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Port extends withdrawal option for LNG plant lease

The Port of Tacoma has extended the period in which Puget Sound Energy can withdraw from its lease for a proposed 30-acre liquid natural gas plant.

According to a news release distributed Friday afternoon, Port CEO John Wolfe authorized the extension of the feasibility period of the lease. The change takes the feasibility period from an Aug. 31 expiration to an Oct. 31 expiration. The release says the change is to “provide additional time for Puget Sound Energy to secure permits before construction begins.”

Representatives of the port and PSE did not return messages.

The project is a $250 million plant that PSE plans to open in 2019 to produce 250,000 gallons of LNG per day by piping in and chilling natural gas into the more compact liquid form. The LNG product would be stored on-site in an 8 million gallon tank almost as tall as the Tacoma Dome. The utility company’s plans call for most of the LNG to be sold to outside agencies, although only one buyer has been reported: Totem Ocean Trailer Express, which would use LNG to power two weekly container ships to Alaska that currently run on marine bunker fuel.

About 7 percent of its output would be used to help the utility supply gas to existing customers on a half-dozen peak use days a year.

The utility says LNG would benefit the city by offering a fuel source to ships that produces less air pollution, and by providing a supply backup on high-demand days. The project’s critics, including the citizens’ group RedLine Tacoma, say the facility is too dangerous to be built near populated city areas. Puget Sound Energy has filed two lawsuits, against a RedLine activist and The News Tribune, to prevent studies of the project’s safety risks filed with the city of Tacoma from being released as public records.

The extension of the feasibility period means the utility can withdraw the project by Oct. 31 at a substantially lower cost than if it pulled out after the lease got into the construction period. Under the terms of the lease signed in September 2014, PSE would have to pay $50,000 if it chooses to pull out of the lease — or for free, if the cancellation can be attributed to environmental reasons the utility didn’t cause. The Port can also cancel the lease.

According to the lease, PSE was to pay nearly $50,000 a month for the 30-acre site, during a feasibility period to run the first 12 months of the lease. An extension past that would mean the cost would go up by $7,000 each month. When the plant moves into its construction period, PSE is to pay the port $146,000 a month. The rent goes up again, to $212,445 a month, when the plant goes into full operation.

If PSE pulls out of the project after the lease moves past the feasibility period, it will owe the amount of rent the full 25-year lease calls for.

No specific delayed permit was cited in the news release announcing the extension of the feasibility period. A PSE filing with the city of Tacoma identifies 12 agencies the utility company needs a permit, approval or review from. The News Tribune spoke with representatives of all 12 agencies this week. Several have been granted, including a shoreline construction permit Tacoma granted which is now the subject of a lawsuit by the Puyallup Tribe. Several permits for the plant are pending, and others have not yet been applied for, government officials said.

Derrick Nunnally: 253-597-8693, @dcnunnally

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