Pinnacle West Energy Explores Feasibility of a Natural Gas Shortage Facility


PHOENIX - Pinnacle West Energy, the generation subsidiary of Pinnacle West Capital Corporation (NYSE: PNW), announced today that it is conducting a feasibility study to evaluate the creation of an underground natural gas storage facility west of Phoenix.

As part of the study, a 30-acre site, located on a thick, naturally occurring salt deposit, is being evaluated to determine if it has the potential to support an underground cavern storage facility. The property is located in an industrial area near the intersection of Dysart Road and Glendale Avenue, near Luke Air Force Base. SunCor Development Company, a sister company of Pinnacle West Energy, is the property’s current owner and has applied for the necessary permits to conduct the study.

Geological testing is anticipated to begin in February and last about 30 days. If the study indicates the area is favorable for storage development and the Company decides to move forward with the project, cavern development could begin as early as June 2002.

The project is being proposed by Pinnacle West Energy; Crystal Gas Storage, Inc., an affiliate of El Paso Energy Corporation (NYSE: EPG); and Gaz de France, an international natural gas storage developer.

"A natural gas storage facility will provide additional security for Arizona’s fuel supply during periods of high electricity and gas demand," said Bill Stewart, president of Pinnacle West Energy. "The western U.S. electricity market experienced its most volatile year in recent memory, and extreme weather conditions across the country have put a strain on the nation's gas supply. Both cases make a strong argument for studying the value of owning this type of facility."

The storage facility would serve as a regional alternative to gas storage facilities in other states. In addition, this project would offer a reliable, quick-response supply buffer during periods of high seasonal demand. This would help ensure that gas-fired power plants in the area, such as Pinnacle West Energy’s Redhawk and West Phoenix power plants, have the fuel supply necessary to meet customer demand. The cavern also could serve other natural gas users in the Southwest. The proposed location is about two miles from an existing, major natural gas transmission system.

Currently, there are about 400 underground natural gas storage projects in the United States, 27 of which are salt cavern projects similar to the one under consideration by Pinnacle West Energy. While depleted reservoirs and aquifers are the most common types of natural gas storage, salt caverns have become increasingly more common.

Salt caverns are formed by injecting water into a salt deposit. Once the salt dissolves in the water, the resultant brine is pumped out until the cavern reaches a pre-determined depth.

Pinnacle West Capital Corporation is a Phoenix-based company with consolidated assets of approximately $7 billion. Through its subsidiaries, the company generates, sells and delivers electricity and sells energy-related products and services to retail and wholesale customers in the western United States. It also develops residential, commercial and industrial real estate projects.


Alan Bunnell, (602) 250-3376, (602-326-7610 (cell)
Sheri Foote; 602-250-2363, 602-684-1332 (cell)

Rebecca Hickman, (602) 250-5668
Lisa Malagon, (602) 250-5671

This press release contains forward-looking statements that involve risks and uncertainties, which include, but are not limited to, the ongoing restructuring of the electric industry; the outcome of the regulatory proceedings relating to the restructuring; regional economic and market conditions, which could affect customer growth and the cost of power supplies; the cost of debt and equity capital; weather variations affecting customer usage; and the strength of the real estate market. These factors and the other matters discussed above may cause future results to differ materially from historical results, or from results or outcomes currently expected or sought by the Company.

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