Sam Fletcher
OGJ Online
HOUSTON, Mar. 6�The California Independent Petroleum Association (CIPA) is scrambling to extend SoCal Gas Co.�s year-end deadline to stop taking associated natural gas that is not up to state quality standards for compressed natural gas vehicles.
That move could shut down several small and medium oil producers in the Los Angeles basin as well as in Kern and Ventura Counties, CIPA officials said.
Most of the primarily independent producers in those southern California regions historically have sold their associated gas to SoCal Gas. That amounts to about 10% of the utility�s entire gas supply, said company officials.
CIPA officials acknowledge that the gas varies in quality and does not meet the commercial fuel specifications�set by the California Air Resources Board (CARB) in 1992�that strictly limit amounts of ethane, nonmethane components, and hydrocarbons in compressed natural gas (CNG) used to fuel vehicles in that state.
Since then, SoCal has continued to buy gas produced in association with oil by southern California producers and has used various methods to bring it into compliance with state specifications at the CNG fueling sites it supplies. But in July, SoCal notified producers that it was changing that policy and would soon no longer accept gas that did not meet CARB specifications. Utility officials said increased costs, safety concerns, and the growing number of CNG fueling sites made it more difficult to know if its CNG deliveries are up to state specifications.
However, some critics say privately that the California utilities would like to cut their costs by buying all of their gas supplies out-of-state, eliminating the need to provide intrastate gathering and processing systems.
At any rate, SoCal gave southern California producers 18 months either to bring their gas up to specs or find alternatives for disposing gas produced in association with their primary oil production.
But most small and medium California oil producers can�t afford either to treat the gas to CARB specifications or to reinject it, said CIPA officials. Besides, they said, treatment equipment requires extensive permitting from local air boards and other regulators that far exceeds the 18-month time limit.
Since flaring is prohibited, they said, the only alternative may be to shut down production.
Meanwhile, CIPA has proposed legislation that would require California utilities to give some preference to intrastate producers in purchasing gas supplies.
It also wants the legislature to shorten the permitting process for gas treatment plants and to provide tax and other incentives for small and medium operators to use their gas as fuel to generate electric power.
On Feb. 20, CIPA directors approved creation of the California Natural Gas Producers Association as another industry group to lobby state officials on energy issues. Because that proposal involves significant changes to CIPA bylaws, it must be approved by a majority of members.
The associated gas quality issue did not trigger creation of that new group, said CIPA officials. But they do expect it to address that and other industry issues from the producers� point of view.
Contact Sam Fletcher at [email protected]
