By the OGJ Online Staff
HOUSTON, June 14 -- A new study by the Energy Information Administration estimates 590 MMcfd more gas can be delivered to California by interstate pipelines than can be taken away by intrastate gas lines, more than double the California Energy Commission's estimates.
The California Energy Commission (CEC) calculates 200 MMcfd less gas can be picked up at the state border than can be delivered to the state. The federal agency said its estimate was derived by comparing interstate capacities at specific border crossings with the CEC estimates of intrastate receipt capacity.
The report comes at a time controversy has boiled over with respect to why gas prices are higher in California than elsewhere and how much of it has to do with pipeline capacity and control of that capacity both inside and outside the state. City gate prices have been extremely volatile over the past year, rising as high as $60/MMbtu in December 2000.
Last month, President George W. Bush told California Gov. Gray Davis he will ask Pat Wood, newly appointed to the Federal Energy Regulatory Commission, to investigate problems in the California gas market.
According to the California Energy Commission, the major in-state natural gas service providers, pipeline units of PG&E Corp., San Francisco, and Southern California Gas Co. (SoCal Gas), a unit of Sempra Energy, San Diego, Calif., are fully utilizing their receipt capacity at the state border.
Presently, SoCal Gas's system is often operating at or above full capacity. The federal agency said some have speculated SoCal Gas has hesitated to expand its system because, once the hydropower resources return to normal in 1-2 years, less natural gas will be needed for electric power generation. California and the Northwest have been gripped by drought, cutting hydroelectricity output significantly.
But EIA noted SoCal Gas has filed to build several projects to expand delivery capacity in the state. The first project would increase take-away capacity at three critical points on its system. Although capacity would increase by only about 50-60 MMcfd at each point, EIA said one would increase access to growing California gas production, while the other two would upgrade currently constrained interconnections with the interstate network.
A second project involves building a new 200 MMcfd, 32-mile lateral that would link the southern part SoCal Gas's system with an interconnect with the Kern River-Mojave Pipeline on the northern part of the SoCal Gas system.
On the PG&E system, which serves northern California above Kern County, capacity levels exceed current customer needs even on peak days, EIA said. The agency quoted company officials who reported daily requirements during the summer are usually 20-30 MMcfd below certificated capacity at the northern California border, rising to more than 90 MMcfd in winter.
Upgrades in the works
Nevertheless, PG&E plans on upgrading and expanding its system to accommodate a planned increase in capacity on the PG&E Transmission - Northwest system of more than 300 MMcfd in 2002. However, the company has no plans to increase capacity on its southern route, which transports gas into California from Arizona, EIA said, since existing capacity is adequate to meet current customer needs.
Since the beginning of 2001, at least six projects have been proposed to bring additional pipeline capacity into California, but with a couple of exceptions most will not help until 2002. Currently, Kern River Transmission Co., a unit of Williams, Tulsa, Okla., is delivering only about 500 MMcfd into California, although it is capable of delivering up to 750 MMcfd.
EIA said the reason for this is that 200 MMcfd is being diverted to power plants in the Las Vegas area. To help rectify this situation, Kern River will expand its system north of Las Vegas, allowing more gas to enter California. The federal agency said this "emergency" expansion is scheduled to be in service in June.
Meanwhile, a pipeline unit of El Paso Corp., Houston, also expects to complete a 230 MMcfd expansion this summer.
Several interstate pipeline projects proposed to increase capacity to California will not terminate at the state border. They will extend into territories previously the domain of SoCal Gas. Questar Corp., Salt Lake City, Utah, and and Kern River Transmission have proposed expansion projects that terminate in the Long Beach-Los Angeles area.
However, EIA said this segment of both projects is on hold due to an inability of the pipelines to interest customers who may be subject to price penalties from SoCal Gas under current state restrictions.