AL-2. hU3VS Proceeding 911586 Call for Information Aitamont Gas Transmission Company and Pacific Gas Transmission Company Proposais for Pipeiines to Caiifornia Call for Information Altamont Gas Transmission Company and Pacific Gas Transmission Company Proposals for Pipelines to California 11 ENERGY RESOURCES CONSERVATION BOARD Call for Information Altamont Gas Transmission Company and Pacific Gas Transmission Company Proposals for Pipelines to California Proceeding 911586 published June 1992 Published by: ^ Energy Resources Conservation Board 640 Fifth Avenue S.W. Calgary, Alberta T2P 3G4 Telephone: (403) 297-8311 Fax (403) 297-7040 iii Page TABLE OF CONTENTS 1.0 EXECUTIVE SUMMARY 1 1.1 INTRODUCTION 1 1.2 SUMMARY OF INFORMATION FILED 2 1.3 SELECTED ISSUES FACING THE PRODUCING INDUSTRY 15 2.0 INTRODUCTION, BACKGROUND, OBJECnVES AND PROCESS 19 3.0 MARKET INFORMATION . 21 3.1 NATURAL GAS DEMAND PROJECHONS 21 3.1.1 Altamont Forecast of Gas Requirements 21 3. 1.1.1 Northern California 22 3. 1.1. 2 Southern California 24 3. 1.1.3 Total California 26 3. 1.1. 4 Non-California Maikets 27 3. 1.1.5 PGT View of Altamont Projection 28 3.1.2 PGT Forecast of Gas Requirements 28 3. 1.2.1 Northern California 29 3. 1.2.2 Southern California 31 3. 1.2.3 Total California 34 3. 1.2.4 Pacific Northwest 35 3.1.2.5 Altamont View of PGT Projection 36 3.1.3 Comparison of California Gas Demand Projections 37 3.1.4 General Comments on the Forecasts 49 3.2 EXISTING PIPELINE CAPAQTY AVAILABILITY 49 3.2.1 Northern California 49 3.2.2 Southern California 53 3.3 INTERSTATE GAS PIPELINE CAPACITY PROJECTION 53 3.3.1 Altamont Forecast of Pipeline Capacity Requirements 53 3.3.2 PGT Forecast of Pipeline Capacity Requirements 56 3.3.3 Comments on the Proposed Capacity Requirements 58 SHIPPERS OF ALBERTA GAS : 59 3.4.1 Altamont View of its Market Commitments 59 3.4.2 Shippers’ View of Altamont Market Commitments 61 3.4.3 PGT View of Altamont Market Commitments 61 3.4 S3T.A4T.4U S P GOTF VCiOeNw T RofA iCtsT UMaArLke t CCOoMmmMiItTmMenEtNsT S BETWEEN BU YERS AND 61 3.4.5 Altamont View of PGT Market Commitments 62 3.4.6 Comments on Projects’ Market Commitments 64 EX- ALBERTA PIPELINE FACILITIES 65 4.1 DESCRIPTION OF FACILITIES 65 4.2 CONSTRUCTION SCHEDULES 67 4.2.1 PGT View of Altamont Construction Schedule and Altamont Response ... 67 4.2.2 Altamont View of PGT Construction Schedule and PGT Response ...... 68 4.2.3 Comments on Construction Schedules 69 4.3 COST OF FACILITIES 69 4.3.1 Cost of Altamont/Kem River Expansion Project 69 4.3.2 Cost of PGT Expansion Project 69 4.3.3 PGT View of Altamont Costs 69 4.3.4 Altamont View of PGT Costs 73 4.3.5 Comments on Costs of Facilities 73 4.4 COST ALLOCATION, RATE DESIGN AND ASSOCIATED RISKS 73 4.4.1 Altamont/Kem River Project 74 4.4.2 PGT Expansion Project 74 4.4.3 Risks to Altamont Rates 75 4.4.4 Risks to PGT Rates 76 4.5 AVERAGE TRANSPORTATION RATES FORECAST BY REGION SERVED . . 78 4.5.1 Altamont/Kem River Project 78 4.5. 1.1 Northern California 78 4.5. 1.2 Southern California 78 4.5. 1.3 Alternate Markets 79 4.5. 1.4 Comments on Altamont Suggested Rates to Alternate Markets .... 80 V 4.5.2 PGT Expansion Project 81 4.5.2. 1 Northern California 81 4.5.2.2 Southern California 82 4.5.2.S Pacific Northwest 83 4.5.2.4 Comments on PGT Suggested Rates 83 4.5.3 Comments on Ex-Alberta Rate Comparison and the Impact of Variations in Load Factor 84 4.6 PRODUCER NETBACKS 88 4.6.1 Altamont Netback Analysis 88 4.6.2 PGT View of Altamont Netback Analysis 91 4.6.3 PGT Netback Analysis 92 4.6.4 Altamont View of PGT Netback Analysis 95 4.6.5 Comments on the Proponents’ Netback Analyses 96 4.7 DESCRIPTION OF THE TRANSPORTATION COMMITMENTS ON THE PROPOSED FACILITIES 97 4.7.1 ANG-Foothills 97 4.7.2 PGT 97 4.7.3 PG&E 97 4.7.4 Altamont 98 4.7.5 Kern River 98 4.7.6 Other Interconnected Pipelines 98 4.7.7 Comments on Transportation Commitments 99 4.8 STATUS OF PROJECT FINANCING 99 4.8.1 Altamont/Kem River Project 99 4.8.2 PGT Expansion Project 99 4.8.3 Comments on Project Financing 100 4.9 POSSIBLE ALTERNATIVES TO ADDING INTERSTATE CAPACITY 101 4.9.1 Expansion of PG&E Line 300 101 4.9.2 Additional Storage Capacity 101 4.10 ENVIRONMENTAL AND SAFETY CONCERNS 102 5.0 INTRA- ALBERTA PIPELINE FACILITIES 105 5.1 INTRA-ALBERTA PIPELINE COSTS 105 5.2 IMPACT ON NOVA’S COST OF SERVICE 106 5.3 COMMENTS ON NOVA’S COST-OF-SERVICE 107 vi 5.4 ENVIRONMENTAL CONSIDERATIONS 107 5.5 UPDATE OF NOVA COSTS 107 6.1 ALTAMONT H3 6.2 KERN RIVER H5 6.3 PGT 115 6.4 SHIPPERS’ AND SUPPLIERS’ VIEWS ON GAS SUPPLY 117 6.0 gas SUP6P.L4Y. 1 A AVmAoIcLoA B ICaLnIaTdYa PFeOtrRo l ePuRmO PCOoSmEpaDn y F ALCtdI L ITIES 111137 6.4.2 AEC Oil and Gas Company 117 6.4.3 The Joint Submission of: AEC Oil and Gas Company, Esso Resources Canada, Southern California Edison Company and Western Gas Marketing Limited 117 6.4.4 Paramount Resources Ltd 118 6.4.5 San Diego Gas & E lectric Company 118 6.5 COMMENTS REGARDING GAS SUPPLY 118 7.0 REGULATORY ISSUES 121 7.1 SUMMARY OF THE STATUS OF REGULATORY AUTHORIZATION 121 7.1.1 Altamont/Kem River Project 121 7.1.2 PGT View of Altamont Regulatory Status 122 7.1.3 Comments on Status of Altamont Regulatory Authorization 122 7.1.4 PGT Expansion Project 123 7.1.5 Altamont View of PGT Regulatory Status 124 7.1.6 Comments on Status of PGT Regulatory Authorization 124 7.2 THE ISSUE OF CPUC CONTROL 124 7.2.1 Comments on CPUC Control 125 8.0 DISCUSSION OF SELECTED ISSUES 127 INTO CALIFORNIA 127 8.1.1 Capacity Required by Northern California 127 8.1.2 Capacity Required by Southern California 129 129 8.2 DIFFERENCES IN PROPOSED MARKETS TO BE SERVED 8 . 1NEED FOR ADDITIONAL INTERSTATE PIPELINE CAPACITY EXPANSION vii 8.3 COMPARATIVE PRODUCER NETBACKS 130 8.4 PROJECT COST EPnCIENCY 131 8.4.1 Transportation Rates 132 8.4.2 Unit Revenue Requirement 133 8.4.3 Comments on Project Cost Efficiency 134 8.5 IMPACT ON THE PRODUQNG INDUSTRY INTERESTS 134 LIST OF FIGURES 3-1 Comparison of Altamont and PGT Demand Forecasts - T otal California 41 3-2 Comparison of Altamont and PGT Demand Forecasts - N orthern California 43 3-3 Comparison of Altamont and PGT Demand Forecasts - S outhern California 43 3-4 Comparison of UEG Demand Forecasts - N orthern California 45 3-5 Comparison of Non-EOR Cogeneration Demand Forecasts - N orthern California 46 3-6 Comparison of EOR Demand Forecasts - N orthern California 46 3-7 Comparison of UEG Demand Forecasts - S outhern California 47 3-8 Comparison of EOR Demand Forecasts - S outhern California 48 Altamont/Kem River vs. ANG/PGT/PG&E - A lberta Border to Southern California 85 4-2 Unit Pipeline Tariffs at 75 Per Cent Capacity Utilization - Altamont/Kem River vs. ANG/PGT/PG&E - A lberta Border to Southern California 87 ANG/PGT/PG&E - A lberta Border to Southern California 87 Factor (75%) 109 5-2 NOVA’S Unit Cost of Service - I ncremental California Volumes at 85% Load Factor 109 Load Factor 109 (With Altamont and Without PGT^G&E Expansion) 114 6-2 Altamont View of Sequence of Supplies to California: (With Altamont and PGT/PG&E Expansion) 114 6-3 PGT View of Sequence of Supplies to California: Mid-1990’s 116 43 -- Unit PiCpoe lmipna1er i Tsaorinf f so f a t N 9o 1n00- E POeRr CeCnotg e nCe arpaatc iiotyn UDteilmiaznatd i o nF o -r ecasts - S outhern California 48 4 5 -Unit Pipeline Tariffs 3at 50 Per Cent Ca pacity Utilization - A ltamont/Kem River vs. -NOV A’S Unit Cost of1 Service - I ncremen tal California Vol umes at System Average 5 - 6- Alt aNmOoVnAt ’ SV i eUwn i to f C 1Soesqt u 3eonfc eS er ovfi c Seu p -p lI inecsr e tmoe n Ctaalli f oCranliiafo:r n Miia d -V1o9l9u0 m’ess at 65% viii LIST OF TABLES 2223 3-1 Altamont Forecast of Northern California Gas Demand (TJ/d) 25 3-2 Altamont Forecast of Northern California Gas Demand (MMcf/d) 3-3 Altamont Forecast of Southern California Gas Demand (TJ/d) 27 3-4 Altamont Forecast of Southern California Gas Demand (MMcf/d) 24 26 3-5 Altamont Forecast of Total California Gas Demand (TJ/d) 2279 3-6 Altamont Forecast of Total California Gas Demand (MMcf/d) 3-7 Altamont Forecast of Gas Demand in Non-California Markets (MMcf/d) .... 3-8 PGT Forecast of Northern California Gas Demand (TJ/d) 3-9 PGT Forecast of Northern California Gas Demand (MMcf/d) 30 3-10 PGT Forecast of Southern California Gas Demand (TJ/d) 3-11 PGT Forecast of Southern California Gas Demand (MMcf/d) 3322 3-12 PGT Forecast of Total California Gas Demand (TJ/d) 3-13 PGT Forecast of Total California Gas Demand (MMcf/d) 3354 3-14 PGT Forecast of Pacific Northwest Gas Demand (TJ/d) 36 3-15 PGT Forecast of Pacific Northwest Gas Demand (MMcf/d) 36 42 3-16 Comparison of PGT/Altamont Forecasts for Northern California 42 3-17 Comparison of Altamont/PGT Forecasts for Southern California 53 3-18 Altamont Forecast of Interstate Shipments 3-19 Altamont Comparison of Interstate Shipments Required into Northern California with Proposed Pipeline Capacity (Bcf/d) 3-20 Altamont Comparison of Interstate Shipments Required into Southern California with Proposed Pipeline Capacity (Bc^d) 54 56 3-21 PGT Forecast of Interstate Shipments 3-22 PGT Interstate Capacity Requirement as Compared to Existing Capacity 54 into Northern California (Bcf/d) 57 3-23 PGT Interstate Capacity Requirement as Compared to Existing Capacity into Southern C!alifomia (Bc^d) 57 3-24 Altamont Shippers and Volumes 3-25 PGT Expansion Project Market Subscription 60 63 61 4-2 PCS Estimate of Altamont Project Cost 75 4-3 Altamont Pipeline Rate Calculations, Key Assumptions 71 76 4-4 PGT Pipeline Rate Calculations, Key Assumptions 71 79 4-5 Atamont/Kem River Project - E x-Aberta Transportation Rates at 1(X) per cent Load Factor 4 4-6 Ex-Alberta Rates to Non-California Markets 80 4-7 Ex-Aberta Transportation Rates for Expansion Shippers to Northern California at 1(X) per cent Load Factor 4-8 Ex-Aberta Transportation Rates for Expansion Shippers to Southern 3 California at 100 per cent Load Factor 82 - 4-9 Anticipated ANG-PGT-PG&E Rate Increases for Expansion Shippers 83 86 - 82 111 111 as at 31 December 1991 120 2 6 1 5 0 PGT Sh ippers a nd Volum es - 4 - LevelizeUdn i t R ates PCS Estimate 1 of Altamont Proje ct (2ost Underestim ation . 1 Re vised N OVA C osts o f F acilit ies 5 - 6-R evised B oSay2rsdt e mE s tAivmeartaeg e o f U n Gi1ats C Roesste-or fv-eSse r Avviaciel a Fbolree c faosrt I n clusi on in P ermits