In the wake of the NorthernStar Natural Gas bankruptcy filing and abandonment of its FERC-permitted Bradwood Landing liquefied natural gas (LNG) receiving terminal in northwest Oregon, industry observers see the proposed Palomar natural gas pipeline, which had a potential connection with Bradwood, as perhaps the next gas project domino to fall in the Pacific Northwest. However, Palomar officials told NGI last Wednesday that the project is still alive, but "slowed" in its permitting.

A couple of possible outcomes include modifying the western, final 100-mile portion of the project and/or the federal regulatory application for the joint venture project may have to be amended, officials indicated.

Noting that the project sponsors have informed the Federal Energy Regulatory Commission (FERC) of their slowdown, Palomar's Mike Burke, a project director, said this step is being taken "to allow some time to get some additional commercial support" for the four-year-old project to build a 220-mile, 36-inch diameter pipeline for which units of TransCanada's Gas Transmission GTN and Northwest Natural Gas Corp. originally held an open season in 2006 (see Daily GPI, Sept. 26, 2006).

"Once we are through a number of commercial discussions with interested parties and have that all worked out, our plan is to get back to FERC and let them know where we are at with that process and what the project going forward looks like," Burke said. "That may or may not trigger an amendment to the [FERC] application; we're not sure how the commercial discussions will play out."

Palomar's application and docket at FERC remain among the "active" projects, said Burke, who describes Palomar as two projects in one, with an east zone (the first 110 miles) connecting the existing GTN main interstate transmission pipeline with the Portland area where Northwest Natural's system connects with the region's other major interstate supplier, Northwest Pipeline. The second part, or west zone running another 110 miles, would carry on northwest of the greater Portland area to the Bradwood Landing LNG site along the Columbia River toward the mouth of that river at the Pacific Ocean.

"The project has always had two goals -- in the east zone it is to get GTN system gas into Portland, and the second project purpose was to allow LNG to access the Portland market as well as the GTN system," Burke said.

So, the west zone project is probably unnecessary now? Burke did not answer the question, saying only that "until the whole Bradwood-related bankruptcy proceeding is resolved, we're not quite sure what will happen with their interest in the project. We need to let that play out before we can say definitely what is going to happen. Palomar was a second potential pipeline to allow the LNG access to the market."

Bradwood Landing's FERC-approved, conditional certificate for its terminal included a pipeline of about 30 miles connecting to part of the Williams' Northwest Pipeline system; Palomar was going to be a second interstate pipeline connection for the LNG terminal.

The Palomar partnership has promoted its project as a means of expanding interstate interconnections and supply diversity in the region, connecting TransCanada's existing GTN System in central Oregon with Northwest Pipeline's Grants Pass Lateral and Northwest Natural's distribution system near Molalla, OR, approximately 30 miles southeast of Portland. In addition a western segment was included to allow deliveries along Northwest Natural's distribution system west and north of Molalla. The system was envisioned as providing transportation capacity of up to 1.3 Bcf/d, with service beginning in late 2011(see Daily GPI, May 28, 2008).

An initial open season in 2007 provided sufficient commercial support to proceed with the proposed pipeline's environmental prefiling to FERC, Palomar's backers said in the past. Subsequently other proposals for new pipelines to move Rockies natural gas into western markets emerged, prompting Palomar to gauge the interest of potential shippers another time before submitting its FERC application.

According to Northwest Natural, from the gas utility's perspective, Palomar has been in consideration for more than 15 years for the purpose of increasing the reliability of gas supply to its system. Northwest Natural currently serves more than two-thirds of its nearly 700,000 customers from a single interstate pipeline, unlike the vast majority of gas utilities across the nation that have two or more pipelines on which to rely.

©Copyright 2010 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.