Pennsylvania-based Buckeye Partners LP announced Friday it has closed its purchase of the Lodi Gas Storage LLC facility in northern California. Originally announced in July of last year (see Daily GPI, July 25, 2007), the purchase was from ArcLight Capital Partners LLC for total cash consideration of approximately $432 million, Buckeye said.
Buckeye said an additional $12 million will be due ArcLight when approval for expansion of Lodi is obtained from the California Public Utilities Commission (CPUC), which earlier in the month (Jan. 10) conditionally approved Lodi’s sale (see Daily/GPI, Jan. 14).
The partnership said it financed the Lodi purchase with two equity offerings last year and a recently completed debt offering earlier in January.
Along with a second underground storage operation, Kirby Hills, about 45 miles west of the Lodi facility, Lodi Gas Storage now has about 22 Bcf of working gas capacity, and the facilities are interconnected to the Pacific Gas and Electric Co. utility backbone transmission pipeline system in northern California.
The Kirby Hills Phase II expansion project is expected to provide an approximate incremental 12 Bcf of working gas capacity, Buckeye said. The company hopes to have the expansion completed by the end of this year.
CPUC conditions on the sale mostly guard against any sharing of information between Lodi and another merchant storage operation that previously had ties to Buckeye — Wild Goose Storage LLC, the state’s first independent underground natural gas storage facility developed a decade ago. CPUC’s Division of Ratepayer Advocates (DRA), originally opposed the sale until a settlement with five conditions was reached in November and filed with the CPUC.
In addition, the CPUC required Buckeye and its affiliates to “give first priority” to Lodi’s capital needs. Buckeye Partners formed subsidiary Buckeye Gas Storage LLC to acquire membership interests in the Lodi operations.
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