Leaving the so-called “race for LNG” to the sprinters in the southern part of the state, San Jose, CA-based Calpine Corp. indicated Monday it is willing to take its time, absent any strong competitive pressure, in siting a proposed import terminal in the northern half of California. The project also would include a power plant and transmission pipeline infrastructure.

The company’s next step is to get the local government to allow a detailed site assessment of a little-used airport.

Calpine is betting that the current domestic natural gas supply-demand gap will widen in the years ahead, and LNG targeted for North Baja or Southern California won’t do northern California that much good. To ensure adequate supplies and more price competition, the area from Monterey Bay north needs its own LNG receiving site, Calpine concluded.

After sniffing around Humboldt Bay, the second largest natural harbor on the West Coast, the company started to look at a second site — a former U. S. military air field developed in World War II — that is closer to the opening of the harbor, and would require less dredging than the original site farther in the bay. Eureka Airport is named for the major city located in the bay, which is situated in the northern reaches of Pacific Gas and Electric Co.’s service territory and at the end of the state’s gas and electrical transmission systems.

An initial ruling by local elected officials could come next week when the Eureka City Council may take up Calpine’s request for exclusive rights to assess the airport site, on which the company would be looking for 80 acres for its proposed energy facilities.

Part of Calpine’s plans include the development of a 220 MW electric generation plant, partially to supply the estimated 20 MW of power needed for the LNG terminal operations, and a 30-inch-diameter, 155-mile natural gas transmission pipeline.

Calpine estimates it will take three years to get all the necessary state-federal regulatory approvals along with California energy siting and environmental okays. Then, the company estimates a three-year construction period, so its targeted start up is sometime in 2010-2011.

“The commercial arrangements are secondary at this point until we know we have a viable project,” a Calpine spokesperson said. “There are synergies to both sites. From the conversations we have had locally and concerns local people have raised, it would appear that the airport site would be preferable, but from a pure design standpoint, both locations are viable.”

While the region historically has included a lot of environmental activism, and organized groups exist that want to see the bay returned to its non-commercial pre-20th Century state, local political leaders are intrigued with the economic multipliers from an LNG/new power plant site. A downturn in the timber industry and more stringent regulations in fishing have hamstrung the local economy, which historically has been driven by both.

Commercial shipping traffic in Humboldt Bay is light relative to shipping along the state’s coast in the major harbors of San Francisco-Oakland, Los Angeles-Long Beach and San Diego. Oil and gasoline are barged in, wood pulp is moved, and a fishing fleet operates out of the harbor. A fossil fuel power plant operated by PG&E’s utility uses natural gas from the 12-inch-diameter Red Bluff transmission pipeline in all but the winter months; at that time the plant’s use of gas is curtailed and it switches to fuel oil — one of the few power plants in the state still operating as a dual-fuel facility.

The airport, which has a few planes housed on the premises and is “rarely used,” according to Calpine’s spokesperson, is located on the Samoa Peninsula stretching for about 400 acres of shoreline along Humboldt Bay. “There is a drag racing group that probably uses the airport more than the aviation group,” Calpine’s spokesperson said.

Assuming the site would prove on closer review to be “viable,” Calpine intends to take its assessment to a special city-county-harbor district “independent review committee,” which will hire some third-party experts to review Calpine’s work. The council, county board and harbor commission indicated they will vote this spring on a formal memorandum of understanding to create the LNG report committee.

In the meantime, the agreement the Eureka City Council will consider, maybe as early as next week, would not only give Calpine the right to make its site assessment, but also to give the power plant developer the exclusive rights to negotiate with the city for the airport land in the event all sides find it suitable for an LNG receiving terminal, pipeline and power plant.

Inherent in Calpine’s gamble is the belief that northern California is a separate and distinct natural gas market that can’t depend on new gas hookups in the southern half of the state. It is unclear whether the state energy officials at the energy commission, public utilities commission, and electricity grid operator, CAISO, would agree with that premise.

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