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Oregon LNG Undeterred by Court Ruling

Developers of a proposed liquefied natural gas (LNG) import-export project at the mouth of Oregon's Columbia River remain undaunted by a court ruling last month that upheld reversing county permitting approval.

At issue are local land-use approvals that the Clatsop County elected board issued to Oregon LNG two years ago for its proposed facilities at Warrenton, OR (see NGI, Aug. 30, 2010), only to have a newly elected board later reverse that decision. The LNG developer filed a lawsuit, but the local action has been upheld by the Oregon Appeals Court.

In the overall permitting process now awaiting a draft environmental impact statement (EIS) from the Federal Energy Regulatory Commission, the state appellate decision is not a major setback, Oregon LNG CEO Peter Hansen told NGI. Local permitting, however, is one of three key criteria for demonstrating a project's conformance to coastal zone environmental requirements under the 2005 federal Energy Policy Act, Hansen said.

Oregon LNG has until later November to decide whether to appeal to the Oregon Supreme Court or pursue alternatives to demonstrate compliance with coastal zone requirements. Either way, Hansen said the local permitting is not germane to the project's pending export permits from the U.S. Department of Energy (DOE).

"As far as timing is concerned, it probably doesn't impact us," Hansen said. "We can't apply for the coastal zone management act consistency ruling from the state" until an environmental impact state by the Federal Energy Regulatory Commission is done. "That isn't expected until the second quarter next year. In other words, it is not on a critical path yet, although it is needed for our construction authority."

Hansen stressed that there are alternatives for getting the needed coastal zone approval without having a local permit, and Oregon LNG is exploring those options as it reviews the appellate court decision to determine if it wants to appeal to Oregon's highest court.

"Going through the local processes is not necessarily the only way to get the coastal OK," he said, but he didn't detail what those alternatives were. "In our opinion, we certainly meet all the standards for the coastal zone act."

He blamed "pure local politics" for the court fight. "It has nothing to do with the standards." Hansen stressed that the area of the Warrenton waterfront where the LNG facilities are proposed is already a zone where oil and gas development is designated as a "conditioned" use.

In the meantime, Hansen is seeing the recent slowing of the LNG export development pace in Western Canada as a potential positive development for the project (see related story). The growing size and complexity of several liquefied natural gas (LNG) export projects in Western Canada is casting some doubts about their viability, he said. Hansen said the financial and regulatory complexity seems to be increasing for projects aimed at Kitimat and other West Coast British Columbia locations.

"It is pretty clear from what I read that all the Canadian projects are turning into mega-projects," Hansen said. "That is the only way they are going to work when you have many billions of dollar required for pipelines. Once they are mega-projects, costing many billions of dollars, then life does get harder. It now takes a slew of banks to get these projects going."

The Oregon LNG's plans for a $6 billion terminal and pipeline project at Warrenton, OR, are relatively simple, he claimed. He has stressed the project's "direct access" to huge supplies of Canadian gas with a short (nine- to 10-day) sailing time to the Asian market. "The Pacific Northwest is a perfect shipping location for LNG, and construction costs are a lot lower down here where you have an unemployed workforce," he said, noting that the project also can rely mostly on existing infrastructure upgrades as opposed to greenfield projects.

Besides Hansen, the project is financially backed by Leucadia National Corp., a New York City-based diversified holding company. Hansen launched the now multi-billion-dollar project as an import terminal in 2004. He previously ran western development for Calpine Corp., but following that company's Chapter 11 bankruptcy filing in late 2005, Hansen led a small group with Leucadia's help, to purchase the development rights.

In addition to its proposed export and receiving facilities at Warrenton, Oregon LNG has proposed an 86-mile, 36-inch diameter transmission pipeline running easterly into the state of Washington where it would connect with an enhanced portion of Williams' Northwest Pipeline Co. at Woodland, WA (see NGI, July 9). Oregon LNG has signed an agreement with Northwest Pipeline calling for the LNG project backers to pay for all of the pipeline company's regulatory processing fees for the completion of an upgrade of two pipelines running from the Canadian border to Woodland, roughly paralleling Interstate Highway 5. The upgrades, estimated by Hansen to cost $650-750 million, would provide two parallel 30- and 36-inch diameter pipelines to carry Canadian gas for export.

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