Setting aside vociferous local opposition from nearby propertyowners and a proposed denial from one of its administrative lawjudges (ALJ), the California Public Utilities Commission Thursdaygave the go-ahead to a proposed $80 million underground natural gasstorage field near Lodi in Northern California.

Texas-based Western Hub Properties’ $80 million Lodi storageproject is designed to have 12 Bcf of working capacity, with 400MMcf/d injection and 500 MMcf/d withdrawal capacity. It includes a35-mile transmission pipeline that connects with Pacific Gas andElectric Co.’s backbone pipeline. It will be the state’s secondnon-utility storage project, following Wild Goose storage whichwent into service last year. Approval of the Lodi project iseffective in mid-June.

While CPUC Commissioner Richard Bilas said he supports “lettingthe market decide” whether a project should be built and encouragescompetition in gas storage, he “cannot support allowing competitorsto use regulatory loopholes to take advantage of private propertyowners. In my view, this case comes precariously close to allowingthat to happen.”

Although the Lodi project won environmental approval from anALJ, the judge recommended the project not be built because itdidn’t meet local-need criteria.

After postponing a decision on the proposed denial of theproject, the CPUC president and one of the other five commissionersdeveloped an alternative that gives “conditional” certification tothe project so it can proceed with development and construction. Todo so, Western Hub will have to comply with all the designatedenvironmental mitigation measures, obtain adequate insurance andgain other state permits, including the State Lands Commission.

Western Hub officials have maintained that Lodi’s uniquegeographical location with proximity to key electric generatingplants will be the state’s only underground storage projectoffering fast deliverability to meet the needs of an increasinglycompetitive generation market.

In sympathizing with the local concerns regarding this project,Commissioner Bilas said the opposition efforts of Lodi residents”have not been wasted. They highlight the need for [the CPUC] tocontinually review how its policies mesh with changing marketconditions and how these interactions affect people. This willcontinue to be a delicate balancing act.” The CPUC unanimousdecision, Bilas said, “attempts to make that balance.”

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.

Meanwhile, Western Hub is eyeing a second potential storage sitenear Wheeler Ridge, southwest of Bakersfield. It is hoping to helpdevelop an important regional energy hub in the southern end ofCalifornia’s central valley. The project would be similar in sizeto Lodi.

A merchant storage field in the Wheeler Ridge area would be inclose proximity to each of the four major gas pipelines in thestate and to the sites for several proposed gas-fired merchantpower plants — one of them, PG&E Corp.’s La Paloma plant,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.

“This is a storage project that is very similar to the LodiProject,” said Jim Fossum, Western Hub California project manager.The concept of a project in the vicinity of Wheeler Ridge is beingused in Western’s ongoing marketing efforts to line up customersand equity financial support, but there are no specific engineeringplans or draft regulatory filings in place.

Fossum said Western Hub owns some rights to depleted oil/gasproperties in the area, which has a long history of fossil fuelexploration and development covering much of the 20th Century.”We’re working on the engineering of it,” he said, adding that heis not “free to pinpoint precisely where [the proposed site] islocated.”

“We have already told people that we intend to be interconnectedwith PG&E, Southern California Gas Co., 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.”

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