The ship bunkering business at the proposed Tacoma LNG liquefaction facility will not be regulated by Washington’s utilities commission although peakshaving operations will be regulated, according to a settlement reached by several parties.

The agreement would allow gas and electric utility Puget Sound Energy (PSE) to build a $275mn liquefaction facility at the Port of Tacoma, Washington, to serve regulated gas customers as well as sell LNG to shipping companies and other high-horsepower industries in the region.

The lack of state oversight over LNG sales for high-horsepower applications could provide less price transparency in that part of the business.

Although PSE has said it initially wanted to build the plant to meet growing peakshaving demand in Washington, the facility is largely backed by a 10-year contract beginning in January 2019 for PSE to sell TOTE Maritime about 39.6mn USG/yr of LNG, equivalent to about 9mn cf/d (256,000m³/d) of gas.

The parent company of PSE, Bellevue, Washington-based Puget Energy, would be allowed to form a new subsidiary called Puget LNG that would be the primary owner of the Tacoma LNG plant. Puget LNG would not be regulated and would own 57pc of the planned infrastructure that would produce, distribute and store LNG for bunkering and other high-horsepower applications. PSE would own about 43pc of the infrastructure, which would be used to produce, store and distribute LNG to help peakshaving demand for gas customers.

Joint ownership with an unregulated affiliate will allow PSE customers to save tens of millions of dollars in building the plant, according to testimony in regulatory proceedings. PSE would not be liable for any losses incurred by Puget LNG.

The settlement was reached in late September by staff at the Washington Utilities and Transportation Commission, PSE, the Public Counsel at the Washington attorney general’s office, the Northwest Industrial Gas Users and the Industrial Customers of Northwest Utilities. The latter two groups represent major industrial gas consumers in the region.

The three governor-appointed commissioners must approve the settlement for it to be finalized.

Under the agreement, Puget LNG would own 100pc of the proposed bunkering facilities, 90pc of the liquefaction plant and 95pc of the truck-loading facilities, with PSE owning the remaining portions. PSE would own 100pc of the proposed vaporization units and 79pc of the storage facilities, with Puget LNG owning the remainder.

TOTE is retrofitting two Orca-class vessels to run on LNG in addition to diesel. The vessels carry truck trailers and other goods between Tacoma and Anchorage, Alaska. TOTE, which can unilaterally extend the contract for up to 15 years, wants to use LNG to help it comply with new regulations significantly limiting sulfur emissions.

The facility is scheduled to come on line in 2019 with initial production capacity of 250,000 USG/d, equivalent to 156,000 t/yr of LNG, or 21mn cf/d (590,000 m³/d) of gas, and could be doubled to 500,000 USG/d. It would have storage capacity of 8mn USG, equivalent to 667mn cf of gas.

PSE originally proposed that the Orca contract be regulated and that revenues from the facility be shared between PSE investors and customers. The settlement was reached after the regulator said it has no jurisdiction over the Orca contract and customers balked at sharing revenues with investors.

Source: Argus (http://www.argusmedia.com/news/article/?id=1328741)