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Oregon LNG Advocate Says Internal Memo Counters Claims

One of the three major proponents of a liquefied natural gas (LNG) receiving terminal in Oregon produced an internal Oregon Public Utilities Commission (PUC) memo sent to Gov. Ted Kulongoski that counters to some extent an earlier assessment by the state's energy department that LNG is unnecessary. The report by the Oregon Department of Energy said the need for LNG could be precluded by added Rockies supplies and climate change-induced energy efficiency and renewable steps (see NGI, May 19).

While the PUC chairman's assessment seems to indicate LNG could be helpful, he predicted that it would not have any price advantages compared to added pipeline supplies into the state.

Oregon PUC Chairman Lee Beyer sent a May 30 memo to Kulongoski that concluded there is "no assurance that an LNG terminal will ever be built, [but] its presence would help in meeting demand even though it would likely be at the same price as domestic gas." His other conclusions were not unlike those of the earlier energy department report: (a) Northwest gas demand will continue to grow over the next 20 years; (b) prices will continue to go up; and (c) there are no guarantees that new pipelines serving the Northwest will get built.

As it has in California, the debate about siting a LNG terminal in Oregon from both a need and safety standpoint continues unabated. Three proposals are jockeying for favorable public positions as they struggle through different federal/state/local permitting processes. Ultimately, all think they can get the necessary approvals, but which one, if any, builds a facility is another question more dependent on economics and market dynamics. None of the proposals has supplies currently under long-term contract for their proposed facilities.

NorthernStar Natural Gas, the sponsor of the Bradwood Landing LNG project that received its final federal environmental assessment earlier in June, sent out copies of the PUC chairman's memo to the governor, characterizing the document as expressing "concern about the future price of natural gas due to a combination of increased demand, lack of supply, increased production costs...and a move away from coal-fired generation."

NorthernStar interprets the state chief regulator's memo as concluding that the actual cost of LNG landed might be around the $4.50/MMBtu level, which would leave "lots of room for market economics to work," considering the options of Rockies and Western Canada supplies being sent via additional pipeline capacity into the region.

Beyer said that aside from short-term calamities, "natural gas likely will be available for the foreseeable future, but the question is -- at what cost?" He told Kulongoski that "there is not a clear right answer to energy-related questions anymore."

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