Kinder Morgan, Calpine Propose Major Pipeline to CA
Move over El Paso, CIG, Transwestern, Kern River and Questar Pipeline, and make way for another major pipeline project destined for the California energy market. Kinder Morgan Energy Partners L.P. and independent power producer Calpine Corp. announced last week that they plan to build in two stages a 1,160-mile, 1.75-2.25 Bcf/d natural gas pipeline extending from the San Juan Basin to the California border and then to the San Francisco Bay area.
If approved by FERC, the so-called Sonoran Pipeline would become only the second interstate pipeline to be allowed to venture inside the boundaries of California. Kern River Gas Transmission -- which turns into Mojave Pipeline once inside California -- currently is the only other interstate pipe with in-state access.
The $1.7 billion Sonoran project is subject to successful open seasons on the two phases, which will be held this week, and Commission approval, the companies said. Kinder Morgan of Houston and San Jose, CA-based Calpine have targeted both phases of the proposed pipeline to be in service by the summer of 2003. They said they expect to submit an application to FERC by Dec. 1 of this year.
The Sonoran Pipeline will be specifically "shaped to serve gas-fired generation" in California, said Calpine spokeswoman Katherine Potter, adding that it doesn't plan to compete with other types of gas load of existing pipelines that cater to the market.
The phase-one project will include about 460 miles of 36-inch diameter, high-pressure gas pipeline originating at interconnects with TransColorado Gas Transmission, Transwestern Pipeline and various points at the Blanco Hub in San Juan County, NM, near the Colorado-New Mexico state line, which will provide shippers access to the major producing basins in the western region. The pipeline will continue westward with delivery points on the California-Arizona border near Needles, from where a 20-mile, 24-inch lateral to Topock will be built. The phase-one project initially will transport up to 750,000 Dth/d of gas, but it will have the ability to be expanded to 1 Bcf/d.
In the binding "open season" scheduled for this week, the sponsors said they will be seeking, at a minimum, 20-year term commitments at a fixed transportation rate of 39 cents/Dth for firm capacity. Sonoran is proposing to charge shippers actual fuel on phase one via a fuel tracker. Fuel is estimated at 1.3%. Calpine Energy Services L.P. already has submitted an acceptable binding bid for 400,000 Dth/d of phase-one capacity, according to the companies.
The phase-two project will be a continuation of phase one. It will consist of about 590 miles of 36- to 42-inch diameter, high-pressure pipeline carrying 1-1.5 Bcf/d of gas from Needles at the California border to points within the state, terminating in Contra Costa County near San Francisco. A non-binding "open season" for phase-two capacity will be held simultaneously with the phase-one open season this week. Calpine Energy Services has turned in a non-binding bid for 500,000 Dth/d of capacity on this phase.
The phase-two line could connect with several gas pipelines, utilities and suppliers, such as Kern River, Mojave Pipeline, Elk Hills, Pacific Gas and Electric, Southern California Gas and a number of gas-fired generation plants, including those owned by Calpine, the companies said. In addition, they noted Sonoran would be open to considering other connections that are requested by shippers.
Kinder Morgan and Calpine first began talking about the proposed natural gas pipeline last October, when Calpine signed a long-term storage agreement with Kinder Morgan's Texas Pipeline, said Calpine's Potter. "That was the nexus of how it began."
"The Sonoran Pipeline will help ensure a diverse supply of natural gas in California. With our existing plans in [the state], and our plans to bring online an additional 9,000 MW of capacity [within five years], it is essential that we have a dependable, competitively priced source of natural gas," said Calpine Chairman Pete Cartwright. "This important new pipeline will allow us to better control our costs in the California market to help lower energy prices and build needed generation."
Kinder Morgan Chairman Richard Kinder sees the Sonoran Pipeline as a chance for the company to "grow our core business and extend our natural transportation service into new markets."
In the past, California utilities and state officials have managed to block other interstate proposals, preferring to keep all gas facilities under state jurisdiction, rather than ceding jurisdiction to FERC. Kern River/Mojave was only approved after a clause was written into its certificate requiring sponsors to offer it for sale to an in-state utility after 20 years. That option was later dropped.
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