El Paso Snags LNG Lease Option
In what would be the smallest of the four existing liquefied natural
gas terminals in the United States, El Paso Merchant Energy got the go-ahead
on a three-year lease option to build a facility on Radio Island in North
Carolina. The North Carolina State Ports Authority unanimously approved
the deal last week.
The option, if used, allows the Houston-based El Paso Corp. subsidiary
to construct a $250 million LNG storage facility on about 46 acres of land
on Radio Island, which is across the Newport River from the Port of Morehead
City. Preliminary plans call for a facility that could store up to 3.5
Bcf, with a pipeline capacity of 250 MMcf/d. The Ports Authority said the
terminal would be served by two-to-three ships a month.
El Paso spokesman Aaron Woods said the Radio Island facility would be
the smallest of the four U.S. LNG terminals. The Cove Point, MD LNG facility
can store up to 6.7 Bcf with a pipeline capacity of 750 MMcf/d. Earlier
this month, El Paso Corp. announced it was considering construction of
up to six LNG facilities in North America (see Daily GPI, Feb.
Originally, the Ports Authority had set the lease for two years, but
El Paso officials said they could not complete the permitting process in
that time. The lease extends for 50 years and two additional 10-yeare periods
are available. El Paso would own any improvements made on the property
and would be required to pay applicable taxes on the improvements.
"This LNG facility will positively impact the entire State of North
Carolina, but most especially eastern North Carolina, where the absence
of natural gas has severely limited economic development and growth,"
said J. Richard Futrell, chairman of the Ports Authority's board of directors.
"Three quarters of all industrial facilities have a requirement for
natural gas as a prerequisite to locating their operation to a new area."
Erik Stromberg, executive director of the Ports Authority, said the
option would give El Paso the opportunity to move the project forward through
state and federal permitting processes. Noting that some residents were
concerned about safety issues, Stromberg said that "preliminary input
from the U.S. Coast Guard indicates that while there is risk involved,
the risk can be (and is at other LNG facilities in the United States being)
well managed within acceptable parameters."
The next step for El Paso is a hearing before the North Carolina Council
of State next week, on March 6. The lease option goes into effect March
15 under the Ports Authority approval, and if the Council of State grants
its okay, El Paso could begin the permitting process.
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