Projecting flat demand for natural gas in the state for the next two decades, the latest California Gas Report released by the state’s major utilities and regulators essentially makes it difficult to support new interstate pipeline capacity, a former regulatory attorney told the Law Seminars International “Energy in California” conference last week in San Francisco.

Mark Fogelman, now with Friedman Dumas & Springwater, a San Francisco-based law firm, said the main question coming out of the new gas report is how much new supply does California need? And his answer to that rhetorical question was: “Not much.”

“It appears that the vast natural gas network serving California is very much alive and well and more than adequate to serve the state’s needs at the present time,” said Fogelman, who acknowledged that the surge of shale gas is “a tremendously exciting development,” but he is not sure how that will immediately affect California, or if it would require the construction of additional pipeline capacity.

“It is thought by some people that a lot of the newly developed shale gas supplies will be going east,” he said. “It may free up other supplies and maybe even reduce the price of some of those supplies for California.”

While acknowledging that El Paso Corp.’s proposed Ruby Pipeline from Opal, WY, to Malin, OR, could bring added supplies to California, Fogelman said there are other proposed western pipelines that could add supplies for the state, too, but he thinks the real question is whether there will be markets to support them given the latest gas report projections on demand in the state.

“Forecasts are never perfect, never completely reliable and certainly circumstances can change, but I find the 2010 California Gas Report prepared by the utilities to be the most current look at this question,” said Fogelman, noting that it is covering the period of 2010 through 2030. Overall, the report said the state’s total gas demand is only going to grow on average at a “very modest” 0.07%/year, he said. “In other words, the California Gas Report expects the state’s gas demand over the next 20 years to be flat.”

The reason behind this forecast, according to the report, is a combination of factors: nominal growth in residential, core commercial and generation markets will be offset by a decline in noncore commercial/industrial markets. Combined, residential, core commercial and gas-fired electric generation are only supposed to grow on average slightly more than 0.5% annually while commercial/industrial demand is supposed to decline by 0.53% annually.

“California’s aggressive energy efficiency programs are supposed to have a significant impact on managing growth in the residential, commercial and industrial markets,” said Fogelman, a former attorney with the California Public Utilities Commission. Gas will continue to be the fuel of choice in the power sector, he said, but overall demand for gas for generation will only grow at about 0.35%/year due to a combination of more efficient plants, curbs on greenhouse gas emissions, renewables and aggressive demand response programs.

California expects to experience the equivalent of 40 Bcf of energy efficiency savings by 2030, Fogelman said.

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