The prospect for more liquid energy markets with stepped-upintra-day deal-making is driving development of a second merchantunderground natural gas storage facility in northern Californiawith proximity to Pacific Gas and Electric’s backbone transmissionsystem (Line 401), according to the Sacramento-based manager ofWestern Hub Properties LLC.

The proposed $50-$100 million Lodi, CA, storage field about 20miles south of Sacramento will file for California Public UtilitiesCommission certification around Oct. 1, said Western Hub’s JimFossum, adding that it will seek a negative declaration regardingenvironmental issues which he hopes will result in state regulatoryapprovals by May, construction over next summer and start-up of thefacility by October 1999, about six months after the scheduledstart of a rival merchant underground storage facility, Wild Goose,being developed 50 miles north of Sacramento by Canada’s AlbertaEnergy.

Fossum said that depending on customer interest between now andMay, Western Hub may decide to double its injection and withdrawalcapacities to 400 MMcf/d and its working gas capacity to 12 bcf. Hesaid an open season will be held this November, running most of themonth.

“The type of storage we are designing is different than existsin California today,” Fossum said. “The difference is that this isvery fast in and out. So the storage is used for daily balancingand operational flow orders (OFO’s that are increasingly a part ofthe unbundled, restructured energy industry). We’ll be able tosolve the problems for our customers-such as the electricgenerators who are bidding hourly. If the price of electricitysuddenly jumps on a hot summer day, the gas will be available tothem and be replaced the next day.

“We are hearing particularly from the newly emerging electricindustry and gas marketers that there is a real desire for the kindof storage that we are proposing.”

Fossum indicated that Western Hub’s plans complement PG&ampE’snew unbundled approach to transmission and storage under theso-called Gas Accord in which the pressures for balancing and thepenalties for being out of balance are much greater.

“It is designed for that,” Fossum said.. “It is not designed forsummer-winter seasonal storage. It is just too bloody expensive forthat. That is one-term service. We are not designing for one-termservice. We’re designing for what’s coming in the 21st Century,which is no-notification nominations. Now we’re down to dailynominations-from three-day. Soon we’ll be into intra-daynominations in the new world. We can handle it.”

Moving ahead with the project is not contingent upon havingcontracts inked this year, said Fossum, noting that Western Hub isnegotiating with a number of prospective customers, includemerchant power plant operators.

Part of the construction will including building a24-inch-diameter, 30-mile transmission pipeline to hook in withPG&ampE’s gas transmission operations. Fossum said “from thebeginning” that the utility has been very supportive of thisproposed project, which will involve building up to threecompressor units and drilling up to 10 new gas wells on theproperty, an depleted dry gas field.

Richard Nemec, Los Angeles

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