Salt caverns in central Utah could become a major energy storage location, after state land-trust officials Thursday approved a lease agreement for developing land near the Intermountain Power Project near Delta.

Kevin Carter, director of the Utah's School and Institutional Trust Lands Administration, the independent state agency that manages 3.5 million acres of the state's trust lands, said the agency's board approved the lease of about 4,300 acres of land to Salt Lake City-based Magnum Development.

The lease agreement covers a 10-year term, with four 10-year options. The state would receive $25,000 per year for the first five years and $50,000 a year thereafter, plus a gas-storage fee, he said.

"Several opportunities present themselves for underground caverns that could be made huge by dissolving the salt and removing it," Carter said.

Those opportunities include using the caverns for natural-gas storage or for compressed-air energy storage. The land also could be used to store refined oil and gasoline products, he said.

Magnum Development said it plans to map, test and possibly hollow out the thick salt deposit as a repository for natural gas, compressed air or carbon dioxide. Magnum is a portfolio company of Houston-based private equity group Haddington Energy Partners III.

A Magnum spokesman said the company would have to spend millions of dollars to determine if the salt deposit is good for anything.

"This is purely speculative," said Craig Broussard, a partner for Magnum Development. "We don't even know if the existing salt structure can support the ideas. We're placing a big bet."

Magnum plans to map the size and shape of the deposit with seismic surveys and drill test cores to determine the integrity of the repository.

The deposit is believed to be thousands of feet thick, based on a 1979 test drill that found no oil. Its size is unknown.

If the site proves viable, developers of a nearby wind-turbine farm could use compressed air to store energy for peak times. Broussard said Magnum had no agreement with UPC Wind of Massachusetts, which is installing 80 wind turbines seven miles north of Milford in Beaver County.

The caverns could also be used to store carbon dioxide from Intermountain Power Project's neighboring coal-fired power station, if the federal government decides to regulate carbon emissions. Broussard said his company has no agreement with IPP for energy or carbon storage.

If Magnum's storage aims are successful, Carter said the company would owe the state about $240,000 in royalties a year for each salt cavern, based on volumes of energy stored and released. The state would receive an additional 2.5 percent royalty if the land is used for storage of petroleum products, he said.

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