Natural gas transportation and storage — both liquefied natural gas (LNG) and underground — are on track for further expansion in Oregon for later this year, according to NW Natural CEO David Anderson.

Speaking on a 1Q2017 earnings conference call last Monday, Anderson said a major climate action project by the city of Portland involving the use of renewable natural gas (RNG), or biomethane, will be in place by the end of this year. Under the program, the city will build an RNG production facility to recover and convert biogas from the city wastewater treatment facility into RNG for use in transportation.

Once the RNG is cleaned, the gas will be put in the NW Natural utility pipeline system to serve heavy-duty vehicles. Under an agreement, NW Natural will build and maintain a compressed natural gas (CNG) fueling station, for which it will be allowed to earn an authorized rate of return.

“While our investment will be modest in this initial facility, it is noteworthy due to its aggressive reduction of greenhouse gas (GHG) emissions, that the city hopes it will help cut emissions by 21,000 tons annually,” Anderson said, adding that he hopes this is just the first of what will be other RNG projects in the future.

In another expansion project, NW Natural finished additional permitting and preliminary construction work for expanding its North Mist underground gas storage facility to offer “innovative, no-notice” service to the area’s largest electricity distributor, Portland General Electric (PGE). “It can be drawn on at any time to respond to the variability of using additional renewables on the grid,” Anderson said.

The $128 million project at North Mist will add 2.5 Bcf of storage capacity, and a related compressor station and pipeline. In the first quarter, NW Natural finished preparation of the well pad and initial construction of the compressor site, along with gaining permits from the state’s Department of Geology and Mineral Industries, allowing for the additional storage volumes.

“In the coming months, we will be drilling permanent wells, the compressor and pipeline, and are expecting to complete construction this year and be in service next winter,” Anderson said.

In response to questions about other storage expansion longer term, Anderson was more circumspect, lauding Mist’s key role in the region, which has limited gas storage capability and supplements that with two LNG facilities that are currently undergoing upgrades.

“North Mist is one of our opportunities for expansion, and it has location, location, location,” Anderson said. A second facility in which NW has an interest is Gill Ranch in Northern California, but it is facing an over-supplied situation in the state right now, despite the current closure of Southern California Gas Co.’s very large Aliso Canyon storage facility.

“If you look at the current storage numbers they are indicating that we’re in an over-supplied market [in California],” he said. “Our thesis has been long term that California, as it continues to add more and more renewables, will need more gas storage to balance the grid, but at this juncture, the market is clearly telling all of us that it is over-supplied.”

Anderson said that North Mist is in a different situation of having an ideal location, calling it a “perfectly positioned asset,” not only for the current expansion, but perhaps for others in the future.

“For Gill Ranch, we are going to have to see the supply of storage or the demand go up,” he said.

Anderson also reported that NW Natural is spending $60 million on safety/reliability measures for its gas utility system with upgrades of the LNG storage facilities in Portland and Newport, OR, and in the state of Washington it is building a $25 million high-pressure gas transmission pipeline upgrade slated for completion in 2019.

For 1Q2017, NW Natural reported net income of $40.3 million ($1.40/share), compared to $36.6 million ($1.33) in the year-ago quarter.