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Oregon Natural Gas Talk Heats Up on Price, LNG

As state regulators were holding an annual natural gas price workshop last Tuesday, Oregon's largest daily newspaper, the Portland Oregonian published an editorial supporting the development of a liquefied natural gas (LNG) terminal in the state. Meanwhile, the three major natural gas distribution utilities serving the state told energy officials to expect retail natural gas prices to increase this winter in the range of 10-40%, with the state's biggest distributor predicting hikes in the 35-40% range.

The annual half-day workshop convened by the Oregon Public Utility Commission (PUC) caused the state regulatory panel to warn retail gas utility customers to brace themselves for what the regulators called "an expected sharp rise in prices." The PUC summarized this as an outcome from the collective opinions expressed at its workshop.

As a morning backdrop, the Portland newspaper's editorial contended that LNG development in the United States has been "unfairly demonized," including several proposed projects in Oregon, such as the Bradwood Landing project on the lower Columbia River.

"The Bradwood project [by NorthernStar Natural Gas] should be allowed to move ahead," the Oregonian editorial concluded.

"Claims that there's no market for this gas in the Northwest -- that it's really just for California -- are off the mark. Much of the gas would indeed go out of state, at least in the initial years, but Northwest Natural Gas Co. projects that the LNG from Bradwood Landing would supply up to a quarter of its customers' gas needs and more later as the region grows." (Northwest Natural was reinforced that point in its presentation Tuesday at the Oregon Public Utility Commission gas price workshop.)

Portland-based Northwest Natural, the state's biggest gas distribution utility, told regulators it expects its retail rates to go up 35-40% this winter; Seattle-based Cascade Natural Gas, now a subsidiary of North Dakota-based MDU Resources, predicted its rates would go up 15-20%; and Spokane, WA-based Avista Utilities expects rates for its Oregon customers to rise 10-15%.

"Generally, the PUC was told that natural gas prices this coming heating season likely will be significantly higher than a year ago due to growing demand, tight supplies and international pressures as Oregon's natural gas companies secure supplies for their customers for the next year and beyond," said a PUC spokesperson.

PUC gas analyst Ken Zimmerman said this year's trend is "very much the opposite" of what the state faced last year. "Demand is robust while supplies remain tight. As a result, wholesale prices are significantly higher than a year ago," Zimmerman said.

PUC Chairman Lee Beyer called the workshop presentations "sobering news," in light of the other general negative economic pressures on consumers this year. "I can't urge strongly enough that customers should start thinking now about how they can use less natural gas this coming winter," Beyer said.

Oregon receives the bulk of its gas supplies from Western Canada and the U.S. Rockies, but PUC officials said "wild cards" that could push prices even higher are extensive hurricanes that disrupt Gulf of Mexico supplies and any unforeseen major interstate gas pipeline disruptions.

In the supportive editorial, the Oregonian newspaper characterized the overall LNG debate as "overheated," and said concerns about safety are not supported by the industry's record, which it called "excellent," adding that concerns about terrorism are no different than the ones facing any large industrial facility.

Any FERC permit will be heavily contingent on the project meeting various environmental requirements, and in that regard, Oregon Gov. Ted Kulongoski will have "plenty of cards to play," as he has been a critic of the federal siting process for LNG terminals, the newspaper said.

"We share the governor's view that state environmental concerns must be addressed in the development of any LNG operation or accompanying pipeline in Oregon," said the Oregonian. "And we're confident those concerns will indeed be met, because even with FERC's anticipated approval, the Bradwood project still needs state permits under the Clean Air, Clean Water and Coastal Zone Management acts."

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