PG&E National Energy Group, an affiliate of PG&E Corp.,last week formally filed an application at FERC seeking the greenlight to build the U.S. leg of a 215-mile natural gas pipeline thatwould extend from the Arizona-California border through northernBaja in Mexico.

In joint partnership with Sempra Energy International, PG&ENational Energy proposes to build a 500,000 Dth/d, mostly 30-inchpipeline to serve the growing gas demand of large industrials andpower generators in northern Mexico. The deal also includesparticipation by the Mexican firm, Proxima Gas SA de CV.

The pipeline is expected to bring some relief to the strainednatural gas pipeline infrastructure in the southern end ofCalifornia as well. The companies hope to begin construction of the$230 million line in early 2002, and have it in operation by thethird quarter of that year.

“Support for the project remains very strong,” said Thomas B.King, president and COO of PG&E National Energy Group, WestRegion. So much so that PG&E and Sempra Energy increased theinitial capacity of the proposed pipeline by 100,000 Dth/d in theFERC application, and expanded the diameter of the first 12-milelink in the U.S. to 36 inches.

A PG&E spokeswoman estimated the companies already havesigned four precedent agreements for 300,000 Dth/d with EnergiaAzteca, a subsidiary of InterGen, as well as subsidiaries ofPG&E National Energy Group and Sempra Energy International. Thecompanies said they currently are negotiating with other potentialcustomers.

The agreements include some “limited conditions,” such asPG&E and Sempra Energy getting full FERC certification, thespokeswoman said, noting that the companies feel they have “clearsupport from the market.”

“We looked at the gas supply options for our generating plantsin Mexicali, including the option of building our own pipeline, andconcluded that the North Baja project presents the mostcost-effective means for reliably meeting our requirements,” saidPhillip Cantner, InterGen’s vice president of development for LatinAmerica.

The proposed pipeline would begin at an interconnection with ElPaso Natural Gas, near Ehrenberg, AZ, cross southeastern Californiaand northern Baja in Mexico, and terminate at an existing pipelinesystem in Mexico – Transportadora de Gas Natural.

PG&E National Energy Group will be in charge of thepermitting and development of the 80-mile U.S. portion of thepipeline, while Sempra Energy will direct the permitting anddevelopment of the 135-mile Mexican leg, according to thecompanies.

Richard Nemec, Los Angeles; Susan Parker

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