FERC at its Wednesday meeting issued Kern River a certificate to build its long-awaited 2003 expansion project, which would more than double the existing capacity of the Wyoming-to-California pipeline. Earlier in the month, a Kern River executive said that ongoing incremental expansion is all that is needed to supply natural gas demand in California and the surrounding area going forward.

The Federal Energy Regulatory Commission’s certificate opens the door for the construction of a huge new conduit for nearly 900 MMcf/d of additional natural gas to exit the Rocky Mountain region and head to the flood of new power plants in Nevada and California starting next May.

Coming in response to FERC’s action, Standard & Poor’s said a “major risk” has been removed on Kern River Gas Transmission Co.’s (A-/Stable/–) bank loan rating. “A delayed FERC approval could have driven up the costs of the project,” the credit rating agency said. “Standard & Poor’s expects that construction of the pipeline expansion should now proceed on schedule with little delay.”

In its certificate, FERC said that its approval of the project will assist in “satisfying the large demand for natural gas supplies in the western states, and will do so in an environmentally responsible manner.” It also said that the project will strengthen Kern River’s system and allow it to function more efficiently.

The $1.2 billion project would bring the total system capacity to 1.73 Bcf/d. Under the company’s plans, the project would loop about 717 miles of the pipeline’s 922-mile system from Wyoming to Bakersfield, CA. It would also include the addition of 163,700 horsepower of compression at three new and six existing compressor stations. The FERC order requires the expansion facilities to be built and in operation within two years [CP01-422].

The Commission rejected a request by BP America Production Co. and BP Energy Co. for rehearing of the preliminary determination (PD) order in February. Both claimed the Kern River expansion would degrade service to existing shippers at Wheeler Ridge in California. But FERC countered that “Kern River is proposing to construct sufficient facilities at Wheeler Ridge to accommodate the increased sales of primary delivery point capacity on its system, and, thus, contrary to BP’s arguments, Kern River would not be overselling its capacity.”

The Federal Energy Regulatory Commission and the California State Lands Commission in late June issued a joint final environmental impact statement that was favorable to the project (see NGI, June 24). At the time, the agencies said that construction of Kern River ‘s mammoth expansion would be an “environmentally acceptable action,” provided the pipeline adheres to its proposed mitigation measures and complies with the recommended mitigation initiatives.

Speaking earlier this month at the American Conference Institute’s energy symposium in San Diego, Kirk Morgan, Kern River’s vice president for marketing and regulatory affairs, said that incremental expansion which is ongoing, compared to new greenfield interstate pipelines into California, should accommodate all foreseeable additional natural gas pipeline demand.

Existing expansions going forward, bringing an added 900 MMcf/d into California, will help backfill in Southern California for current El Paso Natural Gas Co. supplies that may be diverted to new power plants in Arizona. The economics of further expansions are not clear beyond 2003, Morgan said.

The executive added that more than half of Kern River’s 900 MMcf/d expansion into California is designated for existing markets — new power plants in Nevada and California.

Even with the delays in the unbundling of Southern California Gas Co.’s backbone transmission pipeline system, the opening last April of a new interconnect between Kern and SoCal at Kramer Junction has eliminated much of the congestion at Wheeler Ridge, and the new interconnect is designed for even greater capacities in the future, Morgan said. Kramer adds 200 MMcf/d capacity to SoCalGas’ system, and it is designed to ultimately add up to 500 MMcf/d.

Kern River had taken flak for congestion at Wheeler Ridge, where at one time, Morgan said, there was something like “6 Tcf of nominations,” but Kramer Junction should solve that.

As a new pipeline in the early 1990s, Kern River was sponsored almost entirely by producers in the Rocky Mountains, but today its used almost entirely by local distribution companies or their marketers, said Morgan, outlining Kern’s 32-mile, 24-inch-diameter lateral in the high desert northeast of Los Angeles to serve the Constellation energy joint venture, and 810 MW power plant called the High Desert Project.

The new pipeline lateral that for the most part parallels one already operated by SoCalGas (its Adelanto line), will have a 282 MMcf/d capacity, but it will only be fully utilized if Constellation decides to build a second, adjacent plant. High Desert owns all the capacity on the pipeline lateral, and the first plant will use about 141 MMcf/d when it starts up on its current delayed schedule in the summer of 2003, Morgan said.

Morgan was negative about other currently proposed new pipelines or expansions in the region. For example, he doesn’t think El Paso’s proposed Ruby Pipeline will be built, but if it is, he said Kern River will be compelled to have an open season to compete for that market.

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