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Storage Developer, Salt Mine Operator Do Battle in Louisiana

Henry Gas Storage LLC's (HGS) proposal to construct a 46 Bcf natural gas storage project in the Cote Blanch Salt Dome in St. Mary Parish, LA, is taking fire from the North American Salt Co. (NASC), which claims that the project could jeopardize its workers in the adjacent rock salt mine and create environmental and economic concerns.

HGS, a subsidiary of Ranger Gas Storage LLC, said the location of the project was chosen because the uninhabited Cote Blanche Island "is in close proximity to six existing interstate and two intrastate pipelines and is ideally suited for natural gas storage." The facility would consist of four caverns, approximately 2,500 to 5,000 feet below the surface, with 11.5 Bcf of natural gas capacity each. Aggregate daily withdrawal and injections rates are designed for up to 2.6 Bcf and 1 Bcf, respectively. HGS added that the project's firm and interruptible natural gas storage services would support the increasing energy needs in the Midcontinent, Southeast and Northeast regions of the United States.

A study commissioned by NASC and conducted by Recon Research Corp. found that it was unlikely that the storage project would have long-term viability due to the fact that more than two dozen salt cavern storage projects have been proposed for the Gulf Coast region.

"This report is strike three for the gas storage proposal," said Keith Clark, vice president of NASC. "Because of geographic anomalies, storing gas in the salt dome would jeopardize the safety of our miners. That's strike one. Damage to fish and shrimp is strike two. And shaky economics means the proposal strikes out."

HGS CEO Michael McCall said he believes NASC is "categorically incorrect on all three conclusions." McCall told NGI that the mine and the cavern could "safely coexist for more than 100 years" because "the mine and the closest cavern would be separated by a salt pillar that is more than 3,000 feet thick," adding that he has geologic analysis and rock mechanic studies that show the two facilities can operate safely and that there is no geological possibility of natural gas migrating from the cavern to the mine. "We've offered to meet with the mine's technical experts, but so far they have not offered us the opportunity."

As for the environmental impact claim, McCall said the water for the project would come from the Intracoastal Waterway so they would not be competing with communities or agriculture. He added the plans also include a roughly 20-mile pipeline out into the Gulf of Mexico to discharge brine. "There is no environmental detriment from this project," he said.

McCall said the project is also economically viable. "If you talk to the state of Louisiana's Economic Development department, the Louisiana Oil and Gas Association or the Louisiana Association of Business & Industry, they will say that they believe that natural gas infrastructure development is an investment opportunity in the state and is necessary," he said. "With the known increase in natural gas reserves and the likely increase in natural gas demand, more pipelines and storage are desirable. Consultants don't decide whether energy projects get built. The marketplace does."

HGS filed a request with the Federal Energy Regulatory Commission (FERC) during the summer of 2008 to initiate a review of the project under the pre-filing process. FERC approved the request on Sept. 9, 2008. NASC's opposition to the project has led to a number of exchanges between the companies at the Commission.

HGS said geology "demonstrates that layers of potash-rich sandstone are not continuous and cannot connect the caverns to the salt mine." However, NASC, citing a R.L. Thoms report titled "Anomalous Features in the Cote Blanche Salt Dome and Potential Impact on Salt Mining and Gas Storage," fired back that the geology of the Cote Blanche salt dome incorporates anomalous features that can permit migration of gas from the HGS caverns into the NASC mine.

"In that report, this author concluded that potash-rich layers of sandstone, which span the Cote Blanche mine, are likely to be encountered during solution mining of the salt caverns proposed to be constructed by Henry Gas Storage LLC; and, if encountered, may pose a major long-term concern for the safety of the miners working at the NASC rock salt mine," NASC said in a filing with the Commission.

On Christmas Eve FERC asked HGS to revise environmental reports and collect more data on the proposal.

"That's standard practice in the pre-filing process that we are in," said McCall. "It's down to a very few items...We're working on a plan to gather the more detailed information that they requested. We'll coordinate our planned development with the state and FERC simultaneously and expect to have a permit application filed in the first quarter of 2010."

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