In the wake of a liquidation bankruptcy filing by Houston-based NorthernStar Natural Gas and the demise of its Bradwood Landing liquefied natural gas (LNG) project along the Columbia River in Oregon, executives at two remaining LNG projects in the state told NGI earlier in May that the free-spending Texas company had a problematic site and took a questionable approach to trying to get it permitted.

Both survivors think they’ll continue to have viable projects, although one said that it will not make a final decision on whether it can finance its project until the spring next year. In the meantime, both projects — Oregon LNG at the mouth of the Columbia River at Warrenton, OR, and Jordan Cove at Coos Bay on the state’s south-central coast — indicate they are in the mix for the long haul, as they have so far spent a fraction of the $129 million NorthernStar reportedly ploughed into its ill-fated LNG ventures in Oregon and offshore Southern California (Clearwater Port).

Last Monday (May 17) Oregon LNG’s CEO Peter Hansen said the project will hold an open season this summer on a gas transmission pipeline that would link the proposed LNG terminal to existing storage and interstate pipeline infrastructure in the Northwest, following a push from the Federal Energy Regulatory Commission (FERC) in a letter sent to Hansen May 14.

A major difference in the two remaining projects is that the Oregon LNG terminal would be strictly a merchant, tolling facility. The Jordan Cove terminal and pipeline will require long-term contracts from shippers and producers before it begins construction.

“We’ve felt all along that we have the right site, and I think [the bankruptcy] is another good example of development coming down to ‘location, location, location,'” said Hansen, during an interview Friday with NGI. “[NorthernStar] spent several years trying to fit a square peg into a round hole. Their site was never intended for this source of use as far as I can tell, and they were never able to get it rezoned appropriately.”

Calling NorthernStar’s backers “a political lightening rod” because of the way they ignored state officials early in the process, Jordan Cove’s Project Manager Bob Braddock said the regulatory atmosphere in Oregon might get “a little less testy” in the future. “It might have a little bit of a positive bearing on the local and state levels. Early on they basically ignored the state and that created a tension from the get-go, and certainly the [Bradwood Landing] location is a lot more sensitive from a political standpoint.”

Jordan Cove is two separate, but linked projects — the receiving terminal and a 234-mile, 36-inch-diameter transmission pipeline cutting across Oregon that would be a major interstate gas pipeline serving the Pacific Northwest region and California. Each project is estimated to cost about $1.2 billion. The terminal is fully permitted, Braddock said, but the pipeline still has unfinished state land-use permitting, which he expects to be completed by the end of this year or early 2011.

Neither remaining project sponsor will say precisely how much they have invested so far in the development of their respective projects, but each indicated it is in the $20-40 million range and nowhere near the total submitted by NorthernStar in its Chapter 7 bankruptcy filing.

Although Oregon LNG is still awaiting its biological assessment (due any day now, Hansen said), and it will not have a draft environmental assessment from FERC until later this summer, the project’s backers think they have the inside track to be the one and only LNG terminal on the West Coast, because four years ago the project completed its land-use permitting, including the state appeals board that proved the Achilles heel for the Bradwood project.

“In order to use our site, we needed to rezone and get a comprehensive plan element, and we completed that in January 2006,” Hansen said. “That was the very first thing we worked on because if you can’t get that done, there is no point in spending millions of dollars on anything else.” Oregon LNG local approvals were appealed to the state Land Use Board of Appeals and the state appeals court, just like Bradwood, but unlike its competitor, the project prevailed.

And unlike Bradwood, Oregon LNG maintains that it is “adequately capitalized” at this point in the permitting process. “We are running a vastly different operation,” said Hansen, adding that Bradwood, in contrast, decided early on to run a “flashy operation” with lots of employees. “We have done it very differently [and frugally].”

Oregon LNG proposes to build a 120-mile, 36-inch-diameter pipeline from its proposed terminal at Warrenton, OR, to connect with the regional interstate pipeline system outside the Portland metropolitan area. In addition, it wants to have a 10-mile, 24-inch-diameter lateral pipeline going to the Mist underground gas storage field northwest of Portland.

Jeff Wright, the energy projects office director at FERC, wrote Hansen, warning that to keep the ongoing environmental review process on track, the LNG project sponsors need to furnish FERC with a schedule for the open season in the next 20 days. Wright also alluded to “uncertainty in the outcome of the environmental analysis,” a characterization that Hansen did not like.

“What ‘uncertainty’ is there?” Hansen asked rhetorically. “That’s nonsense.”

The other remaining active LNG project in Oregon, Jordan Cove, located on the Pacific Coast at Coos Bay, involves an even more extensive new interstate gas pipeline proposal called the Pacific Connector, a 234-mile, 36-inch-diameter 1 Bcf/d line. Project Manager Braddock said the pipeline alone, which has several partners including California-based Pacific Gas and Electric Co. (PG&E), is estimated to cost $1.2 billion.

The Pacific Connector would make connections with a number of pipelines near Malin, OR, including Williams’ Northwest Pipeline near Myrtle Creek, Avista Corp.’s distribution system near Shady Cove, PG&E.’s transmission system, Tuscarora Gas Transmission’s system and Gas Transmission Northwest’s system.

Pacific Connector said previously it had entered into agreements with seven customers for the full capacity of the pipeline. The proposed pipeline is a limited partnership of Williams Pacific Connector Gas Pipeline LLC, PG&E Strategic Capital Inc. and an affiliate of Fort Chicago Energy Partners, Fort Chicago LNG II US LP.

Besides having to work through some land-use issues for the pipeline with state and local authorities, Braddock told NGI last Friday that the key determinants on whether the project, which already has a conditioned FERC approval, gets built depends on signing long-term LNG supply contracts. The project will not move forward without them.

Braddock said he and his backers won’t make what he called a “final investment decision” — go or no-go — until the spring next year. “We’re still in the development phase, and we still need to determine at the end of this phase whether we’ll have all the necessary commercial agreements in place to justify going forward,” he said. “That’s an ongoing effort and we anticipate it will continue to be.

“The end of this calendar year should be a time when the dust should come to settle fairly clearly to determine if the project is still on schedule, or whether there might be issues that would cause more delay. That would be principally based on alignment with LNG supply coming online in the Pacific Basin.”

Unlike the Oregon LNG terminal, which is being conceived as strictly a merchant, tolling facility, Jordan Cove will have long-term contracts from shippers and producers before it begins construction, Braddock said. “Long-term contractual obligations for the facility are a requisite. We would not move forward on a purely speculative basis; it just won’t happen.”

In the next six to eight months, Jordan Cove will be focused on lining up long-term supplies and assessing the global LNG situation in the Pacific Basin, Braddock said.

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