In what would be the smallest of the four existing liquefiednatural gas terminals in the United States, El Paso Merchant Energygot the go-ahead on a three-year lease option to build a facilityon Radio Island in North Carolina. The North Carolina State PortsAuthority unanimously approved the deal last week.

The option, if used, allows the Houston-based El Paso Corp.subsidiary to construct a $250 million LNG storage facility onabout 46 acres of land on Radio Island, which is across the NewportRiver from the Port of Morehead City. Preliminary plans call for afacility that could store up to 3.5 Bcf, with a pipeline capacityof 250 MMcf/d. The Ports Authority said the terminal would beserved by two-to-three ships a month.

El Paso spokesman Aaron Woods said the Radio Island facility wouldbe the smallest of the four U.S. LNG terminals. The Cove Point, MD LNGfacility can store up to 6.7 Bcf with a pipeline capacity of 750MMcf/d. Earlier this month, El Paso Corp. announced it was consideringconstruction of up to six LNG facilities in North America (see DailyGPI, Feb. 6).

Originally, the Ports Authority had set the lease for two years,but El Paso officials said they could not complete the permittingprocess in that time. The lease extends for 50 years and twoadditional 10-year periods are available. El Paso would own anyimprovements made on the property and would be required to payapplicable taxes on the improvements.

“This LNG facility will positively impact the entire State ofNorth Carolina, but most especially eastern North Carolina, wherethe absence of natural gas has severely limited economicdevelopment and growth,” said J. Richard Futrell, chairman of thePorts Authority’s board of directors. “Three quarters of allindustrial facilities have a requirement for natural gas as aprerequisite to locating their operation to a new area.”

Erik Stromberg, executive director of the Ports Authority, saidthe option would give El Paso the opportunity to move the projectforward through state and federal permitting processes. Noting thatsome residents were concerned about safety issues, Stromberg saidthat “preliminary input from the U.S. Coast Guard indicates thatwhile there is risk involved, the risk can be (and is at other LNGfacilities in the United States being) well managed withinacceptable parameters.”

The next step for El Paso is a hearing before the North CarolinaCouncil of State next week, on March 6. The lease option goes intoeffect March 15 under the Ports Authority approval, and if theCouncil of State grants its okay, El Paso could begin thepermitting process.

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