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Natural gas project on horizon

S.L. company plans to store fuel in underground salt caverns near Delta

A Salt Lake-based company wants to convert underground salt caverns in central Utah to store up to 45 billion cubic feet of natural gas.

Magnum Gas Storage LLC announced Friday the end of a bidding period for its Magnum Gas Storage Project to be located near Delta in Millard County.

Plans for the 2,150-acre site call for development of eight caverns. Natural gas will be stored in caverns 1,300 to 1,400 feet tall and 300 feet in diameter, located 3,500 to 4,000 feet underground in a naturally occurring salt dome formation.

The company says the project is one of the first large-scale salt cavern natural gas storage facilities to be developed in the western United States. Salt storage caverns are common near the Gulf Coast region in Texas and Louisiana, Magnum Energy managing director Rob Webster told the Deseret News. Natural gas is often stored in underground reservoirs or aquifers, he added.

Magnum plans to build a "Western Energy Hub" in connection with the project, which would be designed to expand the development of renewable energy resources in the West, according to Webster. The hub is designed to become a crossroads of existing and developing electric, natural gas and renewable energy infrastructure such as compressed-air energy storage and solar facilities, he said.

"Historically, gas has been stored seasonally," Webster said. "(Companies) would put it into the ground in the summer when prices are lower and demand is down and pull it out of the ground in the winter when demand is high."

The salt caverns are well-suited for natural gas storage because once formed, they allow little injected natural gas to escape unless specifically extracted. The walls of a salt caverns also have the structural strength of steel, making them much less susceptible to decay and leakage over time, according to the Web site naturalgas.org.

A company fact sheet indicates that two salt caverns, each with working gas capacity of approximately 5.6 billion cubic feet, will be developed initially. The first cavern is expected to be available for natural gas storage beginning in early 2012.

The project still requires some federal permit approval. Webster declined to disclose the overall cost of the project's development.

Webster said the bidding process resulted in 26 inquiries requesting more than four times the project's planned capacity. Magnum will immediately begin working with respondents to develop service agreements.

"We believe that the success of this open season demonstrates the industry's growing recognition of the need for high-deliverability natural gas storage in the West," Webster said. "This facility will provide natural gas-fired electric power generators, gas distribution companies, producers and marketers throughout the West with cost-effective, efficient and reliable access to natural gas supplies."

The project offers customers direct and indirect interconnections with multiple pipelines originating out of the Rockies. The project would connect directly with a new lateral to the Kern River and Questar interstate pipelines at Goshen, Utah County, creating a header that will indirectly serve the Opal, Wyo., area market hub pipeline interconnections as well.

Among the companies filing a letter of interest in the storage project was Questar Gas Co., the area's largest residential and business provider of natural gas that serves nearly 900,000 customers in Utah and Wyoming.

Tina Faust, Questar Gas manager of gas supply, told the Deseret News that salt caverns provide a more reliable storage facility than other options.

"What matters is that (the project) is close to a (natural gas) transmission line near Delta … which for us is very valuable because we have transportation on both those pipelines," she said.

Questar spokesman Steve Chapman told the Deseret News that, if successful, the project could provide the utility with much-needed flexibility and added capacity to meet the future growth needs of its customers.

"It also gives us the ability to store lower-price gas in times of the year when demand is down and keep it on hand to pull out and deliver during those periods of higher demand when spot market prices are generally higher," he said.

Magnum Gas Storage LLC and Magnum Energy LLC are wholly owned by Salt Lake City-based Magnum Development LLC.

e-mail: jlee@desnews.com