Governor ups ante against LNG sites

TED SICKINGER
The Oregonian Staff

Gov. Ted Kulongoski insisted Thursday that federal regulators halt all reviews of proposals to build liquefied-natural-gas terminals in Oregon until they study all alternatives for supplying natural gas to the region.

In a letter sent Thursday to Federal Energy Regulatory Commission Chairman Joseph Kelliher, Kulongoski said he had asked the state attorney general to examine Oregon's legal authority to refuse state permits for the projects until FERC complies with his request.

Kulongoski also told Kelliher he had asked Oregon's congressional delegation to enact legislation that would wrest back state control for licensing LNG facilities. State authority was preempted by the federal government as part of the Energy Policy Act of 2005.

The governor's new posture, outlined Thursday in an interview with The Oregonian, marks a bold departure from his wait-and-see, open-minded approach that has accompanied debate and review of the gas-importing terminals for years.
From the outset, the LNG proposals have stirred controversy.

Some in rural communities welcome the jobs and taxes they would generate. Other residents scorn the potential damage to the Columbia estuary and decry the likely use of eminent domain to seize farmland, vineyards and forest for hundreds of miles of pipeline.

Kulongoski told Kelliher he wasn't "unalterably opposed" to LNG being part of Oregon's energy mix. But he said FERC's "approach to the licensing of plants and pipelines has created a crisis of confidence with Oregonians."

Opponents of the projects cheered Kulongoski's moves. They have been appalled by FERC's style of regulating the terminals -- an extension, they say, of a laissez-faire approach of the Bush administration.

"This is just the type of leadership we want to see the governor take on this issue," said Brent Foster, executive director of Columbia Riverkeeper. "It's encouraging that he's recognizing that these LNG projects deserve a very close look, and it's important that the rush to approve these projects not leave us with a mistake."

The governor's new stance puts Oregon in league with states across the country that have raised objections to FERC's permitting approach and its preemption of state licensing authority.

"Ultimately, we may end up in court over this," Kulongoski said in the Thursday interview. "We're not exactly clawless.... The state doesn't have all the tools, but we are a critical piece. You're going to have to meet the state concerns."

Energy companies have proposed building three LNG terminals in the state: one in Coos Bay and two on the Columbia River. The terminals would accept imports of supercooled natural gas from abroad, reheat the liquid into a gas, and ship the gas to West Coast markets through one of four proposed pipelines.

Two other companies have proposed building pipelines to ship domestic natural gas from the Wyoming Rockies to southern Oregon.

Project proponents say Oregon needs to diversify its natural-gas supply to offset potential price spikes as regional demand rises and, as they contend will happen, Canadian imports or domestic supplies go into decline.

The Northwest Gas Association projects that natural gas demand will grow 2 percent annually during the next five years, driven primarily by higher need for electricity generation and growing residential use.

"The Northwest's need for additional natural gas is well documented," said William "Si" Garrett, chief executive of NorthernStar Natural Gas Inc., in an e-mail statement. NorthernStar wants to build the Bradwood Landing terminal 20 miles upriver from Astoria on the Columbia River. Bradwood is expecting a decision from FERC -- its first on any of the Oregon proposals -- in the spring or early summer. The company says nine studies in the past two years have shown a need to boost the region's gas supply.
Industrial gas users and the gas industry's regional trade group said Thursday that the federal government does not need to analyze the region's gas needs and how best to meet them. No company would build a facility that wasn't needed and fully subscribed, they contend.

"I'm not sure the government is as well-equipped as the market to determine which facility is most efficient and cost-effective at meeting the region's needs," said Dan Kirschner, executive director of the Northwest Gas Association.

Kulongoski, however, said the regional need for gas, and which facility would best meet that need, are "threshold questions."

Each of the proposed LNG and Rockies pipelines could import far more gas than Oregon uses. Opponents long have contended that project backers want to use Oregon as a back door to California, which already has spurned several efforts to locate LNG terminals there.

Oregon state agencies, meanwhile, have complained that FERC's environmental review of Bradwood was inadequate and that it had abdicated its responsibility to thoroughly evaluate alternatives.

Some of Kulongoski's Democratic colleagues, including Secretary of State Bill Bradbury and Oregon House Speaker Jeff Merkley, have opposed the terminals. Bradbury, in particular, is wary of seeing the state tie its energy future to an imported fossil fuel with higher greenhouse emissions than domestic natural gas.

In his letter, Kulongoski asked that FERC's review of alternatives include a full analysis of carbon emissions along LNG's path from source to market, including liquefication overseas, trans-ocean shipping and re-gasification here. The analysis, he said, should be compared with the harms of extracting more gas domestically.

"No review of any of the three individual LNG projects should proceed further until this carbon study is completed by FERC," Kulongoski wrote.
Ted Sickinger: 503-221-8505 tedsickinger@ news.oregonian.com