Message-ID: <33306003.1075846688494.JavaMail.evans@thyme> Date: Fri, 19 May 2000 07:21:00 -0700 (PDT) From: lorna.brennan@enron.com To: steven.harris@enron.com, jeffery.fawcett@enron.com, lorraine.lindberg@enron.com, kevin.hyatt@enron.com, christine.stokes@enron.com, tk.lohman@enron.com, lee.huber@enron.com, susan.scott@enron.com, sarabeth.smith@enron.com Subject: California Western Storage Initiatives Cc: mike.mcgowan@enron.com Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit Bcc: mike.mcgowan@enron.com X-From: Lorna Brennan X-To: Steven Harris, Jeffery Fawcett, Lorraine Lindberg, Kevin Hyatt, Christine Stokes, TK Lohman, Lee Huber, Susan Scott, Sarabeth Smith X-cc: Mike McGowan X-bcc: X-Folder: \Susan_Scott_Dec2000_June2001_1\Notes Folders\Discussion threads X-Origin: SCOTT-S X-FileName: sscott3.nsf Note: Let me know if we need to gather more information on these storage initiatives. I would be happy to research further. Lorna CA Gets 2nd Merchant Storage Project, 3rd on the Way Setting aside vociferous local opposition from nearby property owners and a proposed denial from one of its administrative law judges (ALJ), the California Public Utilities Commission Thursday gave the go-ahead to a proposed $80 million underground natural gas storage field near Lodi in Northern California. Texas-based Western Hub Properties' $80 million Lodi storage project is designed to have 12 Bcf of working capacity, with 400 MMcf/d injection and 500 MMcf/d withdrawal capacity. It includes a 35-mile transmission pipeline that connects with Pacific Gas and Electric Co.'s backbone pipeline. It will be the state's second non-utility storage project, following Wild Goose storage which went into service last year. Approval of the Lodi project is effective in mid-June. While CPUC Commissioner Richard Bilas said he supports "letting the market decide" whether a project should be built and encourages competition in gas storage, he "cannot support allowing competitors to use regulatory loopholes to take advantage of private property owners. In my view, this case comes precariously close to allowing that to happen." Although the Lodi project won environmental approval from an ALJ, the judge recommended the project not be built because it didn't meet local-need criteria. After postponing a decision on the proposed denial of the project, the CPUC president and one of the other five commissioners developed an alternative that gives "conditional" certification to the project so it can proceed with development and construction. To do so, Western Hub will have to comply with all the designated environmental mitigation measures, obtain adequate insurance and gain other state permits, including the State Lands Commission. Western Hub officials have maintained that Lodi's unique geographical location with proximity to key electric generating plants will be the state's only underground storage project offering fast deliverability to meet the needs of an increasingly competitive generation market. In sympathizing with the local concerns regarding this project, Commissioner Bilas said the opposition efforts of Lodi residents "have not been wasted. They highlight the need for [the CPUC] to continually review how its policies mesh with changing market conditions and how these interactions affect people. This will continue to be a delicate balancing act." The CPUC unanimous decision, Bilas said, "attempts to make that balance." Five local property owners --- one immediately adjacent to the proposed project --- traveled to San Francisco to urge the regulators to reject Western Hub's applications. They called the company "very arrogant" in the way it treated local landowners and argued that the project would "significantly adversely affect the quality of life" in their community. Meanwhile, Western Hub is eyeing a second potential storage site near Wheeler Ridge, southwest of Bakersfield. It is hoping to help develop an important regional energy hub in the southern end of California's central valley. The project would be similar in size to Lodi. A merchant storage field in the Wheeler Ridge area would be in close proximity to each of the four major gas pipelines in the state and to the sites for several proposed gas-fired merchant power plants --- one of them, PG&E Corp.'s La Paloma plant, which began construction May 17, will be the state's largest merchant plant (1,048 MW). Western Hub anticipates moving through the state approval processes quicker and having the project operational in the "next two to three years," according to its California-based officials. "This is a storage project that is very similar to the Lodi Project," said Jim Fossum, Western Hub California project manager. The concept of a project in the vicinity of Wheeler Ridge is being used in Western's ongoing marketing efforts to line up customers and equity financial support, but there are no specific engineering plans or draft regulatory filings in place. Fossum said Western Hub owns some rights to depleted oil/gas properties in the area, which has a long history of fossil fuel exploration and development covering much of the 20th Century. "We're working on the engineering of it," he said, adding that he is not "free to pinpoint precisely where [the proposed site] is located." "We have already told people that we intend to be interconnected with PG&E, Southern California Gas Co., Kern River and Mojave pipelines," he said. "We intend to not only provide service to the power plants in the area, but to the Las Vegas area and to the power plants in Arizona." Fossum said the expectation is that large customers in Nevada and Arizona could store gas in California for the peak-load times when they need extra supplies; take more than their normal loads off the Kern River or Mojave interstate pipeline and "pay" for the extra supplies out storage that would go to uses in California. "On a hot summer day, a customer in Las Vegas may need more gas but there is no capacity available because everyone else wants it, too," Fossum said. "So the Nevada customer arranges to take extras from Shell or Chevron [or one of the California-based customers] and supply that gas back to them at Wheeler Ridge."