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PSE Gets Washington State Regulators OK For LNG Storage & Transportation Project

Puget Sound Energy (PSE) gained state regulatory approval Monday for its plans to develop a $275 million liquefied natural gas (LNG) facility to store utility customer supplies and marine fuel (see Daily GPI, Dec. 24, 2015).

The Washington state Utilities and Transportation Commission (UTC) approved an all-party settlement agreement with additional conditions to protect PSE utility customers on a long-standing project. Originally the Bellevue, WA-based combination utility planned to begin building the project last year, only to be challenged by a Native American tribe in court despite the support of the city of Tacoma, WA, and its port authority.

UTC approval allows PSE's privately held (Macquarie) parent company, Puget Energy, to create a wholly owned subsidiary, called Puget LNG LLC, whose sole purpose as a limited liability company is to own, develop and finance the facility in the Port of Tacoma, a regulatory commission spokesperson said.

Under the settlement approved by UTC, PSE and Puget LNG will operate the Tacoma LNG facility under a joint ownership agreement that they must file with the state regulators before moving ahead with the project. Puget LNG will sell transportation fuel for ships, and the facility will provide stored natural gas supplies for PSE core residential customers to use during peak demand periods in the winter months.

The Tacoma LNG plant will be operated as a non-utility unregulated business, per the settlement agreement.

"The [three-member] UTC determined that the provisions of the settlement will allow PSE's ratepayers to continue to have the same, or even an enhanced, level of protection from financial liability that might result for Puget Energy owning an unregulated subsidiary, or from the activities of Puget LNG," the UTC spokesperson said.

Signers of the settlement agreement include the UTC staff, Northwest Industrial Gas Users, Industrial Customers of Northwest Utilities, and the Public Counsel unit in the Washington state Attorney General's Office. The UTC's approval only pertains to the establishment of the corporate structure.

If built, PSE will have to gain UTC approval for the ratepayer-supported costs of the facilities operations as a storage facility for core utility customers, the UTC spokesperson said.

Plans by PSE to develop an LNG storage and transportation facility at the port south of Seattle last year gained approval of a lease by the port's governing board. The utility's plans are part of a larger development slated for a vacant industrial strip in the Tideflats port.

Tacoma's port is drawing other natural gas-related projects (see Daily GPI, May 7, 2014), such as one by Boston-based Xpress Natural Gas (XNG), which last year unveiled plans to bring truckloads of compressed natural gas (CNG) to the energy-starved Olympic Peninsula in the Pacific Northwest on the western side of Puget Sound opposite Seattle, siting a facility in the Port of Tacoma. The company has been doing something similar in New England in recent years (see Daily GPI, Sept. 8, 2015).

Earlier this year, multi-billion-dollar plans for three natural gas-consuming methanol plants in the Pacific Northwest were scaled back to two plants when the largest proposed facility at Port of Tacoma was scrapped by the developer, a China-based consortium, Northwest Innovation Works (see Daily GPI, April 20).

PSE's proposed Tacoma LNG facility will be capable of receiving nearly 21,000 Dth/d of natural gas from which up to 250,000 gallons of LNG can be produced, and it will have storage capability for up to eight million gallons of LNG. The facility would provide transportation LNG fuel supplies to Totem Ocean Trailer Express Inc., and marine fuel sales to other vessels and purchasers.

UTC's Pipeline Safety Section is conducting a review of the safety of the proposed LNG facility, separate from the ongoing proceedings.

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