeting.

CPUC President Michael Peevey was the only regulator siding with Simon. "My conclusion is simple: that the risk of gas migration [leaks] is low and that risk should not be the reason for denying this application. Further, the risk of pipeline interruption causing electricity curtailment outweighs the risk of gas migration," he said. However, Commissioner Mark Ferron, one of the newest regulators, said the project "might be desirable, but it is clearly not essential, and in my view there is no overriding consideration in favor of the project."

In looking at existing utility operated gas storage projects in residential areas, the regulators favoring denial noted that all of them had been developed away from residential areas or before development came. The proposed Sacramento facility was to be sited within the city and partly within an adjacent unincorporated area of Sacramento County, all of which is served by SMUD, which relies heavily on gas-fired generation.

Sacramento Natural Gas Storage wanted space in the proposed facility in the old Florin Gas Field under what is now a park and industrialized area. Unlike other independent storage projects in Northern California that were developed under former gas field properties, leases were obtained from residential and other property owners, about 72% of whom signed up. Organized opposition solidified in recent years.

In the past few years other storage projects have begun or been proposed for the central valley region of Northern California where gas and oil fields once existed. Gill Ranch, a 20 Bcf capacity project in the northern end of the San Joaquin Valley, is now in operation, by a unit of Northwest Natural Gas and Pacific Gas and Electric Co. Nicor Inc.'s Central Valley Gas Storage LLC was originally planned to begin service this year as an 8 Bcf storage facility in north-central California, but it is still pending sufficient market interest.

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