With natural gas and power shortages looming, Western HubProperties won significant victory from California regulators, whoover-rode both internal opposition and vociferous local oppositionfrom nearby property owners to give conditional approval to aproposed $80 million underground natural gas storage field inNorthern California.

The Texas-based firm’s Lodi storage project is designed to have12 Bcf of working capacity, with 400 MMcf/d injection and 500MMcf/d withdrawal capacity. It includes a 35-mile transmissionpipeline that connects with Pacific Gas and Electric’s backboneline. It will be the state’s second non-utility storage project,following Wild Goose storage, which went into service last year.Approval of the Lodi project is effective in mid-June. Western HubProperties also is formulating plans for a project similar to Lodioutside of Bakersfield.

After postponing a decision, the California Public UtilitiesCommission (CPUC) President Richard Bilas and another of the fivecommissioners developed an alternative that gives “conditional”certification to the project so it can proceed with development andconstruction. To do so, Western Hub will have to comply with allthe designated environmental mitigation measures, obtain adequateinsurance and gain other state permits, including the State LandsCommission.

The Commission had been faced with an adverse preliminarydecision by an administrative law judge who recommended the projectnot be built because it didn’t meet local-need criteria. He foundno fault, however, with its environmental aspects.

Bilas said that while he supports “letting the market decide”whether a project should be built and encourages competition in gasstorage, he “cannot support allowing competitors to use regulatoryloopholes to take advantage of private property owners. In my view,this case comes precariously close to allowing that to happen.”

Five local property owners — one immediately adjacent to theproposed project — traveled to San Francisco to urge theregulators to reject Western Hub’s applications. They called thecompany “very arrogant” in the way it treated local landowners andargued that the project would “significantly adversely affect thequality of life” in their community.

Western Hub officials have maintained that Lodi’s uniquegeographical location with proximity to key electric generatingplants will make it the state’s only underground storage projectoffering fast deliverability for power generation.

Meanwhile, Western Hub is eyeing a second potential storage sitenear Wheeler Ridge, southwest of Bakersfield, where it is hoping tohelp develop an important regional energy hub. A merchant storagefield of about the same size as Lodi in the Wheeler Ridge areawould be in close proximity to each of the four major gas pipelinesin the state and to the sites for several proposed gas-firedmerchant power plants — one of them, PG&E Corp.’s La Palomaplant, which began construction May 17, will be the state’s largestmerchant plant (1,048 MW).

Western Hub anticipates moving through the state approvalprocesses quicker and having the project operational in the “nexttwo to three years,” according to its California-based officials.

Western Hub California Project Manager Jim Fossum said WesternHub owns some rights to depleted oil/gas properties in the WheelerRidge area, which has a long history of fossil fuel exploration anddevelopment covering much of the 20th Century. “We’re working onthe engineering of it,” he said, adding that he is not “free topinpoint precisely where [the proposed site] is located.”

“We have already told people that we intend to be interconnectedwith PG&E, Southern California Gas, Kern River and Mojavepipelines,” he said. “We intend to not only provide service to thepower plants in the area, but to the Las Vegas area and to thepower plants in Arizona.”

Fossum said the expectation is that large customers in Nevadaand Arizona could store gas in California for the peak-load timeswhen they need extra supplies; take more than their normal loadsoff the Kern River or Mojave interstate pipeline and “pay” for theextra supplies out storage that would go to uses in California.

“On a hot summer day, a customer in Las Vegas may need more gasbut there is no capacity available because everyone else wants it,too,” Fossum said. “So the Nevada customer arranges to take extrasfrom Shell or Chevron [or one of the California-based customers]and supply that gas back to them at Wheeler Ridge.”

Richard Nemec, Los Angeles

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