Oregon LNG has withdrawn the penalty and damage charges it filed against the Port of Astoria in U.S. District Court, and the two parties are meeting with a judge today to begin working out their differences.

Port of Astoria Executive Director Jack Crider said the company's move, filed with the court Tuesday, was a step toward settling the ongoing breach of contract lawsuit. The suit was filed last year amid disputes over the Port's 2004 lease and sublease of land on Warrenton's Skipanon Peninsula for a proposed liquefied natural gas import terminal.

A federal judge sided with Oregon LNG earlier this month, and ordered the Port to take immediate steps to correct the breach of contract. When Port commissioners postponed a vote on the issue at their regular meeting last week, the company filed a motion for civil contempt against them for not acting fast enough on the judge's order.

In the motion, the company asked the court to make the Port pay $500,000 of Oregon LNG legal bills for the case in addition to daily penalties and damages. After talking with the judge, Port commissioners held a last-minute meeting March 19 to renew their 92-acre lease on the LNG project site for a 30-year term, and Oregon LNG proceeded to withdraw its motion seeking compensation.

Crider said he, the Port's attorney Thane Tienson and Port Commission President Bill Hunsinger would be meeting with a settlement judge and Oregon LNG in Portland today, and that the Port had one top priority going in.

"The most important thing is for them to release us from any potential damages and attorney fees," he said.

The Port's lease renewal followed six months of hand-wringing under heavy legal pressure from LNG developer Oregon LNG. Port Commissioners say they're still unhappy with the unprofitable lease agreement they're being forced to renew, but they were left with little choice.

If Oregon Department of State Lands signs off on the renewal, it will put the Port's master lease back in line with its sublease of the same property to Oregon LNG.

Oregon LNG CEO Peter Hansen said that's what his company has been asking for all along. He has argued the company needs the Port to have a 30-year lease agreement with the state to secure his company's 30-year sublease of the property, satisfy his project's investors and obtain LNG development permits.

"We are glad that most of the commissioners finally decided to do the right thing and honor the agreement the Port entered into five years ago," Hansen said in an e-mailed response following Friday's vote. "This unnecessary conflict has consumed an enormous amount of resources and has been a huge distraction for us."

The?Port collects $38,400 a year in rent from Oregon LNG and passes it on to the state without making a profit.

Last summer, in the face of a state investigation into the Port's 2004 LNG deal and several concerns over the Port's liability and lack of profits in the lease arrangement, Port commissioners voted to extended the initial five-year lease term with the state for two years instead of renewing it for a 30-year term as originally planned.

Oregon LNG, however, had already renewed its sublease for 30 years, and filed a breach of contract lawsuit against the Port for its failure to renew the masterlease.

The Port has until April 8 to appeal the judge's decision on the lawsuit. The Port would likely waive its right to appeal if it settles with the company, according to Tienson. But Crider said the meeting today is preliminary and won't yield a final settlement.

? Check online for an update of Friday's action at www.dailyastorian.com