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Merchant Gas Storage Proposal Eyes Fast Track

September 21, 1998
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Merchant Gas Storage Proposal Eyes Fast Track

The prospect for more liquid energy markets with stepped-up intra-day deal-making is driving development of a second merchant underground natural gas storage facility in northern California with proximity to Pacific Gas and Electric's backbone transmission system (Line 401), according to the Sacramento-based manager of Western Hub Properties LLC.

The proposed $50-$100 million Lodi, CA, storage field about 20 miles south of Sacramento will file for California Public Utilities Commission certification around Oct. 1, said Western Hub's Jim Fossum, adding that it will seek a negative declaration regarding environmental issues which he hopes will result in state regulatory approvals by May, construction over next summer and start-up of the facility by October 1999, about six months after the scheduled start of a rival merchant underground storage facility, Wild Goose, being developed 50 miles north of Sacramento by Canada's Alberta Energy.

Fossum said that depending on customer interest between now and May, Western Hub may decide to double its injection and withdrawal capacities to 400 MMcf/d and its working gas capacity to 12 bcf. He said an open season will be held this November, running most of the month.

"The type of storage we are designing is different than exists in California today," Fossum said. "The difference is that this is very fast in and out. So the storage is used for daily balancing and operational flow orders (OFO's that are increasingly a part of the unbundled, restructured energy industry). We'll be able to solve the problems for our customers-such as the electric generators who are bidding hourly. If the price of electricity suddenly jumps on a hot summer day, the gas will be available to them and be replaced the next day.

"We are hearing particularly from the newly emerging electric industry and gas marketers that there is a real desire for the kind of storage that we are proposing."

Fossum indicated that Western Hub's plans complement PG&ampE's new unbundled approach to transmission and storage under the so-called Gas Accord in which the pressures for balancing and the penalties for being out of balance are much greater.

"It is designed for that," Fossum said.. "It is not designed for summer-winter seasonal storage. It is just too bloody expensive for that. That is one-term service. We are not designing for one-term service. We're designing for what's coming in the 21st Century, which is no-notification nominations. Now we're down to daily nominations-from three-day. Soon we'll be into intra-day nominations in the new world. We can handle it."

Moving ahead with the project is not contingent upon having contracts inked this year, said Fossum, noting that Western Hub is negotiating with a number of prospective customers, include merchant power plant operators.

Part of the construction will including building a 24-inch-diameter, 30-mile transmission pipeline to hook in with PG&ampE's gas transmission operations. Fossum said "from the beginning" that the utility has been very supportive of this proposed project, which will involve building up to three compressor units and drilling up to 10 new gas wells on the property, an depleted dry gas field.

Richard Nemec, Los Angeles

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ISSN © 2577-9877 | ISSN © 1532-1266
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