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Search Under Way for New Storage Fields

Search Under Way for New Storage Fields

Two preliminary underground natural gas storage projects in the West, separated by more than 1,000 miles, are textbook examples of the fact that demand and market location alone are only part of the strategic considerations for making new merchant storage economically viable.

Texas-based Western Hub Properties, which has fought off local NIMBY concerns and environmental challenges to move ahead with a new merchant storage project in the northern California town of Lodi, publicly announced some months ago it wants to develop a similar project in the southern half of the state, south of Bakersfield, CA, near the important gas hub of Wheeler Ridge. On the surface, the geographical area is an excellent market location since it is the nexus for several major interstate and intrastate transmission pipelines and proposed gas-fired generating plants, but Western is finding the challenges underground are keeping it from identifying an economically viable project.

Similarly, the two energy giants in the Pacific Northwest, PG&E Corp.'s National Energy Group, operating a major interstate gas pipeline out of western Canada, and Avista Corp., based in Washington state, are teamed up to develop an underground storage project in the southeast corner of Washington near the Stanfield, OR, Hub. They are still a year away from filing for a Federal Energy Regulatory Commission certificate, officials said this week because a lot more geologic and seismic "exploration work" needs to be completed before a viable project can be identified.

In both areas, the need for the gas storage --- principally for existing and planned gas-fired power generation --- is clear, and the market access is clearly good, but the formation of the underground landscape may yet prevent commercial storage projects from being built. For now, the respective proponents are remaining optimistic they can solve the underground puzzles.

"The challenge is purely figuring out just what is down there, and whether or not you are going to lose your gas some place," said Jim Fossum, Western Hub's California-based project manager. "We think we have better fields we have isolated. The work is positive. We just got a report this morning that looks like a thumbs up."

Western Hub is using teams of reservoir engineers and petroleum geologists for the field work, but ultimately Fossum and his colleagues must analyze the data. "It has to add up well enough so our financial backers will say yes," he said Monday, still hopeful for a project he first identified in May. "Land is not a problem," said Fossum, noting that it is the ultimate geology under the mostly privately held acreage that will make or break the project.

Similarly, the uncertainty concerning ultimate "closure" of the gas supplies in underground rock continues as PG&E and Avista expect another year of research and development before they know whether they have a go, and if so, what the characteristics (working capacity, injection/withdrawal rates, etc.) of the storage project will be. "The evidence so far is good," said a Spokane, WA-based Avista spokesperson, adding that it is still "preliminary," however, and the companies have not made a final commitment to developing a storage project yet.

"We drilled a well last year just to see if there were domes that we could produce a lot of water in at the depths we were looking for, and based on that one well, we came away with pretty encouraging results. But it is not nearly enough to decide to develop a site," said Mike Hocking, PG&E's engineering director on the proposed storage project.

Other developers of underground gas storage in other regions of the U.S. expressed skepticism about the eastern Washington site, calling it among "the most difficult" types of surroundings because of the preponderance of basalt, several-hundred-million-year-old lava flows. They caution that a storage field in this type of rock has really never been done, and if one is completed, they say it may end up being more like the existing aquifer storage project in southwest Washington, Jackson Prairie.

Hocking said that the comparisons to Jackson Prairie can't be taken too far because the geology in that part of the state --- on the western side of the Cascade Mountains --- is very different. Jackson is shallower with sedimentary rock under sandstone type formations.

"This is much different than Jackson Prairie," he said, noting that the basalt formations, in theory, should provide the cap that is needed for a storage operation

Two of the keys are whether the gas can be securely contained underground so it does not migrate away from the storage project and how much volume ultimately can be stored and moved in and out of the field.

"Seismic analysis is pretty difficult in basalt layers like this," Hocking said. "We're drilling and testing between two drill holes to quantify what the actual porosity and permeability are.

Although there is no history of oil/gas development in the immediate area targeted for an underground storage operation, PG&E's officials point out that 25 miles to the northwest is a depleted natural gas field that produced "billions and billions of cubic feet" from the 1920s through the '40s. In addition, Steve Knudsen, PG&E's project development director, said the Pacific Northwest is experiencing a mini-boom with a lot of different groups looking for oil and natural gas finds in the region. "Historically, on and off there has been drilling in the Pacific Northwest."

Richard Nemec, Los Angeles

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