Denver-based Western Gas Resources earlier this week exercisedits long-standing option to buy 170 miles of proprietary gaspipelines in the Sacramento Basin and promptly sold the network oftwo- and 10-inch-diameter pipes to California-based merchant powerplant developer Calpine Corp. No dollar figures on the deals willbe released, and both companies are expected to make formalannouncements later this week or early next week, according toWestern Gas and Calpine.

Western Gas last year acquired the option to buy the pipelinesfrom Aera, an alliance of Shell and Mobil, and established WesternGas Resources California as a company that sought state regulationas an open access pipeline serving existing and future industrialcustomers, including Calpine’s existing and proposed power plantsin the East San Francisco Bay area.

Western’s California company has now been sold to Calpine, whichmay eventually seek similar open-access, state-regulated status forthe pipelines, according to a Western Gas official. The CPUC lastfall rejected Western Gas’ application to operate an open-accessdistribution system on the basis that the regulatory commission hasno existing policy allowing local gas transmission and distributioncompetition. Putting the pipeline under state regulation would putit in competition with Pacific Gas and Electric Co., the localmonopoly transmission and distribution network.

“We’re still very interested in California,” said Craig Supplee,Western’s business development director in Denver. “We just thoughtwith the CPUC decision this was our best possible businessdecision.”

Supplee speculated that Calpine will operate the pipelines on amerchant basis until “the commission (CPUC) shows a differentattitude toward the pipeline. Some time in the future they willwant to go back and try to do a deal like we were doing. Until thecommission attitude changes, I don’t think they will do that. It’stoo expensive.”

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