Located less than five miles from downtown Los Angeles, theindustrial city of Vernon sits as an attractive trophy for one oftwo proposed natural gas interstate pipelines. The business-focusedlocal government is finishing construction of a new municipal gasdistribution system that will compete with Southern California Gas’existing network. By next year, there will be duplicative gasdistribution systems operating.

Although no one will officially confirm negotiations, it isobvious that both Questar’s Southern Trails line, a plannedconversion of an interstate oil pipeline, and the proposed southernexpansion of Kern River Pipeline’s existing system are targetingVernon. It’s a city with less than a dozen residential energycustomers and more than 900 commercial and industrial businessoperators that collectively represent a 38 MMcf/d gas load and a$54 million annual electric bill paid to municipal utilities. Someof its industrial sites are ripe for future cogeneration ormerchant power plants. The city leaders boast that Vernonrepresents “one of the most cost-effective manufacturing centers inthe U.S. with the lowest utility bills in the region.”

A Questar spokesman said conversion of the 700-mile formerlyArco oil pipeline, which runs primarily between northwestern NewMexico’s Paradox Basin and Long Beach, CA, is moving along onschedule for start of gas service in mid-2001. Upon completion, thepipeline’s capacity will be 120-130 MMcf/d. He refused to namespecific customers, but noted Questar has signed one contract andnegotiations are ongoing with all other potential customersidentified from an open season held late in 1998. Questar filed arequest with FERC March 9 to change the project to an “at-risk”status, meaning it is foregoing the process of proving a minimalcustomer base in favor of having its shareholders take the riskthat it can sign up the needed load to make the pipelineeconomically viable.

Kern River also would not say if Vernon is among the 1 Bcf/d ofinterest the interstate pipeline company received during its recentopen season. “At this point there is nothing to report,” saidKern’s Jennifer Pierce, noting that there is “lots of interest”from what she characterizes as numerous potential customers inSouthern California. Pierce also said that Kern is offering “termdifferential” rates for interstate transportation into Californiaas a means of sweetening their offers to prospective customers.

Vernon is in the third phase of a four-phase constructionprogram begun in 1997 at the urging of several of the city’s largemanufacturers who were unhappy with existing gas utility rates fortransportation. In total, the city will operate 41 miles ofdistribution pipe and five miles of steel mainline. “We believe wehave planned for not only current loads but significant growth inthe future,” said Dick Sweeney, gas operations manager for theVernon utility. “The industrial customers asked us to develop thenatural gas system, but it would be a little premature to havecontracts yet since we’re not operational yet. I know several ofthese industrial customers are under other contracts right now, andthey will have to fulfill those obligations before they signanything with us.”

Richard Nemec, Los Angeles

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