Finding Cheap Gas is Next Hurdle for Otay Mesa

After navigating California regulatory maze successfully with some precedent-setting environmental planning, the backers of the first new power plant slated for electron-starved San Diego County still have some difficult decisions ahead regarding gas supply for the 500-MW Otay Mesa generating plant.

Supplies of gas still are not lined up, said Susan Segner, project manager for PG&E's national energy group. She said PG&E is "negotiating" all aspects of supply and delivery infrastructure, including talks with San Diego Gas and Electric. About 80 MMcf/d of supply and transportation needs to be found by PG&E Generating. A connection eventually could be made with a proposed gas transmission pipeline from the California-Arizona border south through California to the U.S.-Mexico border and then east into the North Baja industrial corridor. PG&E and Sempra Energy are proposing the pipeline, which is aimed at generation and large industrial loads on the Mexican side of the border. A PG&E official indicated it is a potential supply line for the Otay Mesa plant, which is expected to come online in summer 2003.

A second proposed new natural gas interstate pipeline into California - Questar's Southern Traisl project, a conversion of the inactive Four Corners Oil Pipeline running from New Mexico to Long Beach Harbor - is not a possibility, according to PG&E.

PG&E expects final state approvals to start construction by January or February 2001. It made it through California's regulatory mine field by obtaining an air emissions permit through a $33 million agreement with Waste Management, Inc. to build a refueling station and convert Waste Management's heavy duty truck fleet to operate on liquefied natural gas (LNG). PG&E will create a private LNG refueling station and clean fuel fleet for the waste hauler with the emission credits going to offset projected emissions from the power plant, which is near the U.S.-Mexico border.

"We believe that reductions on the mobile side are a good policy call, and to the extent it is applicable to other areas of the country, we would be open to the concept," Segner said. "It is a very strategic and important regulatory offset call in this program. We worked a year and a half with the California Air Resources Board (CARB), U.S. EPA and the San Diego Air Quality District."

The deal announced in September reduces air emissions from the waste hauler's operations by 50%, according to PG&E, which said this is the first power plant project in the nation to offset its emissions with reductions of mobile sources. San Diego County like many local governments today manages its air quality within a regulatory framework that requires new sources of emissions to be offset by reductions from other sources, which normally are other stationary sources.

The mobile offsets deal broke a permitting stalemate with the California Energy Commission, the state agency siting new power plants. Segner said PG&E has made "significant progress" with the state energy commission since the air district approvals were made final and permits obtained Sept. 18.

The plant itself will be equipped with state-of-the-art air emission equipment and it will be air-cooled, so use of water will be kept to a minimum. Otay Mesa will use about 15 acres of the 46-acre site owned by PG&E, and Segner said that expansion of the generating units longer term could be a possibility, although any additions would require added mobile air emission credits as offsets to permit the added generation capacity. And they would require added gas supplies, too.

Richard Nemec, Los Angeles

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