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

You won’t see any sign on the property door in Bath, NY. Butpeople in the trade say there’s a “silent auction” going on becausethe company needs new money and new management after suffering aseries of devastating setbacks in an on-going fight for permitswith 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. inHouston, “and maybe the same thing can happen at Bath.” The remains ofthe bankrupt Avoca recently came under new management which haspledged to revive the project. (See Daily GPI, July 30, 1999)

Robert Weinberg, BPSI President, admits his company is in afinancial bind and says he’s quietly looking for prospectivebuyers. “We’ve tried to sell our business,” Weinberg says, “but, sofar we haven’t been able to make any deals because of all theregulatory hang-ups and fines we’re facing (at last count, morethan $40 million levied by the DEC).”

“Amoco and Columbia Transmission both have looked at the cavernproperty,” Weinberg says, “and so far have passed on it.” But,interested lookers keep coming. “We’re approached almost everyday.”

In 1995, Houston-based Market Hub Partners (MHP) wanted to buyout BPSI, Weinberg says, “but neither the money nor the conditionswere right.” Since then, MHP has concentrated on developing its owngas-cavern project in Tioga, PA and has aggressively opposed BPSI’spermit applications to expand its cavern capacity.

Before getting into its current financial bind, BPSI had beenoperating a successful LPG cavern storage business, which itpurchased from Mobil Oil in 1983. In November 1991, the companysubmitted an application to the DEC for a permit to expand itsfacilities by drilling and solutioning out salt brine to constructseven additional caverns.

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

The application was revised to satisfy the DEC’s objections anddrilling began. A blowout occurred. No one was hurt but theincident turned into a media event that caught the interest oflocal citizens’ groups and put the DEC regulators in a defensivestance. In 1996, MHP, which was in the process of getting approvalfor its cavern project in Tioga, filed objections to the BPSI/CNGpermit application at FERC to expand cavern capacity.

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

Last January CNG said things were dragging on too long andcanceled its storage contract with BPSI. Last March BPSI’s Weinberglashed out and sued two top DEC officials for alleged “arbitraryand capricious” regulatory actions. In May, he filed suit againstMHP for allegedly violating the RICO (Racketeer Influenced andCorrupt Organization Act) and anti-trust laws.

Some people in the industry believe new owners, behind thescenes, could settle the off-setting fines and lawsuits to getcavern production rolling again. BPSI’s Weinberg agrees. “If I soldthis business, the cavern projects would go through in a minute…Anew deck of cards is what it’s going to take.”

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