Kern River Gas Transmission plans to carry out another expansion of its system to California, providing an outlet for more Rocky Mountain natural gas, if California regulators next month authorize state utilities to turn back capacity on the El Paso Natural Gas and Transwestern pipeline systems in order to provide supply diversity for California consumers, said an official for the pipeline last Wednesday.

If the California Public Utilities Commission (CPUC) should issue a final decision in September that requires state utilities to turn back capacity on the other California-bound pipes, “we’ll hold an open season for this expansion and we’ll also hold a reversal so [that] if there are shippers on Kern that would like to get off, that would be the time,” said Kirk T. Morgan, vice president of market and regulatory affairs for Kern River, at the Rocky Mountain Natural Gas Strategy Conference & Investment Forum in Denver.

Up for grabs will be 2 Bcf/d of California core transportation contracts, which expire in August 2006, and 545 MMcf/d of non-core contracts that expire around the same time, he noted.

“We’ll certainly…be competing for those volumes,” Morgan told producers and other industry executives. He said Kern River’s system still can be expanded by 200-500 MMcf/d with looping near Salt Lake City and Las Vegas, NV. The targeted in-service date for the proposed expansion would be November 2007.

“We think the California commission is doing the right thing. They should have supply diversity,” Morgan said. “Rockies gas will ultimately have to compete with LNG [liquefied natural gas]” in California, if the state orders supply diversity. But “we think we can get there before LNG.”

Supply diversity “[would] promote gas-on-gas competition” in the California gas market, and it would provide price stability, Morgan said.

Kern River currently has receipt point capacity of 4 Bcf/d in Wyoming and some in Utah, and delivery point capacity of 5.7 Bcf/d, of which 3.4 Bcf/d is for transportation to the California border.

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