Federal regulators have denied a utility's request to again renew a preliminary permit for a proposed large-scale power generating reservoir south of Goldendale in south-central Washington state. 

That puts the fate of the $2.5 billion proposal, which garnered support from a Chinese hydropower company in November, back into question.

The proposal by the Klickitat County Public Utility District envisions a large-scale energy storage facility near Columbia River's John Day Dam to help get the most value out of the increasing supply of renewable, but variable, wind and solar power.

The Federal Energy Regulatory Commission rejected the utility's request for a second extension for its preliminary permit and a request for a new permit the utility had also filed. It also denied a permit filed by a private company, Portland-based Clean Power Development, which was set up by one of the utility's former consultants.

"We're still trying to assess it, coming at Christmas time like it did we really haven't reviewed it," said Brian Skeahan, the PUD's lead on the project.

The PUD's existing permit, which gave it exclusive right to study and develop the project with the goal of applying for a license, has now expired. It first received the three-year permit in 2009 and its first extension was granted in 2012.

The federal commission rejected the new request saying the utility had ample time to prepare its application and that another extension would "constitute site banking."

While the permit isn't actually required in order to apply for a license, it gives companies the security of developing project plans without competition, Skeahan said.

"We could still do a license application, but the question is will we," he said in a phone interview on Tuesday. "That's a big discussion for the PUD board and HydroChina."

The plan is to build linked reservoirs along the river. Water would be pumped from a low reservoir to upper reservoirs when there's electricity to spare and released back through turbines to the lower reservoir to generate power when it's needed.

That need is predicted to be greatest when the wind isn't blowing and the region's hundreds of wind towers aren't generating power.

In its request for an extension, the utility cited unexpected contamination and clean-up needs at the site where it proposed to build the lower reservoir -- a former aluminum smelter.

FERC said that since the time frame for completion of that cleanup by the previous owners is unclear, the site is not ready for development. The denial decision came just a week after Congress members from Washington and Oregon sent a letter to FERC supporting the project and the request for an extension.

Skeahan said that the utility has a 30-day deadline to appeal the decision, but the board has not had time to discuss whether it should.

- By Kate Prengaman, Yakima Herald-Republic, Wash.

http://www.energybiz.com/article/15/12/feds-say-no-washington-state-storage-project