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Western Gas Resources Moves Into California Distribution

Western Gas Resources Moves Into California Distribution

The potential for selling to several gas-fired merchant power plants in the area is what prompted Denver-based Western Gas Resources to enter California's increasingly crowded natural gas market by getting an option to buy a Shell-Mobil gathering and delivery system in northern California. Included in the proposed deal that should be wrapped up by year-end are 170 miles of two-inch- and 10-inch-diameter pipelines crossing more than a dozen local gas fields between the Sacramento Airport north of the capital and the industrialized north Contra Costa County to the southwest, where there are substantial existing and proposed large industrial loads.

Aera, an alliance between Shell and Mobil, owns the interest in two systems that Western Gas is proposing to buy, given the go-ahead from state regulators to operate the pipelines as open-access utility facilities and interconnect with Pacific Gas and Electric's existing backbone transmission pipeline system at the expanding Denverton Creek gas field. Gas supplies totaling about 70 MMcf/d are located within a ten-mile corridor formed by the Steelhead and Sacramento River Gas Systems. Shell historically owned this pipeline system, principally to supply gas to its refinery in Martinez, CA, which is now operated under a Shell-Texaco joint venture called Equilon Refinery. Heading east in the same area parts of the pipeline system go by a Tosco refinery and existing power plants owned by San Jose, CA-based Calpine Corp., which has a proposal to build a new merchant power plant nearby, as does Enron.

(Calpine also continues to own a portion of the Sacramento River pipeline system not included in Western's deal.)

Western Gas, an independent gas gatherer, processor, transporter, producer and energy marketer with the bulk of its assets in Wyoming, is currently talking with prospective customers as well as with PG&ampE regarding interconnection with its large transmission system in the area, according to Craig Supplee, who heads Western's business development out of Denver.

Supplee said Western Gas is proposing to move both locally produced gas, along with Canadian supplies flowing through PG&ampE's transmission system, for Shell, Tosco, and Calpine among other prospective customers. An open season is planned for May.

Supplee indicated Western Gas is betting that the California Public Utilities Commission, to which it applied April 6 for utility status, will continue its more than a decade-long policy of "supporting competition" for gas supply business to large, so-called "non-core" customers, such as power plants and refineries.

Richard Nemec, Los Angeles

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