With a development agreement among six of its members and three other public sector partners, the Southern California Public Power Authority (SCPPA), is actively pursuing up to six aggregated natural gas supply deals from supply basins throughout the Western United States. The effort kicks off the first two weeks of October when a SCPPA contingent will visit with possible suppliers in the gas patch as a “reconnaissance” mission, the group’s Executive Director Bill Carnahan told NGI/Power Market Today Monday.

SCPPA, a state-chartered joint powers authority for financing public sector energy projects, has hired Houston-based Petrie Parkman & Co. as its “petroleum consultant,” said Carnahan, noting that the group of large California municipal utilities, including Los Angeles Department of Water and Power (LADWP), plans to have the first of four to six supply contracts in place by January, ultimately shooting to acquire reserves equivalent to 50-60 MMcf/d on a long-term basis.

SCPPA would use its highly rated credit for tax-exempt financing of $75 to $100 million to support part of the collective gas purchasing, said Carnahan, adding that the recently signed development agreement is pooling the partners’ resources to pay for the consultant, lawyers, and engineers needed to analyze the prospective supply deals. In addition to six Southern California munis, the City of Redding in northern California; Turlock Irrigation District in the central valley; and the Southern Nevada Water Authority are participating in the group gas buy.

“We’ll only be financing for a portion of the SCPPA members,” he said. “The development is a SCPPA project so we can have the money in one place and do the contracts centrally to get things going. LADWP will bring its own money to the table, so we’re in a financing role for part of the members, and in a coordination role for all of the participants, including arranging (pipeline) transportation to the Sempra (Southern California Gas Co.) system at the California-Arizona border.

“We’ll probably be doing multiple properties to spread our risk and get some diversity in the supply. It will take at least four or five deals to get up to the volumes the folks need for their generation resources (in the greater Los Angeles basin and the three outlying areas).”

SCPPA is concentrating on working through Petrie Parkman to identify potential suppliers, who may not know of SCPPA or the possibility of supplying a consortium of muni utilities in the Southwest. Carnahan said the group has put together specific criteria for potential gas reserve properties with Petrie’s help.

“We want to buy into a producing field; we’re not out trying to drill wildcat wells,” Carnahan said. “We want property with production histories, and we want to be a minority participant, so they continue to operate the field. We’re not going to get in the operating business. We’re set to go on a two-week road trip to Texas, Oklahoma, Colorado and Wyoming.”

The next step is to identify the prospective partners who would make the munis minority owners in their own gas reserves.

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