Wyoming should invest in the construction of a natural gas pipeline running to California because of the return the state would realize, according to the Wyoming Natural Gas Pipeline Authority.
While the proposed pipeline running from southwestern Wyoming near Opal to Kern County, Calif., probably will be built even if the state doesn't issue a low-interest $250 million loan, the state would enjoy "significant benefits" by having a stake in the project, according to the authority."The authority has always recognized that the purpose of a loan to a pipeline is to secure and ensure shipment of Wyoming gas through that pipeline," the authority said in its long-awaited report to Gov. Mike Sullivan.
"That purpose, and the resulting economic benefits to Wyoming, are viewed by the authority as the overriding goal of the state's financial participation in a pipeline project."
Two companies are advancing plans to build gas pipelines from Wyoming to California to serve that state's energy needs. The Kern River Gas Transmission Co. filed its application for a permit from the Federal Energy Regulatory Commission in May 1985, while the Wyoming-California Pipeline Co. entered the race in August 1987.
In its report to Sullivan, the pipeline authority did not formally recommend one of the companies for the low-interest loan. Instead it said that while Kern River "appears to have an advantage over the WyCal project," WyCal "is well-organized and financed and has shown considerable aggressiveness in attracting prospective customers."
Sullivan, who received the authority's report Tuesday and released it Wednesday, said he and Attorney General Joe Meyer would study the document and then meet with representatives from Kern River and WyCal before deciding which company should be offered the loan.
"The decision as to whether or not to make the pipeline loan will be made within the next few weeks, after a thorough review by me and the attorney general," said Sullivan.
"But without regard to which direction that decision takes, let us recognize that we have taken control of our own destiny," he said. "We refused to simply sit back and react to somebody else's decisions about our livelihood as a state."
The pipeline authority's proposal calls for a sliding rate for the loan, ranging from 4 percent if at least 500 million cubic feet per day of Wyoming gas is shipped through the line to at least 10.5 percent if the level of Wyoming gas drops below 350 million cubic feet.
At 4 percent, the state would not realize as much income from interest than if the $250 million were invested conventionally, according to the authority. Roughly $11 million less in interest would be generated in 1991 if the loan carried a 4 percent interest rate, the authority figured.
However, such a rate would spur a greater return in severance taxes because of increased gas production, the authority said. In 1991 that would translate into $17.8 million, and by 2005 the sum would grow to $35.2 million, according to the authority.
"The principal benefit to the state of this financing will be substantial incentives to encourage the development and shipment of Wyoming gas," the authority said in its report.
Among the authority's recommendations to Sullivan was one urging that any loan issued by the state for the pipeline should give the state "the right to call or accelerate repayment of its loans" if sufficient amounts of Wyoming gas aren't shipped through the pipeline.
Earlier this week word came from Salt Lake City that both Kern River and WyCal could begin construction on their pipelines as early as this fall.
While officials have said two competing pipelines could be built between Wyoming and California, there's been speculation that market demand will determine which company's pipeline is actually built.
Both companies plan to start construction near Opal, go through Utah and Nevada, and enter Southern California west of Las Vegas. Kern River's pipeline would terminate in Kern County, Calif., and WyCal's would end just across the Nevada state line.