FERC Proposes New Rules On Energy Co Affiliate Dealings
09/26/2001 
Dow Jones Energy Service 

FERC Grants PD for Tuscarora Lateral, Approves Northern Abandonment 
NGI's Daily Gas Price Index 
published : September 27, 2001

TRANSWESTERN TOUTS SUCCESS OF OPEN SEASON FOR SUN DEVIL PIPELINE
09/13/2001 
Foster Natural Gas Report 

FERC Proposes Rulemaking, Plans Meetings 
NGI's Daily Gas Price Index 
published : September 27, 2001

Proposed Rule Extends Marketing Affiliate Regulations to All Affiliates 
NGI's Daily Gas Price Index 
published : September 27, 2001

Govt keen to solve Enron crisis
09/27/2001
The Statesman
Fin. Times Info Ltd-Asia Africa Intel Wire. 

US Physical Natural Gas Prices Fall; Light Demand Seen
09/26/2001 
Dow Jones Energy Service 

Transwestern Pipeline.
09/17/2001 
The Oil and Gas Journal 

National Post Business Magazine 
Deconstruct 
Passing Gas: How dancing elephants and smart pigs help heat your home
Larraine Andrews
10/01/2001 
National Post 

Heating Bills This Winter to Ease Sharply Utilities: Lower natural gas prices are reducing costs for Californians, but reliance on imports could be a problem in the long run, studies say.
NANCY RIVERA BROOKS
09/27/2001 
Los Angeles Times 

USA: FERC OKs Tuscarora natgas pipeline for Nev, Calif.
09/26/2001 
Reuters English News Service 
-------------------------------------------------
FERC Proposes New Rules On Energy Co Affiliate Dealings

09/26/2001 
Dow Jones Energy Service 
(Copyright (c) 2001, Dow Jones & Company, Inc.) 
WASHINGTON -(Dow Jones)- The U.S. Federal Energy Commission proposed Wednesday new restrictions governing natural gas pipeline and electric utility affiliate dealings. 
The commission unanimously agreed to initiate a rulemaking to tighten regulations prohibiting pipelines and utilities from providing market-sensitive information to their marketing affiliates. 
FERC rules allow monopoly pipeline and utility companies to sell natural gas and electricity at market rates, providing they adopt codes of conduct that prevent the passage of information giving a competitive advantage to their marketing affiliates. 
The proposed changes reflect the sweeping convergence between the natural gas and power sectors in the years since FERC deregulated the pipeline industry in the 1980s. 
FERC's "code-of-conduct" rules prohibit pipelines from sharing market-sensitive information with their gas-marketing affiliates. But the rules don't address the pipeline's power marketing affiliates. 
The commission's proposed rules would expand the code-of-conduct rules to address all marketing affiliates, including those involved in financial transactions that don't entail the physical delivery of energy. 
The template for the proposed changes can be found in the conditions FERC imposed in a 1999 order authorizing the acquisition of Pittsburgh-based Consolidated Natural Gas by Dominion Resources (D). The commission approved the electricity-natural gas convergence merger, contingent on Dominion agreeing to adopt codes of conduct applying equally to its gas and power marketing affiliates. 
FERC's rule changes would apply to other electric utilities with pipeline investments, such as CMS Energy (CMS), Duke Energy (DUK) and American Electric Power Co. (AEP). 
It wasn't immediately clear how the changes would affect joint operating agreements, such as the one between Entergy Corp. (ETR) and privately held Koch Industries. 
The largest impact will be for large pipeline companies with extensive power marketing operations and investments in power plants. 
For example, El Paso Corp. (EPG), Williams Cos. (WMB) and Enron Corp. (ENE), represent about 70% of the interstate pipeline industry, and are among the nation's top power marketers and merchant power plant developers. 
The changes under consideration stem from the commission's investigation of El Paso Natural Gas Co.'s controversial contract with a marketing affiliate for pipeline capacity into California. 
The affiliate transaction has been blamed for California's dramatic runup in natural gas prices over the past year, which contributed to the state's unprecedented high electricity cost last year. 


NGI's Daily Gas Price Index 
published : September 27, 2001
FERC Grants PD for Tuscarora Lateral, Approves Northern Abandonment 
The Federal Energy Regulatory Commission (FERC) has issued a favorable preliminary determination on non-environmental grounds to Tuscarora Gas Transmission's Wadsworth Lateral, a 14.2-mile pipeline extension and associated facilities that would increase Tuscarora's transportation capacity by 95,912 Dth/d. The lateral would extend from Tuscarora's mainline in northern Washoe County, NV, to an interconnect with Paiute Pipeline in Nevada. 
The expansion of the 229-mile pipeline system, which extends from Malin, OR, to a growing Nevada market, would serve two new power generation facilities in Nevada near Tracy and Wadsworth. Duke Energy plans to construct a 540 MW plant near Wadsworth, and Morgan Stanley is now constructing the 360 MW Naniwa Energy facility near Tracy. 
The added capacity also would supplement the growing gas distribution needs of Sierra Pacific Power Co. and Southwest Gas Corp., which collectively distribute natural gas to all of northern Nevada and portions of Northern California. 
If FERC approves the application, Tuscarora said it would begin construction in April 2002 and begin service by the end of that year. The $60 million expansion is supported by long-term, firm transportation contracts ranging from 10-to-15 years that are contingent upon completion. 
FERC also gave Northern Natural Gas the authority to abandon by sale its far east leg to Wisconsin Gas for use by affiliate Guardian Pipeline. The Northern line runs from Boone County, IA, to an interconnect with ANR in Rock County, WI. It extends to a delivery point near Eagle, WI. This nine mile, 24-inch diameter line is located primarily in Walworth and Waukesha, WI. 
FERC has given Guardian Pipeline authorization to eliminate construction of its Eagle lateral, which would have run parallel to the Northern line. The 8.5 mile, 16-inch diameter Eagle Lateral would have run from a connection with Guardian to Eagle, WI, at a delivery point with nonjurisdictional facilities of Wisconsin Gas and Wisconsin Electric. 

TRANSWESTERN TOUTS SUCCESS OF OPEN SEASON FOR SUN DEVIL PIPELINE

09/13/2001 
Foster Natural Gas Report 
Page 10 
(c) Copyright 2001, Foster Associates, Inc. 
Enron Corp.'s subsidiary Transwestern Pipeline Co. says it received requests for more than 1.3 Bcf/d of capacity for its proposed Sun Devil Pipeline expansion project that would transport San Juan Basin natural gas production to market areas in Phoenix and California by January 2004. 
Transwestern's Sun Devil Pipeline was announced as another of several new western states' gas transportation options. A Transwestern official said the gas-fired electric generation market in Arizona is the second largest growth market in the U.S. The company is working with shippers to finalize transportation agreements and expects to file its Sun Devil application with the FERC early next year. Shippers needing additional information can contact Project Director Kevin Hyatt at 713-853-5559 or email at Kevin.hyatt@enron.com. 
Transwestern announced its plans on August 8. The proposed project will include new compression and pipeline looping plus a new lateral, the Flagstaff - Phoenix, Arizona lateral, which would add approximately 175 miles to Transwestern's existing system. The project's estimated in-service date is January 2004. The proposed facility modifications will enable Transwestern to deliver an incremental 780,000 dth/d from the Blanco Hub located in San Juan County, New Mexico to the Thoreau area, an incremental 90,000 dth/d from Thoreau to the California border, and an incremental 450,000 dth/d from Thoreau to Phoenix. Potential supply receipt points from the San Juan Basin at the Blanco Hub are BRT/Val Verde Plant, WFS/Milagro Plant, WFS/Kutz Plant, and TransColorado/Blanco. Transwestern will consider interconnecting with other upstream and downstream pipelines, subject to the mutual agreement of the pipelines. The estimated maximum one-part reservation rates, exclusive of fuel and all surcharges, for firm service through the capacity described in this open season are as follows: San Juan to Thoreau -$.0985 dth/d; Thoreau to California -- $.240 dth/d; and Thoreau to Phoenix -- $0.454 dth/d. (See REPORT NO. 2348, pp6-7.) 
Transwestern's Red Rock Project (CP01-115), approved by FERC earlier this summer and under construction, will add 150 MMcf/d of new capacity for deliveries to the California border in mid-2002.



NGI's Daily Gas Price Index 
published : September 27, 2001
FERC Proposes Rulemaking, Plans Meetings 
In the same way your teacher loaded you down with books and assignments on the first day of the school year, new Federal Energy Regulatory Commission Chairman Pat Wood, presiding over his first meeting Wednesday. He put a whole slew of initiatives in motion, setting meetings, rulemakings, and calling for comments. 
Sorting it out: 
The Commission voted out a proposed rulemaking that which would extend the standards of conduct to fence off federally regulated transmission monopolies, both gas pipelines and electric transmission lines, from any other affiliate, including financial affiliates (see related story). For gas pipelines, which have been unbundled for a number of years and subject to affiliate codes of conduct for an equal number of years, the proposed rule will not be as onerous as it will for electric utilities, many of which are still bundled. This will mean, however, that gas transmission utilities must maintain firewalls between themselves and power affiliates, as well as gas marketing affiliates. Turn in your comments, please. 
By its second meeting in October, FERC will have a detailed business plan, including priorities and completion dates for its Oct. 1, 2001 to Oct. 1, 2002 fiscal year. Wood directed a panel of senior staff members and another of junior staff members and union representatives to come up with the plan. The commissioners voted Wednesday to amend their existing five-year plan to emphasize their major new emphasis on market monitoring and mitigation. 
FERC will be holding regional meetings on gas and electric infrastructure. It will start with a meeting on the western infrastructure following the Nov. 1-2 Western Governors Association meeting in Seattle. Wood said he expected federal and state regulators, and others to participate. A meeting for the Northeast may be scheduled in December, with sessions for the South and Midwest to come later. Attendance is not mandatory. 
FERC will cooperate with the Department of Energy in two technology-oriented sessions, one to explore technology solutions such as remote metering to capturing retail and wholesale consumer demand response in mid-February and another to investigate new transmission technology in mid-January. 
Don't be surprised to see a lot of topics debated at FERC's regular open meetings. The sunshine laws which prohibit more than two commissioners from discussing FERC business except in an open meeting, is confining, Wood said. (Usually commission staff runs back and forth among commissioners to establish positions before the meetings). Wood would like to have more discussions out in the open to work things out, and also to let the public know "not just what we are doing, but why we are doing it." 
And also, be prepared to pledge allegiance to the Flag of the United States of America from now on at any FERC meeting presided over by Chairman Wood. The chairman also asked for a moment of silence Wednesday for the victims of the Sept. 11 attack. 


NGI's Daily Gas Price Index 
published : September 27, 2001
Proposed Rule Extends Marketing Affiliate Regulations to All Affiliates 
Federal Energy Regulatory Commissioners Wednesday agreed to issue a notice of proposed rulemaking broadening the application of standards of conduct for transmission providers, including both natural gas pipelines and power lines, to require separation of the regulated monopolies from any other company affiliate. 
Previously, the rules simply required creation of a firewall, including separate operations in separate locations staffed by separate personnel, between gas pipelines and their marketing affiliates. The proposed rule would wall off both gas and electric transmission operations from any other affiliate, gas or electric, including financial affiliates. 
The Commission was presented with two options regarding the application of the proposed rule to electric transmission affiliates, which still in many cases have bundled operations. One option would enforce complete separation, while a second would have exempted employees who deal in sales or purchases of bundled retail native load. Staff and Commissioners Wood, William Massey and Nora Brownell appeared to favor walling off all affiliated personnel, so they would not be privy to market information about transmission operations that other non-affiliated competitors did not have access to. 
Commissioner Linda Breathitt, however, argued for exempting personnel dealing solely with retail native load. Breathitt said that while she supported the eventual separation of the entities, she was concerned about the timing. "I see no compelling reason at this time; there have been no complaints and no evidence." She said she thought state commissions might consider the move an infringement on their jurisdiction. "I agree with concept philosophically, but I think there will be other opportunities later on, after we do a little more bridge-building with state commissions." 
Wood said he understood "the political issue here with respect to federal-state relations, but I think this is an opportunity for discrimination that ought to be eliminated." Staff pointed out that if there were any problems with transmission reliability or if some small utilities had problems, waivers could be granted. Staff was questioned by the commissioners as to how much information was available to affiliate personnel. "If I am an affiliate employee dealing solely with retail native load, I can go into the control room and get all the information I want," one staffer responded. 
Wood proposed, and the commissioners ratified, a proposed rule with no exceptions, but which makes clear that in the final rule the Commission may reverse field and determine that separation of employees dealing with sales of native load is not required. Commenting parties should provide cost/benefit analysis on both sides of the question. State commissions are also invited to comment. Wood had suggested the Commission extend the separation to all sales employees, "but make it clear that if we don't hear from people that they really want this separation, we ain't going to do it." 

Govt keen to solve Enron crisis

09/27/2001
The Statesman
Fin. Times Info Ltd-Asia Africa Intel Wire. The Statesman Copyright (C) 2001 The Statesman Ltd. All Rights Res'd

STATESMAN NEWS SERVICE & AGENCIES NEW DELHI/MUMBAI, Sept. 26. An inter-ministerial committee of Union secretaries is monitoring the Enron crisis regularly, to facilitate some kind of early solution to the Enron imbroglio involving the Dabhol power project, the power minister, Mr Suresh Prabhu, said here today, while refusing to divulge the options being explored. 
An institutional framework committee, made up of the finance secretary Mr Ajit Kumar, power secretary Mr Ashok K Basu, law secretary Mr R L Meena and the petroleum secretary Mr V N Kaul, has been monitoring the developments on the project front, and regularly interacting with the parties Mr Prabhu said at a briefing.
We want an early solution to the problem, but the Centre has a very restricted role, limited only to facilitate an amicable solution, he said. 
Mr Prabhu refused comment on Enron chairman, Mr Kenneth Lays reported letter to the Prime Minister, Mr Atal Behari Vajpayee, seeking $5 billion in damages for terminating the contract, but said if by writing letters problems can be solved, we can also write letters. He said the government and the Cabinet have been kept informed of the status of the negotiations but it would be premature to speak at this stage on the problem which has its genesis in the contract signed in 1992. 
DPC AGM: Notwithstanding its depleting financial conditions, Dabhol Power Company has recorded a higher net profit of Rs 208 crore for the year ended 2000-01, compared with Rs 198 crore in the previous year. 
Disclosing this at the annual general meeting here today, the Enron India chief, Mr Wade Cline, said that the promoters of DPC would be making efforts to fetch additional finances from the institutions to complete the remaining 10 per cent construction work of the 2,184-MW power project at Guhaghar in Ratnagiri district of Maharashtra. 
Godbole report: The recommendations of the Godbole Committee, that held renegotiations with Enron on the future of DPC, are likely to remain on paper. 
This was clear from the Maharashtra Chief Minister, Mr Vilasrao Deshmukhs post-Cabinet-meeting statement today when he said the government noted certain recommendations of the Godbole panel following several round of talks with officials of Enron-DPC over the past five months. 
Mr Deshmukh said these recommendations would guide the government in future while negotiating fresh projects. 
The fate of DPC will thus remain undecided. In the last Cabinet meeting, the Maharashtra government announced terms of reference for an inquiry commission, which would be set up to probe the entire Enron-MSEB deal ab initio. However, the government is still to name a retired Supreme Court Judge to head the commission. 
Mr Madhav Godbole, a former bureaucrat, had clearly suggested that the panel should call off renegotiations, since Enron had announced its desire to walk out of the DPC. He said other states such as Karnataka, Madhya Pradesh, Delhi and Rajasthan were ready to purchase Enron power, provided the rate per unit ranged between Rs 2.25 and Rs 2.40. This was rejected by Enron. 
Other recommendations noted by the State include: The Union Government which has given counter guarantee of Rs 2,500 crore, should raise bonds of the same amount and give them to Maharashtra as interest-free loan.


US Physical Natural Gas Prices Fall; Light Demand Seen

09/26/2001 
Dow Jones Energy Service 
(Copyright (c) 2001, Dow Jones & Company, Inc.) 
HOUSTON -(Dow Jones)- U.S. natural gas physical prices fell Wednesday on light demand, as traders hoped to take advantage of cash-outs on pipelines, marketers said. 
"Not much is getting done for next month," one veteran trader said. "It's (Tuesday) all over again." 
He said traders are hoping they can "get away with as much as possible on those cash-outs and pray they don't get a call from pipelines" asking them to ante up on the $2.15/MMBtu and above prices from earlier in the week. 
As for next-month bidding, "everyone was asking," but not much was getting accomplished on baseload trading for October physical gas, a trader said. 
Wednesday, prices were at a premium to the New York Mercantile Exchange to start the session, but ended up either in convergence or slightly in contango, he said. 
Looking ahead, some incremental demand may be seen next month, as some utilities switch to natural gas from fuel oil and a number of nuclear energy sites go off-line for maintenance, one veteran trader said. 
October, a shoulder month, tends to be a major price discount month, he said. On the Nymex there's presently a 42-cent difference between the outgoing October contract and the November contract. The November-November 2002 spread is more than 80 cents. 
Wednesday, traders again saw tight ranges as the Nymex October contract traded under the spot cash bid-ask price, which are both at 30-month lows. 
Traders are in the midst of a three-day monthly bid week as they set baseload pricing for October. 
The Nymex Oct natural gas futures contract expired at $1.83 a million British thermal units, down 9.5 cents. November settled at $2.253/MMBtu, down 4.7 cents. 
The American Gas Association said 91 billion cubic feet of gas was added to storage, and the bearish report sparked a selldown in October to $1.76/MMBtu. 
At the benchmark Henry Hub in south Louisiana, the delivery point for Nymex gas, prices fell 5 cents-8 cents to a $1.85-$1.92/MMBtu closing range. 
First-of-month index for the Henry Hub is around $2.34/MMBtu. 
Deals at Transcontinental Gas Pipe Line Station No. 65 were done at $2.03-$2.15/MMBtu, up 5 cents-6 cents. 
At the Arizona-California Border, where gas from El Paso's pipeline begins delivery to Southern California, buyers paid $1.72-$1.81/MMBtu, down 4 cents-5 cents. Index for September is at $2.66/MMBtu. 
At PG&E Citygate, traders paid $1.85-$2.05/MMBtu, down 3 cents on the bid, up 8 cents on the ask. September first-of-month index is at $2.71/MMBtu. 
At the Katy hub in East Texas, prices were in a $1.81-$1.87/MMBtu range, down 6 cents. First-of-month September index is $2.37/MMBtu. 
At Waha in West Texas, buyers paid $1.65-$1.78/MMBtu, down 3 cents-9 cents. Index is at $2.32/MMBtu, traders said. 


Transwestern Pipeline.

09/17/2001 
The Oil and Gas Journal 
Page 8 
Copyright 2001 Gale Group Inc. All rights reserved. COPYRIGHT 2001 PennWell Publishing Co. 
Enron unit Transwestern Pipeline has received requests for more than 1.3 bcfd of capacity on its proposed 400-mile Sun Devil Pipeline expansion project, which would bring natural gas from New Mexico's San Juan basin to market in Phoenix, then to California by January 2004. "Sun Devil is an important project that will serve the gas-fired electric generation market in Arizona, which is the second-largest growth market in the US," Transwestern said. The company presently is working with shippers to finalize transportation agreements. It plans to apply with FERC early next year. The company also said its Red Rock pipeline project will make 150 MMcfd of gas capacity available for delivery into California in mid-2002.


National Post Business Magazine 
Deconstruct 
Passing Gas: How dancing elephants and smart pigs help heat your home
Larraine Andrews

10/01/2001 
National Post 
National 
Page 86 
(c) National Post 2001. All Rights Reserved. 
REVEALED Finding natural gas was once a matter of luck -- surface seeps provided the only real clue. Eventually, though, people realized that seeps often occurred on anticlinal or dome-like slopes, indicating the presence of an underground trap. In the early 1900s, oil companies began relying on geologists to help them read what the rocks had to say, but it was many years before seismic technology could give a picture of rock formations hidden deep in the Earth. These days, specialized vibroseis trucks use mechanical vibrations to create seismic waves. Costing US$350,000 each, the trucks weigh from 18,000 to 30,000 kg and travel in groups of four or five. They are often called "dancing elephants," operating in unison at 100-metre intervals. An on-board hydraulic system presses a central plate against the ground, lifting the truck into the air and vibrating it over a controlled frequency band. The resulting waves are reflected from rock layers in the Earth -- different types of rock reflect waves differently, much as a ball bounced on pavement will bounce higher than a ball bounced on sand. The returning waves are then measured by sensitive geophones, or jugs, strung out every 25 metres along the ground. Supercomputers process the data to generate a 2-D or 3-D picture of the underground structures. In the end, the only sure way to know if gas exists is to drill, but these days the final decision is based on much more than a hunch and a prayer, since so much is at stake: about $900,000, the average cost to complete a gas well in western Canada. 
SNIFFED Natural gas at the wellhead contains a potentially poisonous contaminant called hydrogen sulphide, or H2S. Natural gas that contains more than 1% of it is called "sour" gas. It has a strong odour, similar to rotten eggs. About 30% of Canada's total natural gas production is sour, most of it found in Alberta and B.C. By contrast, discoveries in the Arctic and off the East Coast contain less than 1% H2S and are called "sweet." If the gas is sour, it is "sweetened" by converting up to 99% of the H2S into elemental sulphur for use in fertilizers and for export. The remaining H2S is flared, a controversial incineration process that results in the conversion of H2S to sulphur dioxide, which is released into the atmosphere. (An excellent account of the controversy can by found in Andrew Nikiforuk's book Saboteurs: Wiebo Ludwig's War Against Big Oil, to be published this month.) Whether sweet or sour, the natural gas used to heat our homes must be processed before it is pipeline-ready for shipment. Processing occurs at plants close to the production areas or at straddle extraction plants on major pipeline routes. In Canada, there are 837 processing plants, 756 of them in Alberta. The four largest processors are: Husky Energy Inc. (51 plants), Anderson Exploration Ltd. (49), Canadian Natural Resources Ltd. (47) and Conoco Canada Ltd. (35). 
SQUEALED "Smart pigs" aren't actually pigs. They're sophisticated tools that travel inside pipelines checking for corrosion and evidence of stress or cracking in the pipe. Early versions were called pigs because they squealed as they moved inside the pipe. Propelled by the gas, they travel at speeds from 0.8 to 16 km per hour. Only about six companies in the world build and inspect pipelines with pigs, which have cost up to US$1 million for researchand development. Pigs range in size from 89 mm to 1.4 m in diameter and can be as long as 6 metres. Special pig "launch and trap facilities" are built along the length of the pipeline to allow for insertion and removal at various intervals. 
TRAPPED In nature, natural gas, made predominantly of methane -- four hydrogen atoms attached to one carbon atom -- is found mixed with other hydrocarbons such as ethane, propane and butane, as well as hydrogen sulphide and carbon dioxide. Most experts believe the carbon and hydrogen came from microscopic plants and animals deposited with mud and silt at the bottom of ancient oceans. Over millions of years, the intense pressure and heat caused by growing layers of sediment transformed this organic material into crude oil and natural gas. The sediment itself eventually became porous sedimentary rock. Oil and gas migrate upwards through this rock because they are less dense than the seawater in its pores. You would see the same result if you put a mixture of gas, oil and water in a glass: they would separate according to their different densities. If the gas manages to reach the surface, it is released into the atmosphere. But often it will be stopped in its upward journey by impermeable rock formations, or cap rocks, that trap it in underground reservoirs. 
SHIPPED Hidden a metre or more underground, a vast subterranean network of steel pipes and plastic tubes delivers natural gas from the wellhead to the consumer. Almost 80,000 km of gas pipelines link producers in the west to the populated regions of eastern Canada and the U.S. Efficient movement through the pipeline requires transmission at high pressure along the way. Propelled at speeds of up to 40 km per hour, it takes about three days for natural gas from Alberta to reach markets in southwestern Ontario. A voracious U.S. appetite for natural gas has sparked recent additions to the system, such as the $1.8-billion, 1,051-km Maritimes and Northeast pipeline that moves Sable Island gas from Nova Scotia to Dracut, Mass., and the $4.5-billion, 2,988-km Alliance pipeline that links B.C. and Alberta to the Chicago market. 
MEASURED In the metric system, joules measure energy content. The joule was named after James Joule, an English physicist who co-discovered the law of conservation of energy: "Energy used up in one form reappears in another and is never lost." One joule is the amount of energy required to heat one gram of water by 1/4 degree Celsius. Since joules are so small, people normally speak in terms of gigajoules, or one billion joules. An average Canadian home would use about 150 GJ in a year, and one gigajoule on a particularly cold winter day. Producers and pipeline operators measure natural gas by volume using cubic metres (or cubic feet, just to confuse the issue). One cubic metre is the size of an average dishwasher. Canada is the third-largest producer of natural gas in the world, producing 162 billion cubic metres in 1999. No. 1 is the Russian Federation (551 billion), No. 2 is the U.S. (540 billion) and No. 4 is the U.K. (100 billion). According to Oilweek magazine, the top three Canadian producers in 2000 were: Alberta Energy Company Ltd. (gas revenues of $2.3 billion), PanCanadian Petroleum Ltd. ($1.6 billion) and Canadian Natural Resources Ltd. ($1.3 billion). 
DISCOVERED The first natural gas discovery in Canada was at Stoney Creek, N.B., in 1859. The first commercial development came 30 years later, when entrepreneur Eugene Coste drilled a well that supplied communities in Essex County, Ont., near Windsor. By 1904, he had moved west, making history in 1909 with "Old Glory," so-called for the size of its flare, near Bow Island, Alta. This discovery was large enough to justify a 270-km-long, 40-cm-wide pipeline to Calgary, the longest of its kind at the time. 
PRICED If Canada has so much natural gas, why did prices hit an all-time high of $16.90 per gigajoule in December 2000, up from $2.63 in January 2000? Simple supply and demand, combined with a cold winter and fears of low storage levels. Since then, prices have fallen to the $4.50 range, partly due to the economic slowdown. Matthew Foss, an economist with the Canadian Energy Research Institute in Calgary, predicts an average price of $3.50 per gigajoule this winter, since storage facilities are at near capacity and new drilling is proceeding: about 13,000 gas wells by year's end.

Heating Bills This Winter to Ease Sharply Utilities: Lower natural gas prices are reducing costs for Californians, but reliance on imports could be a problem in the long run, studies say.
NANCY RIVERA BROOKS

09/27/2001 
Los Angeles Times 
Home Edition 
Page C-1 
Copyright 2001 / The Times Mirror Company 
Winter heating bills in California will be substantially smaller than the swollen tabs of last year because of sharply lower natural gas prices and plentiful supplies, utilities said Wednesday. 
But the longer-term picture for consumers is not as rosy, despite the recent decline in wholesale natural gas prices. 
Two reports released this week warn that California's heavy reliance on imported natural gas, which fuels most of the state's power plants in addition to fulfilling most of its heating needs, could be setting the state up for future energy crises. 
For now, the wholesale price of natural gas is dropping along with most fossil fuels, and supplies are plentiful. Natural gas futures slumped to a 2 1/2-year low Wednesday after an industry report showed a bigger-than-expected jump in U.S. inventories. 
The American Gas Assn. said supplies in storage rose 3.3% last week to 2.848 trillion cubic feet, continuing a steady build made possible by reduced demand from manufacturers. 
In response, natural gas for October delivery fell 9.5 cents, or 4.9%, to $1.83 per million British thermal units on the New York Mercantile Exchange. Prices have dropped 82% from a Dec. 27 record of $10.10 per million BTU, caused by scant supplies. 
Prices in California, which imports 85% of its natural gas from other U.S. states and Canada, peaked much higher in December at about $60 per million BTU. California wholesale prices now are hovering close to the Nymex price. 
California was clobbered harder last winter than the rest of the country for several reasons: colder-than-usual weather, heavy use by in-state power plants and reduced pipeline capacity caused by a deadly explosion. In addition, state regulators accused a major pipeline operator, the El Paso Natural Gas unit of El Paso Corp., of manipulating the market; federal regulators have not yet ruled on that case. 
"The message this year is much better than it was at this time last year," said Anne Smith, vice president for customer service at Southern California Gas, a subsidiary of San Diego-based Sempra Energy. Southern California Gas' more than 5 million customers paid record prices last year, as did the customers of Sempra's San Diego Gas & Electric and PG&E Corp.'s Pacific Gas & Electric. 
Unlike with electricity, the price of natural gas is not fixed for residential and small-business customers. The gas utilities pass along the commodity price to customers with no markup. 
Last winter, which runs from November to March in the utility world, the average residential customer of Southern California Gas got a monthly bill of $80. This winter, the average bill is expected to be about $60, Smith said. 
The basic commodity cost for natural gas sold to its residential customers for this October, for example, will be 15.9 cents per therm, compared with 57.04 cents last October. (A therm is one-tenth the standard wholesale measure of 1 million BTUs, or about 100 cubic feet of gas.) 
Transmission costs, which remain fairly constant year to year, average about 40 cents per therm for the company's residential customers. (The average single-family home uses about 75 therms a month.) 
PG&E projects similar cost declines, and both utilities say they have plenty of gas in storage to meet the needs of their core residential and small-business customers. 
But problems loom with California's natural gas supply system, according to studies released this week by the California Energy Commission and the California Public Interest Research Group. 
The two studies agree that heavy demand has strained the state's delivery and storage systems, but otherwise they had little in common. 
The final draft of the Energy Commission staff report, released Monday, noted that utilities already are moving to expand or build new pipelines, and recommended that the state encourage the drilling of more natural gas wells and expansion of pipeline systems within California, among other things. 
The CalPIRG report, released Wednesday, advocates that the state deny licenses to any new power plants fueled by natural gas and to encourage renewable energy production through favorable taxation and by requiring that a minimum of 20% of the state's electricity come from wind, solar and geothermal sources by 2010. 
"Natural gas is cleaner than other fossil fuels," said CalPIRG's Brad Heavner, the report's author. "But it's not a magic bullet, and by relying on it we are setting ourselves up."


USA: FERC OKs Tuscarora natgas pipeline for Nev, Calif.

09/26/2001 
Reuters English News Service 
(C) Reuters Limited 2001. 
WASHINGTON, Sept 26 (Reuters) - Tuscarora Gas Transmission Co. won preliminary approval on Wednesday from the Federal Energy Regulatory Commission to build a pipeline to ship natural gas to local distribution companies and electric power plants in Nevada and California. 
The pipeline and related facilities would carry up to about 96 million cubic feet per day of natural gas. 
The agency must still determine the environmental impact of the pipeline before making a final decision on the project. 
Tuscarora owns an interstate natural gas pipeline system that begins at a connection with PG&E Gas Transmission-Northwest Corp., located near Malin, Ore., and extending southeasterly for 229 miles to its terminus in Storey County, Nevada, at the Tracy Power Plant. The power plant is owned by Sierra Pacific Power Co., an affiliate of Tuscarora. 
Shipments in the pipeline would be phased in over a two-year period beginning in November, 2002. 
Tuscarora Gas Transmission Co. is a partnership between Sierra Pacific Resources and TransCanada Pipelines Ltd.