POLITICS: PennAve

Oregon natural gas export project angles for prime position to tap Asian markets

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Energy Department,Oregon,Climate Change,PennAve,Energy and Environment,Fracking,Asia,Zack Colman,Natural Gas,Trade

COOS BAY, Ore. -- A road here on Oregon's southwestern coast one day might lead to Asia.

Wishful thinking abounds in Coos Bay for the Jordan Cove Energy Project, the seventh and latest natural gas export terminal approved by the Energy Department. If it gets built, it would be the first U.S. export terminal on the West Coast, giving it prime real estate to tap into Asian markets thirsty for natural gas.

"One of the biggest impacts from the DOE approval is it shows the market that this is truly viable," Chuck Deister, the lead lobbyist for the project, said during a tour of the would-be site. Currently, it's lots of flat land, though the construction site now has a crane, a piledriver and a couple hard-hatted men walking around on this unusually hot and sunny morning. "It showed our potential customers in Asia that this project is real."

The natural gas industry, though, has been dismissive of its prospects — one industry insider even tried persuading the Washington Examiner to visit a different Oregon project. The concern, aside from the politics of an active environmental base in a deep blue state, is that Jordan Cove has too long a slog from start to its estimated 2019 finish because it's a greenfield project, meaning the developers are starting from scratch rather than converting an import facility like ones on the Gulf Coast.

"Jordan Cove, being more of a greenfield and I think there are other issues just in that region of the country too, that may be one that has a little more difficulty," Marty Durbin, president of America's Natural Gas Alliance, told the Examiner.

Residents in Coos Bay, however, largely support the $7.7 billion project, seeing its potential to revive an economy that slowed when several paper mills shut down in the 1980s.

First, though, the project must overcome local worries about safety and logistical concerns from hosting a potentially explosive facility and an anticipated influx of workers.

Deister recently told the Bay Area Chamber of Commerce to expect up to 2,100 workers during peak construction in 2016 or 2017. Many would commute, though Deister said developers are working to minimize traffic and housing disruptions.

As for the terminal itself, it would sit atop 40 feet of earth that needs to be hauled in — a move to guard the facility from the high point of a potential tsunami tidal wave — and far enough from the bayside town that a pulley system must be installed to bring in shipments from the bay.

The town's top two employers now are a local hospital and a sparsely used casino and hotel, which offers discounted lodging to patrons who are here for Jordan Cove (the Examiner did not partake). A majority of children qualify for free or reduced lunch at school, Deister said. Driving from adjacent North Bend, largely vacant motels line the street until arriving at empty storefronts and a clutch of restaurants that dot Highway 101, the main drag through Coos Bay.

"This place must have been bumping when there were six or eight pulp mills going," said John Mohlis, executive secretary of the Oregon Building and Construction Trades Council, who called the $7.7-billion project being financed by Calgary-based Veresen his union's top priority.

Some of the trickier elements of the project are not in Coos Bay itself but along the 232-mile pipeline route, which would cut through four counties. A pair of groups — Landowners United and Rogue Riverkeeper — are already drumming up opposition to the pipeline.

“We’re here today in conjunction with folks around the state to send a message that Oregonians are proud of where we call home, we don’t want to see our state trashed for the benefit of foreign fossil fuel companies," Rogue Riverkeeper program director Forrest English said in a statement regarding April rallies in Coos Bay and elsewhere in Oregon opposing natural gas exports.

The Obama administration, despite catching heat from industry and lawmakers for its pace, supports exporting more natural gas. The crisis in Ukraine, which had bent to Russian political pressure for decades because Russia dominates the natural gas market in Central and Eastern Europe, has recently brought more urgency to the issue.

The Energy Department has given the OK to 9.3 billion cubic feet per day of natural gas exports to non-free trade agreement nations, and it still has 24 applications pending. Many in the industry, however, expect a "pause" when approvals reach 12 bcf per day.

Asia is the primary destination for U.S. natural gas exports because the price spread is greatest. Though U.S. natural gas is trading at about $4 bcf per day, the liquefaction process necessary to ship natural gas and transportation adds around $10 to prices, making potential profit margins thinner than they would seem.

Deister argued shorter shipping times and avoiding potential delays from Gulf Coast suppliers at the Panama Canal would erase the cost difference between a greenfield project like Jordan Cove and a brownfield on the East Coast -- say, Dominion's proposed Cove Point, Md., facility, which received a clean environmental grade last week from the Federal Energy Regulatory Commission -- over the lifetime of the anticipated 20-year contracts.

Jordan Cove spokesman Michael Hinrichs said skeptics aren't paying attention to the bigger picture: Veresen is plowing ahead with the project, as it has gone full throttle into the $100 million-plus FERC licensing process that industry insiders consider the litmus test for how committed developers are to projects.

"ExxonMobil and Chevron, they look at it as simply, 'How are you going to secure that financing?' But that's something our backers need to figure out. And from everything we know, they are very willing to foot that bill," Hinrichs said.

And while Oregon brings its political complications, Jordan Cove has the backing of Democratic senators Jeff Merkley and Ron Wyden, who has sounded a cautious tone on natural gas exports.

Still, environmental groups outside Coos Bay, which recently helped thwart a proposed coal export project here, may get involved too. It's still early, but industry and environmental insiders say local pressure against proposed natural gas import terminals in the 2000s are instructive. On top of that, concerns about the public health impact of hydraulic fracturing, or "fracking," prevalent in the national dialogue resonate here, and climate-conscious activists are growing increasingly vocal about blocking export terminals.

But if Jordan Cove's backers have been forthright throughout the course of a three-hour mid-May tour, then they're also serious about pulling out all the stops to get the project built — including pursuing eminent domain, the controversial maneuver governments use to seize personal property for public use.

"Though the opposition is always louder, we've had more people showing up to our workshops just to get more information," Hinrichs said. "Eminent domain is the last option for us."

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