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Western Moving Forward on New California Pipeline

Western Moving Forward on New California Pipeline

An open season for up to 100 MMcf/d of firm transportation capacity in the Sacramento Delta region of northern California is set for May 10 through the end of June by Western Gas Resources (WGR), which is planning to make an existing gas pipeline, gathering and delivery system an open-access, state-regulated operation. The state regulatory process to make the change will begin June 8 with a pre-hearing conference in San Francisco.

Based on initial informal support for the project, which will move gas to the heavily industrialized East San Francisco Bay area, Western expects it to be fully subscribed with producers, marketers and large industrial customers, according to Rick Maceyka, manager of Western's Pacific Region. Maceyka said the project has received "quite a bit of support from local gas producers in the area."

"We're asking for binding expressions of interest, but since we don't yet have the [California Public Utilities Commission] certificate to operate, the deals can't really be binding. So, it will be binding contingent on us getting a certificate we can live with. If the California commission imposes some substantial condition or surcharge that significantly reduces the economic value to transport, then we're obviously not going to hold the subscribers to the contracts. Who knows what the possibilities are?"

The timetable, scope, hearing schedule and issues for the state regulatory proceeding will be set at the pre-hearing conference, according to a San Francisco-based CPUC spokesperson. "It looks like a fairly extensive proceeding," the spokesperson said. "It could be concluded this year or next, but in any case, it will be a long one."

Maceyka estimates the case could be wrapped up by the end of this year, using filings by merchant gas storage operators in the general area as a yardstick. Western Gas proposes to buy the pipeline system from its current owner, Aera, an alliance between Shell and Mobil oil companies, and interconnect them with Pacific Gas and Electric Co.'s existing backbone gas transmission pipeline system at the expanding Denverton Creek gas field. The sponsors intend to upgrade the pipeline network with compression, odorization and the PG&E interconnect, all of which has required it to make an environmental assessment of its operations for the impending regulatory hearings. Maceyka doesn't foresee any undue environmental issues slowing down the proceedings.

Gas supplies totaling about 70 MMcf/d are located within a 10-mile corridor formed by the Steelhead Pipeline and another 30 MMcf/d is estimated along the Sacramento River Pipeline. Together they make up the Shell-Mobil holdings that Western Gas intends to use to flow both local and Canadian supplies through PG&E's transmission system for sale to large refineries, power generation plants and other large industrial loads in the East Bay area.

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