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Private Investors Buy Bankrupt Avoca

Private Investors Buy Bankrupt Avoca

Northeastern Gas Caverns LLC, a New York company, has purchased all the salt cavern drilling rights, licenses and equipment owned by the bankrupt Avoca Natural Gas Storage Co. for $8 million, promising to revive the project, once highly touted as the first high-deliverability salt cavern storage in the Northeast. NGC also has agreed to assume a portion of Avoca's secured debt.

Avoca filed for bankruptcy in May 1997 after it failed to find an acceptable way to dispose of the brine that is a byproduct of leaching the underground salt to form the storage caverns. The initial deep brine disposal wells drilled by Avoca did not have enough permeability and were able to take only 25% of the brine. Another scheme to run a pipeline to a Watkins Glen, NY salt plant also fell through. Observers say there currently is a glut in the market for salt, which makes disposal only slightly less difficult than more toxic wastes.

Texas and Louisiana, where much of the nation's salt cavern storage is located, border the saltwater Gulf of Mexico so disposal is not a problem. Inland in New York State, environmentalists and fishermen have campaigned to keep the salt brine out of local freshwater streams and the water table.

The new owners, a private company represented by Leonard "Buzz" Nave, a Kentucky attorney and Shawn Griffin, a New York attorney, have not said how they will deal with the disposal problem. The attorneys said the new owners are private investors, not affiliated with any energy companies.

Avoca had been backed by Dynegy, Bechtel and PG&E's US Generating, and Equitable Resources. The partners and banks had sunk a total of $80 million into the project by the time Avoca filed for Chapter 11. At the time the company listed $56 million in liabilities.

The Avoca project is in southwestern New York State near the border with Pennsylvania and not far from another highly touted salt cavern storage project, Tioga Gas Storage, also called the Northeast Hub. The latter has been planned by Market Hub Partners, whose 66% owner, Houston-based TPC Corp., was recently acquired by Nipsco.

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