Department of Energy report says Oregon doesn't need LNG

Saturday, May 10, 2008
TED SICKINGER
The Oregonian Staff

The state Department of Energy has concluded that imported liquefied natural gas isn't needed in Oregon, would be more expensive than domestic natural gas and would come at a higher environmental cost than piping in more gas from the Rocky Mountains.

The department's report, issued Friday, dramatically raises the bar for three proposals to build liquefied natural gas terminals in Oregon.

Also Friday, Gov. Ted Kulongoski asked federal energy regulators to redo their preliminary environmental analysis of the Bradwood Landing LNG project, which would be located 30 miles upriver from Astoria. Bradwood is the only LNG proposal facing a pending decision.

State officials believe that the scope of that project has changed substantially since the federal analysis was issued last August and that significant new information should be built into a new study.

NorthernStar Natural Gas Inc, the Houston-based energy startup that wants to build Bradwood Landing, said the company remained committed to addressing any of the state's concerns.

However, Joe Desmond, a spokesman for NorthernStar, said the Department of Energy's conclusions about gas supply and demand were flawed.

NorthernStar has sunk more than $33 million into permitting efforts and spent two years more than it originally planned to obtain them. The Federal Energy Regulatory Commission is expected to issue its final environmental impact statement for Bradwood Landing next month. That review typically includes a proposed licensing decision.

The Department of Energy's report could lead to another delay or presage a stronger political push against Bradwood and other proposed LNG terminals in Warrenton and Coos Bay. Kulongoski has asked the state Department of Justice to research Oregon's legal means to block the terminals, if necessary.

Mike Carrier, Kulongoski's energy policy director, said Friday's letter and the Energy Department's report did not mean the governor was adopting a hardened position against the terminals. Instead, he said, it was meant to ratchet up pressure for FERC to address Oregon's issues before the agency issues its final review.

FERC holds overall authority for licensing LNG terminals. But the state retains both political clout to block the projects and the regulatory authority to issue -- or deny -- permits for the terminals under the Clean Air, Clean Water and Coastal Zone Management acts

State leaders and agencies have decried FERC's hands-off, market-based regulatory approach to LNG terminal sitings. The agency has essentially told state officials that it intends to license all projects that meet its environmental standards, then let the market decide which projects attract financing and which get built.

The state, meanwhile, has been trying to force FERC to perform a comprehensive analysis of the need for natural gas in Oregon, as well as a study of which five proposed projects, including two proposed pipelines from Wyoming, would best serve that need.

The state study addresses those questions directly. Among its chief conclusions: There is adequate gas in the Rocky Mountains, Canada and Alaska to serve Oregon's near- and long-term needs, and proposed Rockies pipelines could provide gas more economically than the LNG terminals. There is already a surplus of LNG terminals in the United States. Many can't attract LNG cargoes because other countries are willing to pay more. LNG plants in Oregon would likely be underutilized, particularly with the presence of a new LNG terminal in Baja, Mexico.

LNG terminals have significantly higher CO2 emissions than North American gas due to energy used in supercooling the gas to a condensed liquid, transporting it via tanker, then rewarming the liquid into a gas.

Pipelines from the Rockies appear to have less environmental impact and generate less pollution than LNG terminals.

In his letter, the governor also cited a number of changes in NorthernStar's Bradwood plans that he believes need to be addressed in a new environmental analysis, including impacts on salmon, changing pipeline routes and discharges into the Columbia River.

NorthernStar disputes most of those assertions outright. It also believes that the department's study missed the mark in a number of ways. While LNG is in tight supply and expensive today, their terminal -- if approved -- wouldn't open until at least 2011. By 2014, they say, a host of new LNG projects will increase supply worldwide and reduce prices.

Moreover, they say LNG suppliers who land natural gas in Oregon will price the gas at or below the market price for domestic gas. If supply turns out to be as big as they project, LNG will have a dampening effect on U.S. natural gas prices as supplies in the Rockies and Canada get tighter, NorthernStar contends.

NorthernStar also says the market dynamics behind the Wyoming pipeline proposals are changing and they may not be commercially viable alternatives to the LNG terminals.

On the other side of the LNG issue, opponents of the terminals and associated pipelines applauded the governor and the Department of Energy's actions.

"This is what we've been saying for the last two years -- that LNG doesn't make sense," said Brent Foster, executive director of Columbia Riverkeeper, an environmental advocacy group. "Whether you're a ratepayer, a landowner facing a pipeline though your property or someone who cares about salmon, there's no benefits from LNG. The only people who benefit from LNG is the gas company."

Ted Sickinger: 503-221-8505, [email protected]