Ground

Ground was broken this month for development of a $275 million,540 MW natural gas-fired power plant in Arizona by San Jose,CA-based Calpine Corp., and close observers of California electricrestructuring are indicating this plant may be the first of manymore out-of-state plants designed to serve California.

Ground was broken last week for a $275 million, 540 MW naturalgas-fired power plant in Arizona by San Jose, CA-based CalpineCorp., and close observers of the California electric restructuringare indicating this may be the start of more to come throughout theSouthwest.

Moving one step closer to bringing 1.325 Bcf/d of gas fromWestern Canada to Chicago, Alliance Pipeline last week announcedthe start of construction with the clearing of 410 miles offorested rights-of-way for mainlines and laterals in northwesternAlberta and northeastern British Columbia. The entire system isexpected to be completed and in service by October, 2000. Alliancesaid it already has commitments from 37 shippers for 15-yearcontracts worth a total of $8.2 billion. Agreements have beenreached with 93% of landowners along its 2,320-mile route acrossCanada and the United States, while time to complete the NEBproceedings has been built into the construction schedule.

The longevity of the San Juan Basin never ceases to amaze mostindustry observers. Like the Denver Broncos’ John Elway, thewestern producing basin in New Mexico and Colorado just seems tokeep coming back each year to produce even more despite its age andthe endless predictions of its degeneration by its critics.

The gas market actually did pretty well last year considering itwas the warmest year on record, but it may take an ice age toreduce the surplus storage gas bequeathed to 1999. Spotdelivered-to-pipeline gas prices in the U.S. averaged $2.02/MMBtuin 1998, down 41 cents, or 17%, from 1997. Some points fared betterthan others and the West generally did better than the East. Canadaactually came out ahead.

TransCanada Pipelines and Westcoast Energy subsidiary St. ClairPipelines last week filed with Canada’s National Energy Board tobuild the last remaining support components required fordevelopment of the Millennium Pipeline project, a 700 MMcf/d gasline designed to serve markets throughout the Northeast.

A combination of copious amounts of gas both in the pipe andground, and very little weather demand had the stage set perfectlyfor the futures market to trend lower Monday. But despite all theominous fundamental news and bearish sentiment, few traders wereprepared for the price erosion that occurred in early tradingyesterday. The January contract gapped dramatically lower on theopen and quickly set a $1.97 low in the first half hour of trading.That left the spot month to trade sideways for the rest of the daybefore settling at $1.976. In doing so, the January contractcrushed its previous life-of-contract low of $2.085.

The futures market gave back some ground early in the dayFriday, but then managed to rebound late to trade to either side ofunchanged for the day. That enabled the December contract to settlefor the second day in a row at $2.553. Estimated volume was amoderate 47,537.

California’s statewide electricity ballot referendum that wouldturn back parts of the state’s ongoing power industry restructuringis losing by a bigger margin in the latest nonpartisan FieldInstitute survey, but the percentage of undecided voters (36%) isstill large, according to political polling experts.