July 15, 2009: Arizona Gas Storage Project

July 15, 2009 4:06 PM ET
By Susan Nelson

NGS Energy LP plans to file with FERC in the next two to three months for approval to build the first natural gas storage facility in Arizona. The salt-cavern storage facility would have connections with the interstate pipelines owned by Transwestern Pipeline Co. LLC and El Paso Natural Gas Co.

The storage site is located in the Picacho Basin, about 35 miles south of Phoenix. In May, NGS Energy announced that it had signed an agreement with El Paso Corp., giving it an exclusive due diligence period and right to purchase the gas storage facility, located in Pinal County, Ariz. NGS Energy President Laura Luce told SNL Energy that the company has definitive agreements with El Paso for the purchase of the storage facility.

El Paso, the parent company of El Paso Natural Gas, had recently considered developing the site for underground gas storage but then decided not to proceed. Despite El Paso's reservations, Luce said her company is optimistic about the project. "It's a go," she said. "There is an absolute need for storage in the state and there is customer support for it."

Arizona Corporation Commission Chairman Kristin Mayes is very excited about the project and supportive of the enhanced reliability the project will bring to Arizona, Luce said. The company has received significant support from the state and customers, she said. The company is now in discussions with potential customers, but because of confidentiality agreements she would not name the interested parties.

Multifuels LP has proposed a salt-cavern gas storage project in the same area of Arizona, but "we're proceeding regardless" of Multifuels' plans, Luce said. Multifuels has been stymied by its plans to put the salt water removed from the underground formations in an underground aquifer. The company needed to get an exemption from the state's Environmental Quality Act, which does not allow brine to be injected into aquifers. But the company did not receive approval for the exemption from the Arizona Legislature during the past session.

For its project, NGS Energy plans to store the salt water removed from the caverns in above-ground evaporation ponds. Luce expects that certification from FERC and state agencies for the storage facility will come in a year and construction could begin in fall or winter 2010.

NGS Energy also owns the Tres Palacios gas storage facility in Texas, which began service in 2008. The company's Leaf River Energy Center in Mississippi is under construction, while construction on its Windy Hill gas storage project in Colorado will begin in 2010. Also, the company's Gulf Coast Connector project in Louisiana is under evaluation, Luce said.

Reprint courtesy of: www.snlenergy.com