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."