Ruby Pipeline Approved

The California Public Utilities Commission on Thursday approved plans by PG&E Corp's Pacific Gas & Electric unit to bring Rockies natural gas to California on the $3 billion Ruby Pipeline planned by El Paso Corp.

The 670-mile, 42-inch-diameter Ruby pipeline will run from the Opal hub in Wyoming to the Malin, Oregon, hub near the California-Oregon border. The Ruby line would connect with the PG&E natural gas pipeline system at Malin.

The 15-year agreement calls for PG&E as anchor shipper to get 375 million cubic feet per day of the Ruby's capacity to deliver 1.3 billion to 1.5 billion cubic feet (bcf) per day at Malin. The commission also let the utility recover its costs from retail customers to ship gas on Ruby, as well as its Redwood Path line.

The 15-year pact starts in 2011 or when the proposed Ruby line is ready for operation.

El Paso spokesman Bill Connery said the Ruby is on schedule to open in March 2011. The PG&E share will be about a quarter of the line's capacity. Connery said El Paso is talking with about a dozen independent producers of Rockies gas to fill the line.

The Cal PUC action "is a major milestone for the Ruby project," said Connery, who added that El Paso has companies lined up for almost 1.2 bcf per day on Ruby.

Ruby's construction is not expected to be affected by the current credit crunch because construction is to begin in 2010, when, he said, El Paso hopes availability to credit is not as tight.

"Ultimately, the natural gas pipelines, because they have long-term commitments from shippers, tend to be very attractive from the financing standpoint," Connery said.

El Paso plans to file in January for Federal Energy Regulatory Commission permitting for the Ruby line.

Commissioner Timothy Simon said the Ruby Pipeline-PG&E deal is "in the public interest" and will help keep natural gas and electric rates lower and allow California to diversify its gas supply. The state is heavily reliant on Canadian natural gas, which is declining, Simon said.

In approving PG&E's agreement with El Paso Corp and Ruby Pipeline LLC, the California PUC dismissed an alternate proposal for PG&E to get supply from another proposed project, the Sunstone Pipeline backed by Williams Companies Inc (WMB.N: Quote, Profile, Research, Stock Buzz) and TransCanada Corp and its Gas Transmission Northwest Corp (GTN).

The Sunstone line would be 230 miles longer than the Ruby line and would also bring gas from the Opal hub in Wyoming.

Author: Jo Amey