The battle cry of opponents of three liquefied natural gas terminals proposed for Oregon went out within hours of the news earlier this month that the financiers of the Bradwood Landing project on the Columbia River had pulled the plug on it: One down, two to go.
Conservationists concerned about the terminals' environmental impacts and safety issues hailed it as a victory. And they saw it as a harbinger of doom for the two other projects still on track, one that's also on the Columbia River near Astoria and one in Coos Bay. LNG isn't needed here, they said, and the one-two punch of public opposition and heightened state scrutiny ultimately will chase investors away, especially in this economy.
"This is an indication that LNG has no place in Oregon," said Brett Vandenheuvel, executive director of the conservation group Columbia Riverkeeper. "The companies face tremendous opposition, not only grass-roots, but from state agencies taking a very close look at these projects. It's very difficult to force them down the public's throat."
But that's only one way to look at it, say industry experts, state officials and the developers of the two remaining proposed projects. Bradwood Landing, they say, faced some obstacles that were either unique to that proposal or that the company created for itself, by trying to push it through regulatory hurdles instead of redesigning elements that didn't mesh with local land use laws.
Both of the remaining two projects have taken more cautious approaches, their representatives say. They agree that there's only room for one terminal on the U.S. West Coast, but both say they're confident that they have the best proposal in hand.
Whether Bradwood's demise is good news for Oregon Liquefied Natural Gas' proposal in Astoria or the Jordan Cove Energy Project in Coos Bay is something of a crap shoot. At the simplest level, Bradwood's news could mean two completely different things: Either it's easier for Jordan Cove or Oregon LNG to get approved because there's less competition for investors, or it's tougher because a virulent opposition movement can shift its resources to battle the remaining two projects.
Just as the answer to that question is still up in the air, so are a host of other variables that keep energy developers up at night, including how attractive foreign-imported LNG will be when the time comes to start signing checks to build the project.
Even two years ago, energy experts were noting a shift in the supply and demand equation for domestic vs. foreign natural gas. New technology allowing better access to shale gas wells in the Rocky Mountains plus greater demand in foreign markets for LNG that is produced overseas has conspired to drive down the selling price of natural gas here.
Plus, the same economic woes that have led to tighter financing for projects such as LNG terminals has dropped the price of natural gas to abysmal levels: $4 per million British thermal units, as compared with $11 in July 2008, according to Philip Budzik, an oil and gas analyst with the U.S. Energy Information Administration. During the same period, the number of oil rigs in U.S. territory jumped from 361 to 528, while the number of natural gas rigs dropped from 1,475 to 953.
Even with oil prices waning as a psychological effect of the spill in the Gulf of Mexico, "oil is a better play than natural gas," said Budzik. "On a BTU basis, it actually returns more money."
If it's cheap to buy American-made gas, then why would anyone want to build a big expensive terminal to have it shipped here from overseas?
The projects' developers say there's no way to know until the time comes for investors to decide whether to actually plunk down hundreds of millions of dollars on a terminal. Oregon LNG's chief executive officer, Peter Hansen, said he's confident that demand for natural gas and all forms of energy will continue to rise over time, despite volatility in individual commodity prices.
Bob Braddock, Jordan Cove's project manager, agrees, adding that the decline in new gas development actually bodes well for the industry because it eventually creates a supply gap that a West Coast terminal could help close.
Another variable that could affect the proposed natural gas terminals is how tough the state will make it for the developers.
Gov. Ted Kulongoski has made it abundantly clear that he's not happy with two key elements of the way LNG terminals are sited in Oregon. One, the energy bill passed by Congress in 2005 stripped states of their authority in making the basic decision about whether a project belongs on their turf; and two, the Federal Energy Regulatory Commission doesn't consider need as one of the factors it uses to determine whether to approve a project.
Michael Carrier, Kulongoski's natural resources adviser, said the state agencies that are working through the myriad permits the two projects need to obtain are maintaining a neutral position in their decision-making.
"Our fight has never been with the companies trying to build these things," he said.
But Carrier also said the state's dissatisfaction with the feds' "casual, cavalier approach" to licensing terminals means Oregon will put the projects to "the highest level of scrutiny."
"If FERC won't do it, we're going to ensure that these projects are subjected to the review they deserve," he said.
In Braddock's opinion, state agencies have sent a clear message to developers doing their best to interpret ambiguous regulations on unprecedented proposals: Oregon is going to make this difficult.
"We can never assume that bureaucrats who are nonelected do not respond to political pressure," Braddock said. "They do. It's a question of how much they do. How will they shift the line based on political forces?"
What's the best location?
Another variable affecting the LNG picture in Oregon is the pending construction of a new pipeline from Wyoming, which means more available natural gas from domestic sources and potentially less demand for foreign imports.
But Braddock contends that that pipeline isn't sufficient to serve the Pacific Northwest because it won't be available to the Interstate 5 corridor. His project's pipeline would link to the one from Wyoming and be able to reach Oregon and Washington.
Finally, there's the two-part question of where the best place is for a terminal, and whether one's needed at all. Hansen says his Astoria location is the ideal one, because it's situated right on the huge deepwater port that is the Columbia River. He doesn't see Jordan Cove as much of a competitor, he said, because that project's proposed pipeline traverses a long, difficult route across the Coast Range, ultimately to a connection in California.
"It doesn't serve the Northwest market at all," Hansen said. "It's located in Oregon, but that's about the only Oregon connection it's got."
Braddock disputes that point, arguing that Jordan Cove will serve customers here and in Washington and that Oregon LNG's project is too far from California for it to tap into the Golden State's customer base. He also said Hansen is most likely too far behind in the permitting process to be ready for uneasy investors by the time they need to make a final decision about whether to spend money bringing LNG here.
"These decisions will be made within the next 12 months or so," Braddock said. "They will only make this decision in your favor if your project will be ready when they need you to be ready."
Copyright (c) 2010, The Register-Guard, Eugene, Ore. Distributed by McClatchy-Tribune Information Services.