Increased gas and electricity price/supply volatility is musicto the ears of natural gas storage developers, and no one iswhistling louder these days than two firms sinking their investmentdollars into depleted gas fields in California: Western Canada’sAlberta Energy Company, developer of the state’s first merchantunderground storage project, Wild Goose Storage, in a depleted gasreservoir 50 miles north of Sacramento; and Western Hub Properties,the Texas-based developer that will begin construction of thefirst of two new storage projects in the state by the end of March.

Although delayed in finalizing all of its local permits, WesternHub will begin construction on its Lodi Storage Project south ofSacramento by the end of March, according to its California projectmanager Jim Fossum. It has selected a location for a similarproject in the southern half of the state, Wheeler Ridge Hub, whichis expected to start construction by the end of 2002 and beconnected with four different transmission pipeline systems.

Following the completion of its most successful open season yet,garnering long-term four- and five-year contracts for the firsttime, Wild Goose’s Canadian backer said last Friday that it islooking at expanding the field and linking it to the Pacific Gasand Electric Co. backbone transmission pipeline network over thenext three years. Alberta Energy also is taking over storage inOklahoma, too, betting that in the heated energy markets storagemight be a preferable alternative to large pipeline expansions.

“We had a reasonably good year for ourselves and our customers,”said Paul Amirault, Alberta Energy’s vice president for businessdevelopment. “The open season attracted long-term contracts for asmuch capacity as we were comfortable selling and at prices muchbetter than in previous years. The environment has certainlytranslated into an early contracted facility at good prices. Marketarea storage is worth something and this market situation inCalifornia could last for some time.

“So I don’t think it is any secret that we are evaluating anexpansion at the moment. But it would take some time both for theregulatory process and for building a 20 to 25-mile pipeline to thePG&E backbone. That is a more significant endeavor.”

Wild Goose, with 14 Bcf of working capacity, 200 MMcf/dwithdrawal and 80MMcf/d injection, currently is only connectedthrough a relatively small-diameter pipeline to PG&E’s localtransmission system. “It provides a constraint on how much gas wecan handle at our facility,” Amirault said. “The most likely timeframe to bring that online would be the spring of 2004, althoughthat could be sped up by taking some risks by pre-orderingequipment, pipe, etc. We think it is certainly going to be needed,but the trick is to make sure customers see this as the propersolution.”

Amirault said in today’s volatile energy markets storagedevelopers could make a case that their projects are moreeconomically viable than interstate transmission pipelineexpansions. “We think storage makes a lot more sense than buildinga lot more pipe back to supply basins. It gives you better usage ofthe existing pipe,” he said, adding that in recent years thePG&E transmission system in northern California, for example,has averaged only 85% load factor on a year-round basis.

“If you add more storage at the end of those pipes, you canincrease the average load factor by just five percent and get awhole bunch more customers.”

Alberta Energy continues to look for other possible sites in thewestern U. S. for developing new storage projects, but it has yetto find anything better (in California) than expanding Wild Gooseand/or buying existing fields like the 15 Bcf (working capacity)Manchester Gas Facility in Oklahoma, which Alberta is in theprocess of purchasing. “This is an indication that where we canfind an attractive facility, we will step in and buy it,” Amiraultsaid.

Western Hub’s facilities are designed as “multi-turn” storageprojects in which a minimum of 500 MMcf/d of gas can be withdrawnor injected, Fossum said. Lodi is designed for 12 Bcf of workingcapacity. The still-to-be-designated and certificated Wheeler RidgeHub would have 9 Bcf of working capacity in the first of athree-phase build up toward 20-25 Bcf capacity, he said.

“It’s an easy one from an engineering standpoint, although thereservoir analysis is still being completed,” Fossum said. Anapplication to state regulatory authorities is expected “in thenext few months,” he said. The transmission interconnectionsenvisioned for Wheeler Ridge Hub include Kern River, Mojave,PG&E and Southern California Gas pipelines.

Richard Nemec, Los Angeles

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