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Prime Gas Storage Site for Sale

Prime Gas Storage Site for Sale

Bath Petroleum Storage, Inc. (BPSI), a company operating in a prime Northeast salt cavern storage location, is up for sale.

You won't see any sign on the property door in Bath, NY. But people in the trade say there's a "silent auction" going on because the company needs new money and new management after suffering a series of devastating setbacks in an on-going fight for permits with the New York Department of Environmental Conservation (DEC).

"There are new faces coming in to resurrect the Avoca project," says Ken Beckman, president of International Gas Consulting Co. in Houston, "and maybe the same thing can happen at Bath." The remains of the bankrupt Avoca recently came under new management which has pledged to revive the project. (See Daily GPI, July 30, 1999)

Robert Weinberg, BPSI President, admits his company is in a financial bind and says he's quietly looking for prospective buyers. "We've tried to sell our business," Weinberg says, "but, so far we haven't been able to make any deals because of all the regulatory hang-ups and fines we're facing (at last count, more than $40 million levied by the DEC)."

"Amoco and Columbia Transmission both have looked at the cavern property," Weinberg says, "and so far have passed on it." But, interested lookers keep coming. "We're approached almost every day."

In 1995, Houston-based Market Hub Partners (MHP) wanted to buy out BPSI, Weinberg says, "but neither the money nor the conditions were right." Since then, MHP has concentrated on developing its own gas-cavern project in Tioga, PA and has aggressively opposed BPSI's permit applications to expand its cavern capacity.

Before getting into its current financial bind, BPSI had been operating a successful LPG cavern storage business, which it purchased from Mobil Oil in 1983. In November 1991, the company submitted an application to the DEC for a permit to expand its facilities by drilling and solutioning out salt brine to construct seven additional caverns.

In 1995, BPSI negotiated a natural gas storage contract with CNG Transmission to convert an LPG storage facility to natural gas. Around the same time, the DEC questioned BPSI's right to drill a new well to recover the use of one of its previous wells.

The application was revised to satisfy the DEC's objections and drilling began. A blowout occurred. No one was hurt but the incident turned into a media event that caught the interest of local citizens' groups and put the DEC regulators in a defensive stance. In 1996, MHP, which was in the process of getting approval for its cavern project in Tioga, filed objections to the BPSI/CNG permit application at FERC to expand cavern capacity.

Citizen groups were effective in helping to block permit applications and delaying BPSI's attempts to get its caverns going. The groups were also able to get the DEC to look into BPSI's salt discharges into the Cohocton River. BPSI said it had a permit to discharge salt. The DEC maintained that the discharges exceeded specified limits. This is when the fines started to mount up.

Last January CNG said things were dragging on too long and canceled its storage contract with BPSI. Last March BPSI's Weinberg lashed out and sued two top DEC officials for alleged "arbitrary and capricious" regulatory actions. In May, he filed suit against MHP for allegedly violating the RICO (Racketeer Influenced and Corrupt Organization Act) and anti-trust laws.

Some people in the industry believe new owners, behind the scenes, could settle the off-setting fines and lawsuits to get cavern production rolling again. BPSI's Weinberg agrees. "If I sold this business, the cavern projects would go through in a minute...A new deck of cards is what it's going to take."

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