Spokane Journal of Business

Avista weighs expansion at natural gas storage site

Delivery systems upgrade would add to rate of flow

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Avista Corp. is considering participating in an expansion of delivery infrastructure at its one-third owned Jackson Prairie underground natural-gas storage facility in Western Washington.

The multimillion-dollar expansion likely would be launched in the next year or two, says Scott Morris, president of the Spokane companys Avista Utilities division.

We are in the process of making a decision on whether to take part in the expansion, he says.

Avista owns the facility with Puget Sound Energy, of Bellevue, Wash., and Williams Northwest Pipeline, of Everett, Wash.

Avista expects that the three owners will file a preliminary plan for the project with the Federal Energy Regulatory Commission in May, Avista spokeswoman Catherine Markson says.

The company anticipates it will take nine to 12 months for the plan to be reviewed, and expects that the three partners will make a request in January 2007 to begin construction, Markson says. The partners are proposing putting in about 10 new production wells, associated piping, and roughly 15,000 horsepower of new compression to beef up the facilitys rate of deliverability by 35 percent, Avista says. Its believed the project would take 18 months to build.

The Jackson Prairie facility, which is located near Chehalis, Wash., in the southwest corner of the state, already is undergoing a separate storage-capacity upgrade, says Jason Thackston, Avistas director of gas supply.

Currently, it has the capacity to store 38.8 million decatherms of natural gas, but will be able to hold 49.7 million decatherms when the storage-capacity project, which involves extracting water from rock formations to create room to store more gas, is complete. A decatherm is 10 therms; residential Avista customers who heat their homes and hot water with gas burn an average of 70 therms a month.

Roughly half of the gas stored at Jackson Prairie is so-called cushion gas, which must be kept underground so pressures remain high enough to extract the other half of the gas, which is called working gas, Thackston says. When the storage-capacity expansion is completed in 2010 or 2011, Avista will have about 8.5 million decatherms of working gas at Jackson Prairie, equivalent to 27 percent of its annual demand.

The gas is stored in deep underground caverns there. Its usually injected during the summer, when demand and prices are low, and is withdrawn in winter, when demand and prices rise, Thackston says.

Gas is stored at Jackson Prairie as far underground as 2,000 feet, Thackston says. The subterranean gas-storage caverns are in a unique geologic formation that sits beneath 3,200 acres of farmable land, he says. Domelike layers of geologic material keep gas from escaping upwards or horizontally, while groundwater seals the gas in from the bottom, Thackston says. There really isnt a lot of seepage.

Avista Energy, Avistas non-regulated, wholly owned energy-trading subsidiary, is participating with Puget Sound Energy and Williams Northwest Pipeline in the 30 percent storage-capacity upgrade at Jackson Prairie, Thackston says. That project began in 2002.

Now, Thackston says, Avista Corp. and the two other companies are considering the deliverability expansion to increase the facilitys ability to extract and deliver more gas.

In the next two weeks, his department will be analyzing Avista Corp.s potential benefits and costs in the deliverability expansion, but until the three Jackson Prairie partners file the preliminary plan for the proposed expansion, he wont provide any cost estimates, Thackston says.

For us, its a pretty complicated process, he says. Im pressing the people in my group to come up with alternatives and to make sure we understand all of the costs.

The costs of some items that would be used in the expansion, such as steel in the high-grade piping, have been going up, and over the last year sharply rising global oil prices have pushed up drilling costs sharply, Thackston says.

Drilling rigs and drilling personnel are in heavy demand, he says.

Avista Corp., which didnt have sufficient customer growth to participate in the storage-capacity upgrade when that project was launched in 2002, now has growing demand in its gas system, Thackston says. In 2009, it can buy out Avista Energys rights to the storage capacity thats being added and probably will do so, he says. Also, Avista earlier had leased out rights to part of its storage to Cascade Natural Gas, of Seattle, and Terasen, of Surrey, British Columbia, but has terminated Cascades lease effective in 2007, and will give notice to Terasen that it will terminate its lease, Thackston says.

Avista Corp. would have sufficient storage capacity at Jackson Prairie to make its participation in the deliverability expansion worthwhile, and also would have sufficient rights under a contract it has with Williams to transport additional gas via pipeline, Thackston says.

Avista sends gas from Jackson Prairie to its service territory here by pipeline, he says. The gas first moves south down Interstate 5 to the Columbia River, then is carried to the east up the Columbia River gorge, he says. The company also has some gas customers in Oregon.

Williams recently held an open season in which it called for indications of interest from potential customers that wanted to buy gas that would be made available through the deliverability expansion, and received enough binding indications of interest for the project to go forward, Thackston says.

This past winter, wholesale gas prices peaked at $14 per decatherm, more than double what gas cost last summer and again last week. With such price swings, the Jackson Prairie facility gives Avista flexibility to buy and store gas when its price is low, holding costs down, Thackston says. On cold days, he adds, the storage facility both enables the company to avoid buying supply at high prices and gives its gas-utility system reliability.

We stress test our consumption projections with the coldest day on record, Thackston says. On that day, one-third of our supplies come out of Jackson Prairie.

Contact Richard Ripley at (509) 344-1261 or via e-mail at editor@spokanejournal.com.

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