Calpine Corp. looks into building natural gas receiving terminal at mouth of Skipanon RiverWarrenton - A California-based energy company is hoping to build a $500 million receiving terminal for liquefied natural gas in Warrenton, a facility planners say could supply the Pacific Northwest with the in-demand fossil fuel.

Port of Astoria commissioners will vote Friday on whether to lease part of the port's property at the mouth of the Skipanon River to Calpine Corp., an energy company based in San Jose, Calif., that operates 91 power plants across North America and in the United Kingdom.

"It would be a facility that receives liquid natural gas off tanker ships, turns it back into natural gas and puts it back in the pipeline system, for use in the Pacific Northwest primarily," said Peter Hansen, Calpine's vice president for business development.

The project would consist of two cylindrical tanks, approximately 150 feet tall and 250 feet in diameter, a pier supporting pipes that would connect with the tanker ships delivering the liquid natural gas (LNG), a gasification facility that would warm up the LNG and convert it to natural gas, and an improved pipeline system to transport the fuel to Longview, Wash., where it would become part of the general natural gas supply, Hansen said.

MORE INFO.• Friday, 5 p.m. - Port of Astoria commissioners will hold a special meeting to vote on whether to lease the Skipanon property to Calpine. The meeting will be held at port offices, 1 Portway St., Astoria.

• Tuesday, 6 p.m. - The port will host a public informational meeting at the Warrenton Community Center, 170 S.W. Third St., where representatives from the port and from Calpine will discuss the LNG terminal project.

• Nov. 16, 6 p.m. - The port will host a second public informational meeting with a Calpine representative, this time at the port offices in Astoria.LNG shipments would probably come from Pacific Rim countries like Indonesia or Australia, where methane gas is cooled to minus-260 degrees Fahrenheit to turn it into a liquid. In this liquid form, natural gas is 600 times more compact than in its gas form, and therefore more practical to ship.

The liquid is loaded into refrigerated tanker ships, which can carry enough LNG to almost fill up one of the 42-million-gallon silos proposed for the Warrenton terminal. The tankers would dock at Warrenton about twice a week, Hansen said, piloted by the bar pilots and escorted by tugboats and the U.S. Coast Guard.

"We chose Astoria, or Warrenton, because there is an area that's well suited for it," he said. "It is not close to large population centers, and it is close to a shipping channel that has the necessary depth to accommodate these tankers. The further upriver you go, the more issues you have with channel deepening and other navigational issues."

Bring price down?Calpine is interested in making such a large investment because, as the operator of natural gas-fueled power plants, it has a strong interest the price of the fuel.

"Our primary interest in doing this is a desire to get a lower price for natural gas," Hansen said. "We are the nation's largest consumer of natural gas, and consequently we are very sensitive to high gas prices. We believe that right now, the high gas prices are simply caused by an imbalance of supply and demand, and when you increase supply, prices will come down."

Calpine has been talking with the port about the possibility of locating an LNG terminal in Warrenton for more than a month, according to port Executive Director Peter Gearin, who said that port staff have been looking into the company and the need for a LNG facility.

"It takes a great deal of work to support and try to encourage this kind of development in the county," said Gearin. "We felt pretty comfortable that, one, its feasible, and two, there's a good business purpose and demand for this facility."

Photo courtesy of Dominion

The Berge Boston, a liquid natural gas ship, docks at the Cove Point terminal. The storage tanks can be seen in the background. "I think it's going to be a good addition to our local area," port Commissioner Jim Bergeron said. "This looks like it's going to bring in jobs and a big chunk of the tax base, which we really need."

Hansen said that the proposed LNG terminal would employ between 50 and 75 people in family-wage jobs, and that the construction of such a facility over two to three years would employ between 500 and 600 people. Construction costs would be approximately $500 million; once it is completed, the facility is expected to considerably boost the assessed value of Clatsop County, which is currently at $3.7 billion.

Bergeron said that while storing any kind of fuel does come with concerns, "it seems to me like this liquid form is pretty safe."

As a liquid, natural gas is not flammable. As a gas, it is only flammable when it makes up between 5 and 15 percent of the air. To prevent this, the LNG industry has adopted strict regulations to ensure safety.

"You're dealing with large quantities of energy and they need to be treated with respect. The liquid natural gas industry has excellent safety records," Hansen said. The industry uses technologies designed to handle all this energy, he said, citing triple hulled tankers, exclusion zones around tankers and walls encircling the LNG tanks as examples.

Prior problemStill, LNG terminal proposals have met with opposition before, as Calpine well knows.

About a year ago, the company had hoped to build a LNG terminal in California's Humboldt Bay and was trying to enter into an "exclusive right to negotiate" agreement with the city of Eureka. This would not guarantee that the city would sell the site to the company, but would allow Calpine to conduct studies to see if the site was suitable.

At the Eureka City Council meeting to vote on the exclusive right to negotiate, 800 people showed up, many from out of town, said Eureka City Manager David Tyson. People expressed strong safety concerns, as well as concerns about environmental damage that could result from building along the bay and running a pipeline through nearby forests, Tyson said. He added that others felt too intimidated to talk because of the large crowds and the contentious tone of the meeting.

The City Council did not vote on the issue, and Calpine decided to abandon the project.

"It was becoming apparent that while, from a technical perspective, the project could proceed, the volume of rhetoric around it would slow the process down so much that we were just better off pursuing other options," Calpine spokesman Kent Robertson said. "It's unfortunate too; northern California needs added supply of natural gas."

Demand for gasBoth price and demand for natural gas are high across the country.

"We definitely believe demand will increase over the next two decades, in part for the growing need for natural gas for fuel for power production," said Damien Gaul, an industry economist with the Energy Information Administration, part of the federal Department of Energy. Because natural gas produces less greenhouse gases and smog than oil and coal, there was an expansion of power plants fueled by natural gas starting in the 1990s; 900 of the next 1000 power plants in the United States will run on natural gas, according to the energy agency.

In Oregon, 19 percent of energy used is from natural gas, according to an Oregon Office of Energy report. The report stated that per capita use of natural gas increased by 63 percent between 1990 and 1999, but then decreased between 1999 and 2001 because of the sluggish economy and raising natural gas prices.

"Right now, prices are at a historic high, and there's a general recognition that we need to tap new supplies, whether they're from Alaska or LNG or unconventional resources like coal bed methane," Gaul said.

This recognition is reflected in the spike of proposed or planned LNG terminals across the country. Currently, there four LNG terminals in the continental United States, one in Puerto Rico and a LNG export terminal in Alaska that ships the fuel to Japan. But more than 40 LNG terminals, both on land and offshore, are in various stages of the planning and permitting process. This includes plans for facilities in Coos Bay and St. Helens.

If multiple LNG terminals are built, it could flood the market and make the LNG importing business less profitable, but Hansen said that Calpine was not going to wait for other companies to act.

"We are not convinced that all these projects are going forward, and we do not believe that we can just sit and wait and see what happens," Hansen said.

Debt loadalpine has more than $18 billion in debt, but company spokesman Robertson said that even with a high debt load, Calpine wanted to go forward with the project to meet the demand and lower its operating costs.

If Calpine and the port sign a lease agreement, the next step for the company is to draw up conceptual designs then apply for permits from the Federal Energy Regulatory Commission and other federal, state and local agencies.

The permit process is expected to take two to three years, during which time there will be many public meetings. The port is hosting two public informational meetings where a representative from Calpine will discuss the project; the first will be 6 p.m. Tuesday at the Warrenton Community Center, 170 S.W. Third St., and the second will be 6 p.m. Nov. 16 at the port's office in Astoria, 1 Portway St.

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