III. Description of LGS and the Proposed Kirby Hills Facility
A. Description of Applicant
As noted above, LGS is a provider of competitive natural gas storage and withdrawal facilities. It was first granted a CPCN by this Commission (for its Lodi facility) in D.00-05-048.2
LGS is a wholly-owned subsidiary of Lodi Holdings, L.L.C. (Lodi Holdings). In D.05-12-007, we recently approved the transfer of a 50% interest in Lodi Holdings from Western Hub Properties L.L.C. to WHP Acquisition Company II, L.L.C. (WHP Acquisition II), a Delaware limited liability company that is a wholly-owned subsidiary of ArcLight Energy Partners Fund II, L.P. (ArcLight Fund II).3 Both ArcLight Fund II and its affiliate, ArcLight Fund I, are passive investors in the power and energy industries, and both are managed by ArcLight Capital Partners L.L.C., an investment management firm headquartered in Boston, Massachusetts. The practical effect of the transfer approved in D.05-12-007 was to bring Lodi Holdings under unified management and control, and to facilitate the expansion of LGS's gas storage and withdrawal facilities that is the subject of this application.
B. Description of the Proposed Kirby Hills Facility
The gas storage portion of the proposed Kirby Hills Facility will be located in Solano County at the western edge of the Montezuma Hills, about 12 miles west of the City of Rio Vista (Rio Vista) and seven miles southeast of the City of Fairfield (Fairfield). All of the surface facilities except for the remote meter and PG&E interconnection facilities (which are at the other end of the 5.9 mile pipeline) will be located on land leased by Lodi Holdings, the parent company of LGS, from Kirby Hills Associates, a California limited liability company. In March 2005, Lodi Holdings entered into a 50-year Gas Storage and Lease Agreement (Lease Agreement) with Kirby Hills Associates covering all of the Project's subsurface storage reservoirs and the surface facilities (except for the remote metering and PG&E interconnection facilities). The Lease Agreement has been assigned by Lodi Holdings to LGS.
The actual gas storage will take place in the Kirby Hills Domengine Gas Reservoir (Reservoir), which comprises approximately 128 acres lying within the boundaries of the leased property near the Montezuma Hills. The Reservoir was discovered by Shell in 1945 and was operated as a natural gas production field by Shell between 1945 and 1964. In 1972 Shell sold the relevant leases, which were acquired by Dow Chemical Corporation (Dow) in 1975. Dow then converted the reservoir to natural gas storage and conducted active gas storage operations there from 1977 to 1993 in support of a proprietary pipeline system. Dow's leases expired in 1997.4
The gas storage reservoir is known as the Domengine Sand. It varies in thickness from 90 feet to 200 feet and exists at a depth between 1900 and 2200 feet from mean sea level. The Domengine Sand is capped by a dome-shaped layer of hard shale, which is what actually traps the gas. LGS proposes that this underground reservoir be accessed through up to four well pad sites that will be located on the 128-acre property. LGS plans to drill up to 10 new injection/withdrawal wells from the well pads into the storage formation below.
The proposed facility will have a total storage capacity of up to seven billion cubic feet (Bcf), of which about 5.5 Bcf would be working capacity and 1.5 Bcf would be cushion gas. The firm injection and withdrawal capacity for the initial phase of the project is proposed to be 50 million cubic feet per day (MMcf/d). As market conditions dictate, LGS proposes to add compression and wells to increase firm injection and withdrawal capacity up to 100 MMcf/d, which is the maximum capacity that LGS seeks in the CPCN requested here.
At the eastern edge of the underground storage site, less than a mile from the well pads, LGS proposes to locate a compressor/dehydration station. This station will be located on a 10-acre site, and the heart of it will be a building 200 feet long by 35 feet wide housing up to four natural gas engines coupled to reciprocating compressors. The four engines would have a combined output of approximately 7,200 horsepower. Initially, one or two compressor units will be installed, with additional units added as market conditions dictate. In addition to the engines and compressors, the station will include dehydration units with a capacity of up to 100 MMcf/d. The Kirby Hills Facility's maintenance and operations buildings will also be located on the 10-acre site. The injection/withdrawal wells will be connected to the compressor/dehydration station by means of a flow line with a diameter of up to 12 inches.
As noted in the Summary, the second major component of the proposed Facility is a 5.9-mile pipeline, which will run east from the Kirby Hills compressor/dehydration station to milepost 286.65 on PG&E's Line 400 on the Redwood Pipeline System. LGS's pipeline will be bi-directional, made of steel, have a diameter of up to 16 inches, and be buried to a minimum depth of 48 inches. For a good portion of its route, the new pipeline will run parallel to Calpine's existing Montezuma pipeline. The proposed route will require right-of-way easements through nine parcels of land held by six different landowners (including Kirby Hills Associates). The application states that LGS holds easements or easement options with all private landowners along the pipeline right-of-way.
As noted in the Summary, the third and final component of the Project is the remote metering and PG&E interconnection site. LGS states that it has acquired a long-term lease for approximately three-quarters of an acre where the metering and interconnection site will be located. The site is agricultural land that is currently used for cattle grazing. The application states that the site will contain low-lying facilities including a 16-inch valve and bypass manifold, a pig launcher/receiver, and a metering station to measure volume, pressure and temperature parameters. When constructed, the site will be graveled and fenced to control unauthorized access. It will also have a radio tower less than 13 feet in height that will convey data and allow remote operation of facilities at the Kirby Hills storage site.
LGS estimates that construction of the above facilities will take six to eight months. (Application, p. 22.) While the facilities are under construction, LGS proposes to construct a temporary gas injection system. LGS states that the temporary system can be constructed and made operational in a relatively short time after a CPCN is granted, and that "by injecting gas during construction of the permanent facilities, the Kirby Hills Facility will be ready to provide storage services once the permanent facilities are complete." (Id. at 12.)
LGS states that the temporary system will be designed to inject up to 10 MMcf/d of gas into the reservoir. The temporary system will include (1) a temporary interconnection with PG&E Line 182 on the storage site, (2) a temporary skid-mounted meter, (3) a four inch, one-quarter mile temporary gas injection pipeline from the temporary PG&E interconnection to Well Site S-2, and (4) a temporary skid-mounted, natural gas-fired compressor unit of up to 1,000 horsepower located on Well Site S-2 that will connect to Well Sites S-1 and S-2. LGS states that the temporary meter and compressor will be removed after the permanent facilities are put into service, and that the segment of the temporary gas injection pipeline from the PG&E interconnection to the permanent compressor station will be abandoned in place after the permanent facilities become operational.
2 LGS's CPCN for the Lodi facility was subsequently amended in D.03-08-048, D.04-05-034, and D.04-05-046.
3 The other 50% interest in Lodi Holdings is held by ArcLight Energy Partners Fund I, L.P. (ArcLight Fund I). We approved ArcLight Fund I's acquisition of this 50% interest in D.03-02-071.
4 The application notes that "because of their age, capacity, and design pressures, the existing pipeline and metering facilities [from the Dow era] are not expected to be materially useful in the proposed Facility. The existing wells may be useful for gas injection/withdrawal or as observation wells after being reconditioned or worked over." (Application, p. 3.)
