Talks aimed at bringing clean-burning natural gas to Los Angeles from Wyoming collapsed Wednesday, leaving the city's Department of Water and Power facing what it called "a real crisis" in its ability to meet new air-quality goals.
A letter of intent providing for exclusive gas-supply negotiations between the department and Kern River Gas Transmission Co. expired without an agreement after about seven months of talks, said DWP general manager Norman E. Nichols.
DWP sells water and electricity, generating the power at plants capable of using oil or gas.
Kern River has proposed building an 837-mile pipeline to tap a vast, new gas field in Opal, Wyo., and bring the gas to Southern California. DWP maintains that, if it is to meet new smog-reduction standards imposed by the South Coast Air Quality Management District, it must install $1 billion worth of emission-control equipment, which will require gas.
"We cannot prudently proceed with this investment," Nichols said, "unless we have reliable supplies of the cleanest fuel possible, natural gas."
Most electricity-generating plants in Southern California have traditionally burned oil, and switched to natural gas only when that fuel was cheaper. Higher air-quality standards have since forced them to burn more natural gas.
But because utilities can switch fuels, Southern California Gas curtails deliveries if short supplies jeopardize its ability to meet the needs of residential customers. One result has been to create uncertain gas supplies for electric utilities.
A proposed long-term supply contract between SoCal Gas and DWP is pending before the California Public Utilities Commission, but the PUC previously rejected similar pacts between the gas company and Southern California Edison and San Diego Gas & Electric.
The PUC supports the contract concept but rejected some provisions of the earlier contracts, gas company spokesman Rick Terrell said. The commission is also seeking to develop its own plan to allocate pipeline capacity to resolve the problem.
The Kern River talks ended with the two sides at loggerheads on the issue of whether DWP could in the future build its own pipeline connecting to Kern River's.
"We must insist that we have the right, at any time, to build our own pipeline from the Los Angeles area to meet up with the Kern River pipeline," Nichols said.
Nichols said DWP, which supports the gas company's efforts to expand the supplies it receives from El Paso Natural Gas Co. by about 200 million cubic feet a day, has also begun negotiations seeking a future interconnection agreement with Wycal, which proposes to build a rival Wyoming-California pipeline.