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Oregon LNG Faces Site Lease Issue -- Port vs. State

As it works to reach an understanding with state energy officials, Oregon LNG, one of three proposed liquefied natural gas (LNG) receiving terminal projects in Oregon, has been faced with a hesitant Port of Astoria Commission that won an eleventh-hour reprieve in the midst of its inaction on extending a sublease to the LNG development firm for its proposed 96-acre LNG site near the mouth of the Columbia River.

Oregon LNG's long-held Skipanon Peninsula site near Warrenton, OR, is on land that the port leases from the Oregon State Lands Department which needs to be renewed in a 30-year increment. The sublease the Port of Astoria signed with the LNG developer supposedly binds the government entity to extend the lease. Oregon LNG officials call it a nonissue.

"Our sublease is absolutely secure, and we have a unilateral, ironclad right to renew, and it creates an absolute obligation on the port to renew their lease [with the state lands unit] as well," said Oregon LNG CEO Peter Hansen.

The deadline for action by the port came and went May 31, so in anticipation the Lands Department extended the port's deadline three months to Aug. 31. The idea is that the port needs the time to reappraise the property since its original use permit has changed since 2004 when it was first signed by Calpine Corp., the predecessor to Oregon LNG on the proposed terminal project.

"We have had different legal counsel look at it and the port has had legal counsel look at it, and they all tell the same story: the port must renew," said Hansen, who said if the Port of Astoria went ahead and illegally violated the sublease, his company would obviously seek all legal appeals of the action and would also attempt to negotiate a lease directly with the state.

In the meantime, Hansen said Oregon LNG is closed to striking a deal with the Oregon Energy Department over environmental and operating safeguards it will voluntarily take to protect its project. Another major LNG developer, NorthernStar Natural Gas Corp. and its Bradwood Landing project, indicated through a spokesperson that it doesn't have a memorandum of understanding (MOU) with the state energy department, but it has indicated to state officials it would like to sign something.

"We expect to sign a MOU with the state of Oregon in the very near future that outlines how things such as CO2 [carbon dioxide] mitigation, emergency response and [plans for] facility retirement will work," said Hansen, noting the state energy unit would like to see each of the state's three major LNG projects commit to this, too.

On the lease issue, Hansen said he is sure the port commission eventually will "do what it has to do" and extend the sublease, and he is not concerned about continuing local opposition to the project. "The state lands people are not saying anything negative about the project, they are simply indicating they are willing to have the lease renewed," Hansen said. "We're working very cooperatively with the state, so there are no real issues."

At a recent public hearing only 30-35 local residents showed up to protest, according to Hansen. "I wouldn't call that strong opposition," he said. "The public testimony lasted less than an hour. There really is not a lot of ground swell of opposition."

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