With focus shifting to natural gas prices and supplyavailability this fall and winter, a proposed conversion of the old16-inch-diameter Four Corners oil pipeline to natural gas has runinto a stalemate over a Southern California Gas Co. tariff thatallegedly inhibits the new pipeline from signing up industrialloads in the southern half of the state.
As a result, the proposed 120-130 MMcf/d of new gas supplies,originally expected to be in play in California by now, would beavailable at the earliest in the third quarter of next year eventhough the project backer, Salt Lake City-based Questar Corp., hasobtained federal approvals, including an environmental assessmentfor its 700-mile Southern Trails Pipeline.
All the preliminary engineering and planning work has beencompleted, but there won’t be any conversion work of the idle oilpipeline until final resolution of the California tariff issue andan additional environmental assessment on part of the pipeline’sroute in the desert east of Riverside, CA, is completed, accordingto a Questar spokesperson. The pipeline terminates in the heavilyindustrialized port at Long Beach, CA.
“We’re not going to get excited about placing any orders forcompressors until we get these (California) regulatory issuesresolved,” the spokesperson said.
The interstate pipeline has not been able to line up anyCalifornia customers for the converted line thus far, thespokesperson said, because of a SoCalGas “residual load service”(RLS) tariff, which requires customers to pay utility capacitycharges for increments of supply they switch from the SoCal systemto a competing pipeline. A California Public Utilities Commissionadministrative law judge is considering proposals from bothSoCalGas and Questar for alternative tariffs that won’t continue”to hang up our marketing efforts,” the spokesperson said.
The tariff issue is “definitely the priority” for Questar, thespokesperson said. Questar is cool toward one of SoCalGas’alternate proposals, viewing it as too similar to the existing RLS.Another proposal by SoCal and one by Questar, itself, suggest acost-based rate, which is what Questar alleges will allow thecompany to convert the pipeline and compete in the Californiamarket.
“Our proposal is not what SoCalGas has proposed; their’s is sortof a scaleable approach, which we think still tries to keepcompetition from coming in,” said the Questar spokesperson. “Wesupport a cost-based rate that is truly based on the cost ofproviding service.”
The same RLS rate had been the subject of discussions in thefar-reaching SoCalGas settlement discussions last year and earlierthis year as part of the CPUC’s natural gas restructuringproceedings.
“Customers still look at the use of any other pipeline aspunitive,” the Questar spokesperson said. “They have to ante up toSoCal and pay another pipeline, too.”
The other outstanding issue in California for Questar involves”a couple of issues” the company is working through with the StateLands Commission related to environmental aspects for a portion ofthe converted pipeline near an American Indian Reservation in thePalm Springs area about 120 miles east of Los Angeles. It involvesless than 10 miles of the pipeline, according to the spokesperson.
Questar’s $2.2 billion operation includes exploration andproduction in Wyoming and distribution in Utah and small portionsof southeast Idaho and southwest Wyoming. It has about 700,000retail customers, mostly all in Utah, and its interstate pipelinenetwork will allow the converted Southern Trails pipeline to linkwith six interstate or distribution pipelines, includingTransColorado Gas Transmission, Transwestern Pipeline, El PasoNatural Gas, SoCalGas, Pacific Gas and Electric and Southwest GasCorp.
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