FERC has approved Tricor Ten Section Hub LLC’s proposal to convert a depleted oil and natural gas reservoir in Southern California to a high-deliverability multi-cycle gas storage facility to cater to multiple markets in the West. California-based Tricor Energy LLC, parent of the storage company, is an independent energy firm that produces, transports and sells natural gas from its oilfields in California.

The proposed storage facility would serve California, Arizona, New Mexico, Nevada, Oregon, Washington, Idaho, Wyoming, Colorado and the western parts of Utah and Texas, according to Tricor Ten Section Hub.

The project, which would be sited southwest of Bakersfield, CA, would have a working gas capacity of 22.4 Bcf, and would have a maximum withdrawal capability of 1 Bcf/d and maximum injection capacity of 800 MMcf/d [CP09-432]. The proposed facility would interconnect, through a 21-mile, 36-inch diameter header system, with an interstate pipeline running between the cities of Daggett and Bakersfield, owned by Kern River Gas Transmission and Mojave Pipeline Co. The header pipeline will have a design capacity of 1 Bcf/d, said Tricor Ten Section Hub.

The facilities would consist of 26 natural gas storage injection/withdrawal wells; a 42,000-hp compressor station, which would include six 7,000-hp electric drive reciprocating compressors; high-pressure and low-pressure field lines connecting the 26 wellheads to the compressor station; and the bidirectional header system, extending from the compressor station to the interconnection with the Kern River-Mojave pipeline.

In an open season conducted between June and September 2009, Tricor said it received long-term nonbinding bids for 38 Bcf of firm storage service, which is substantially more than the 22.4 Bcf of service being offered. This shows that the market demand for the project is high, the company said.

The Federal Energy Regulatory Commission (FERC) order calls for Tricor’s gas storage facilities to be made available for service within 18 months. The company says the project will be useful to customers seeking to avoid imbalance penalties, capture the value of gas price differentials and support swing gas supply.

The Commission approved Tricor’s request to charge market-based rates for firm and interruptible storage services, even though it found that the company “[had] failed to demonstrate that the scope of its proposed geographic market, which essentially encompasses the entire western United States, is appropriate for use in determining whether Tricor would be able to exercise market power if authorized to charge market-based rates.”

Given this “flaw,” FERC reexamined Tricor’s market power based on what it believed to be a “more appropriate geographic market,” the order said. “Our analysis indicates that Tricor’s market share for working gas is 5% and the market share for maximum peak daily deliverability is 10%. The calculated HHIs [Herfindahl-Hirschman Index] are 1,559 for working gas capacity and 1,937 for maximum daily deliverability. The HHI of 1,559 for working gas capacity is below the 1,800 HHI level that the Commission uses to be indicative of a lack of market power. Further, the market share of 5% for working gas is small, which supports a finding that Tricor will lack market power for working gas.

“We find that while the HHI level of 1,937 for maximum peak day deliverability is above the Commission’s threshold of 1,800, this will be mitigated by its market share of only 10%. In addition, we note that Tricor is a new entrant with no existing jurisdictional or nonjurisdictional operations in the natural gas pipeline or storage industry. In addition, Tricor has no affiliates in the relevant geographic markets…Therefore the Commission will authorize Tricor to charge market-based rates for its proposed storage services.”

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