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California natural gas storage in focus amid reliability challenges in US West


SoCal Gas wants to drill new wells at its fields

Questions loom over future of Aliso Canyon

Houston β€” Southern California Gas wants to drill new wells at all of its storage facilities, including Aliso Canyon, to boost reliability even as it faces a tough regulatory environment and state policies focused on replacing fossil fuels with renewables, an executive said Friday.

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The utility pulled gas from the Los Angeles area field for the first time this winter on January 2. Restrictions imposed after a massive leak there in 2015 have limited Aliso Canyon's use to a last resort. That has forced SoCal Gas to rely more heavily on its other storage fields and to seek curtailments periodically to balance its system.

Even with the adjustments, the California market has seen significant price volatility, and concerns have been raised about the long-term impact on gas deliverability to millions of customers if the restrictions are not eased or if the field is shuttered altogether, as some public advocacy groups have encouraged. With unintended consequences filtering beyond the state to Nevada and Arizona, SoCal Gas and other industry leaders are pushing back more aggressively with their approach.

"Our intention would be to invest in Aliso Canyon with new wells," Neil Navin, SoCal Gas' vice president of gas transmission and storage, said during the final day of S&P Global Platts' annual Gas Storage Outlook Conference in Houston.

After the leak was stopped and an investigation concluded, California regulators allowed Aliso Canyon to resume injections in July 2017. Around the same time, the California Public Utilities Commission approved SoCal Gas' request to increase Aliso Canyon's capacity to a total of 24 Bcf, citing reliability concerns and lower inventory levels at the utility's three other storage facilities. In early July 2018, SoCal Gas once again received CPUC approval to increase Aliso Canyon's capacity to 34 Bcf, bringing SoCal Gas' current total storage capacity to 84 Bcf.

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However, the restrictions on the circumstances under which withdrawals can be made continue to present challenges for the market.

"The situation used to be that all the gas coming in to California would get used or go into storage and come back out. That capability is going away," Kevin Holder, an executive vice president at western US pipeline and gas storage operator Magnum Energy Midstream, said at the conference. "You're starting to see some folks get nervous about the long-term picture." The regulatory and market dynamics in Southern California are impacting decisions by storage operators in the northern part of the state and beyond the state.

Pacific Gas & Electric is proposing to sell two of its smaller storage fields or close them if it cannot accomplish that by 2022, leaving the liquidity and optionality that comes with more capacity to independent operators.

"We are going to back out of that part of the market and rely almost entirely on reliability and managing our system," said Mel Christopher, vice president of transmission and distribution operations at PG&E.


Holder faulted regulators and gas storage opponents for not fully recognizing the broader impact of the policy changes imposed after the Aliso Canyon mishap.

"Taking capacity and deliverability away from it in a vacuum may make some sense in some arguments, but it is having significant unintended consequences outside the border of California," he said. "The reason is, El Paso, although they never would admit it, and Kern River, although they never would admit it, used the flexibility of Aliso Canyon when it was at full strength to balance their system. That's all gone away. So, the people that benefited from that upstream in Vegas, Phoenix, or what have you, are now extremely nervous about that happens with Aliso Canyon."

Holder added, "Are they ultimately going to take the whole thing out? That's still on the table. They are still having those types of conversations, even though we can all sit up here and say that is crazy."

-- Harry Weber and Jack Winters,

-- Edited by Derek Sands,