SAINT JOHN, New Brunswick – Canaport LNG plans to build a $750 million (Canadian) liquefied natural gas terminal and storage tank facility next to Irving Oil’s huge oil tank farm at Mispec Point.

Neighbors like the idea, and the company plans to turn on the tap in December 2008.

Located near the city, the actual farm is stuck out on a thumb of land that was zoned for LNG long before it was a hot topic in North America. The tank farm is home to 17 storage tanks capable of holding 1 billion liters of crude oil and, soon, three LNG storage tanks, a 1,000-foot pier and regasification equipment.

“This is a process [that began in 1968] when our founder K.C. Irving … zoned the crude oil terminal … for LNG,” said Murratte Graves, Irving LNG project director. “He was very visionary.”

It is expected to handle up to 1 billion cubic feet of natural gas daily.

LNG ships will follow the same route as oil tankers and other ships arriving in the Bay of Fundy. “It’s a route that’s been used for many, many years,” Graves said. An LNG ship is expected every four to five days in the beginning, every three days after that.

“Irving Canaport was the Western Hemisphere’s first deep-water petroleum-receiving terminal and is situated in the most densely industrialized region north of Boston,” company officials said in a prepared statement. There are only a handful of homes on the Red Head Road, near where the terminal will be built. A major concern among neighbors is the road, so Canaport is building an $8 million access road that they and the company can use.

The Canaport project is a partnership between Irving Oil, which owns 25 percent of the operation, and the Madrid-based Repsol YPF, which owns 75 percent. Repsol will supply the LNG.

The two companies met several years ago and partnered in June of last year.

“We were looking for a partner here,” said Jorge Ciacciarelli, Repsol spokesman and Canaport general manager. “We knew something about energy, and we didn’t know anything about Canada and Saint John.”

Graves said Irving was just the opposite – it knew crude oil, but little about LNG. “We talked with a few companies, but when we met with Repsol and started working with Repsol we found it seemed to be the best fit,” Graves said.

While most know Irving Oil – it owns the red, white and blue gasoline stations that seem to have sprouted on corners all over the state – few know Repsol, the project’s managing partner.

The international oil and gas company is one of the world’s 10 largest oil companies with a refining capacity of 1.2 billion barrels a day, and it’s a leader in the global LNG market. Repsol LNG has projects under way not only in Canada, but in Algeria, Peru, the Middle East and Mexico. The company has a fleet of 11 tankers, the company said in a prepared release.

With an agreement in place, the next step was federal and provincial approval. That process began in 2001.

In Canada, the provincial government is responsible for the 23 environmental permits necessary for project approval. Among the permits are: an environmental impact assessment, a water alteration permit, a construction permit, a navigational waters permit and a fisheries permit.

The companies’ feasibility study is more than 700 pages. “It’s been a four-year process,” Graves said. “Most of the environmental requirements that we have to follow are provincial. But when we start getting into the fisheries, that’s predominantly federal.”

Canaport got the green light from the province in 2006. Site preparation, blasting and leveling construction work were completed earlier this spring. Two permits are outstanding, including an operational permit.

That contrasts sharply with this country where the Federal Energy Regulatory Commission is the primary agency.

While Canaport has most of its permits in hand, two competing projects in Washington County are at the starting gate as they seek U.S. and Maine regulatory approval.

Oklahoma-based Quoddy Bay LNG wants to build a facility at Split Rock on the Pleasant Point Reservation. The Washington, D.C.-based Downeast LNG wants to build a facility in Robbinston, along Route 1 near Pulpit Rock.

Located 60 miles from Calais, the Canaport project is expected to provide 700 jobs during the construction phase and 40 jobs after construction.

Although there have been issues, safety was not one of them – the company started with a massive education program that worked.

But a city tax break had Saint John folks hopping.

The estimated tax concession could cost the city as much as $125 million (Canadian) over the next 25 years, the equivalent of $100 million in U.S. currency.

“The property tax agreement reached on the Canaport LNG project was necessary to move the project forward,” Graves said. “The city approved a frozen tax rate of half a million dollars a year for the LNG terminal itself. This is in addition to the half-million dollars Irving Oil pays in property tax for the remaining portion of the Canaport property.”

The company believes there will be spin-offs. “This LNG plant is like a cornerstone for us because it allows us to grow industry in this area. It allows us to attract other partners whether it’s power, whether it’s plastics, any industry that natural gas would benefit. This actually opens the door to that development,” Graves said.