The Federal Energy Regulatory Commission has approved theabandonment by Avoca Natural Gas Storage of its unfinished saltcavern storage facility in southwestern New York State. Theabandonment order issued last week follows Avoca’s bankruptcyproceedings and plans for sale of the facility to Northeastern GasCaverns LLC, a New York company.

Northeastern has purchased all of Avoca’s salt cavern drillingrights, licenses and equipment for $8 million. The project had beenhighly touted as the first high-deliverability salt cavern storagein the Northeast. The FERC order noted that Northeastern willconduct further analysis on the feasibility of the storage projectto determine whether to go forward with an interstate facility. Inthe event it proceeds the company would have to file a newapplication with the Commission. Northeastern also has agreed toassume a portion of Avoca’s secured debt.

Avoca filed for bankruptcy in May 1997 after it failed to findan acceptable way to dispose of the brine that is a byproduct ofleaching the underground salt to form the storage caverns. Theinitial deep brine disposal wells drilled by Avoca did not haveenough permeability and were able to take only 25% of the brine.Another scheme to run a pipeline to a Watkins Glen, NY, salt plantalso fell through. Observers say there currently is a glut in themarket for salt.

Inland in New York State, environmentalists and fishermen havecampaigned to keep the salt brine out of local freshwater streamsand the water table.

Avoca had been backed by Dynegy, Bechtel and PG&E’s USGenerating, and Equitable Resources. The partners and banks hadsunk a total of $80 million into the project by the time Avocafiled for Chapter 11.

©Copyright 1999 Intelligence Press, Inc. All rightsreserved. The preceding news report may not be republished orredistributed in whole or in part without prior written consent ofIntelligence Press, Inc.