Puget Sound Energy’s quest to build a liquified natural gas plant in Tacoma passed a major hurdle Monday when a state commission approved a financial agreement between the utility company and regulators.
The agreement was reached in October after more than a year of negotiations over the business structure for the LNG plant. Now that it’s been approved by Washington’s Utility and Transportation Commission, PSE plans to break ground “in the near future” on the $310 million plant, according to H. Grant Ringel, a spokesman for PSE.
Ringel said the project still needs building permits. He couldn’t estimate when the utility would start construction. PSE is aiming to open the plant by 2019.
Under the arrangement, the Macquarie Group — the multinational consortium that owns PSE — will create a subsidiary called Puget LNG to handle the new plant’s commercial business. PSE and Puget LNG will jointly own and operate the Tideflats plant, with PSE contributing $133.7 million of the $310.7 million construction cost.
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Both UTC staff and PSE say the deal will protect ratepayers from higher bills if Puget LNG loses money — one intent of the agreement.
Part of a news release from the UTC says the agreement “will allow PSE’s ratepayers to continue to have the same, or even enhanced, level of protection from financial liability.”
The deal alters a pledge Macquarie made to state and federal regulators to win permission to buy the utility in 2008. The regulators’ approval came with a written agreement that Puget Energy — the holding company that owns Puget Sound Energy — would not own or operate another business besides the utility company.
The LNG plant is being built to make and store extra supply for regional use during a half-dozen peak demand days a year. This will require less than 10 percent of the plant’s capacity.
The plant also plans to provide LNG for Totem Ocean Shipping Express for two Alaska-to-Tacoma ships that currently run on dirtier diesel-based fuel and to sell LNG to other industrial customers. No such buyers have signed on yet, according to PSE.
For its money, PSE would gain a percentage of ownership of the various aspects of the LNG plant, depending on how much of it is construed as part of utility service.
The plant will be able to produce 250,000 gallons of LNG a day, with an 8 million gallon on-site storage tank. PSE officials said that if they cannot find buyers for the LNG that the utility and TOTE don’t need, the plant will produce less of it.
The agreement “opens the door to actually deliver the benefits of the project,” Ringel said. “Not only the cleaner transportation fuel for the ships — and at some point probably trucks — at the Port of Tacoma but also the environmental improvements for air quality.”
The plant is planned for a 30-acre site leased from the Port of Tacoma. The feasibility period of that lease, previously extended because permitting was taking longer than anticipated, ended Monday. During the construction phase, the port is charging PSE $146,000 a month in rent.
If PSE pulls out of the project now that the feasibility period is over, it will owe the full amount of rent due under the 25-year lease.
At a hearing last week, the agreement with the UTC had the support of some business and labor groups that argued the plant will create jobs and produce fuel for ships that is more environmentally friendly than diesel-based fuel.
But it also had detractors worried about a major accident at the plant.
Members of RedLine Tacoma, a group that advocates against fossil fuel-based industries in the city, argued a dangerous accident at the plant would cost taxpayers money, regardless of whether the UTC agreement protects them from paying more on their gas bills.
Safety studies commissioned by PSE say the effects of possible spills, fires or leaks at the plant won’t extend outside the site’s property lines. Some industry experts have told The News Tribune the reviews were thorough in their look at common risks of the plant, but didn’t spend much time examining the effects of an unlikely catastrophic failure there.
Claudia Riedener, a RedLine member, said she believes the UTC deal doesn’t protect taxpayers from a catastrophic accident, and she isn’t convinced PSE needs extra supplies during peak demand days.
Opponents of the plant also have warned of environmental risks of fracking, which produces some of the natural gas that could be converted to LNG at the plant.
Puget Sound Energy supplies gas and electric service to thousands of homes and businesses in Western Washington.
Staff writer Derrick Nunnally contributed to this report.