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CHEYENNE, Wyo. — The proposed sale of Wyoming's only natural gas storage reservoir could lead to more than 100 new construction jobs and a decadelong rate decrease for 53,000 natural gas customers in central and southern Wyoming.

But Colorado-based SourceGas said the sale of the Oil Springs Reservoir, in eastern Carbon County, won't go through unless Wyoming lawmakers first abolish a provision in state law that may require SourceGas to give customers up to $40 million if the sale goes through.

EnStor, the Houston-based energy storage company that wants to buy Oil Springs, has big plans for the reservoir. It wants to spend $100 million to expand the facility and convert it from a local reservoir designed to feed gas only to Wyoming customers during peak usage times into a major gas storage facility connected to interstate gas pipelines.

The expansion would also create about 100 to 120 construction jobs over a two-year period, said Paul Copleman, communications manager for EnStor.

The sale wouldn't have any effect on SourceGas service, Copleman said. In fact, he said, the roughly $1 million per year SourceGas would save from the deal would be passed along to customers in its Casper division, which includes the Casper area and Fremont, Carbon and Albany counties.

Over the next 10 years, residential customers in those areas would see their annual gas bills drop by an average of $12.13 per year; commercial users would see an average annual reduction of $71.67.

“It really is a win-win,” said state Sen. Eli Bebout, R-Riverton, a supporter of the deal. “It's good for the state. It's good for the rate payers.”

Changing the law

SourceGas and EnStor have agreed in theory to the sale, though they haven't yet worked out a final sale price. That's because there's a holdup: a state law that could force SourceGas to give customers rate cuts far greater than what the utility is willing to pay.

Under a 1987 state law, whenever SourceGas or any other Wyoming utility sells any natural gas to a nonutility, it has to give its customers a rate discount equal to the current price of natural gas subtracted by the price of the gas when the utility first bought it.

The Wyoming Public Service Commission has alleged that this law applies to the estimated 16 billion cubic feet of so-called “cushion gas” stored in the Oil Springs Reservoir. “Cushion gas” is natural gas permanently stored in the reservoir to provide required pressurization needed to extract the “working gas” sent on to customers' homes and businesses.

With the regional wholesale price of natural gas at about $2.65 per million British thermal units as of December — about $2.38 per mmbtu more than what was paid for the cushion gas in the Oil Springs Reservoir — the PSC said SourceGas would have to shell out roughly $40 million to its Casper division customers. SourceGas disputes this number, saying only about 4.25 billion cubic feet of cushion gas — worth about $10 million — is recoverable.

SourceGas disputes whether it would have to pay any money to customers under the law at all. But even the prospect of having to give out that much money would kill the Oil Springs deal, SourceGas and EnStor officials said.

“If this statute is not repealed, this transaction will not occur,” said Larry Wolfe, an EnStor lobbyist.

To resolve the dispute, both SourceGas and EnStor have turned to the Wyoming Legislature.

Senate File 92, which passed the Senate 29-1 last month, would simply abolish the 1987 law. The bill passed the House Minerals Committee on Wednesday; it must now pass three votes on the House floor before it would go to Gov. Matt Mead for his signature.

SourceGas and EnStor lobbyists and officials note that the law has never been invoked since it was passed and was a relic of an outdated age when natural gas companies had to stockpile “working gas” under agreements with gas suppliers.

Potential opposition

Even if the legislation passes, the Public Service Commission must still approve the final sale of the Oil Springs Reservoir to EnStor.

PSC Chairman Al Minier, speaking to the Minerals Committee on Wednesday, said he expects there will be interveners in the proposed sale — which means the PSC will hold public hearings on the issue.

Given that the Oil Springs Reservoir has held natural gas since 1951 — it was bought by SourceGas in 2007 — Minier said the Public Service Commission will factor how much rate payers have been paying to buy and maintain the reservoir's cushion gas over the years.

He also said he expects to hear complaints about the new expenses that SourceGas — and its rate payers — will take on when the utility no longer owns the reservoir.

But if SF92 passes, Minier said, the commission will limit itself to working out terms of the reservoir sale that “will hopefully be fair to shareholders and rate payers.”

Minier said he was “frankly a little surprised” that the commission hasn't yet heard from the public about the legislation.

Conservation groups are also watching the proposed sale.

Richard Garrett of the Wyoming Outdoor Council said that he's apprehensive about plans to expand the Oil Springs Reservoir because it's located in the Shirley Basin, one of seven areas his organization has identified as “heritage landscapes” in need of preservation.

“We believe that this is one of the select few areas of the state that is so special that it deserves to be protected from the consequences of development,” Garrett said. “As this project moves forward (and) will have developmental impact, you might expect us to weigh in on (environmental impact statement) issues and so forth.”

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