Idyllic Oregon thrust into energy export debate
COOS BAY, Oregon
COOS BAY, Oregon (Reuters) - When federal officials arrived in this scenic but economically struggling port a few weeks ago for hearings on a proposed liquefied natural gas plant, some residents had a sense of déjà vu: it was only six years earlier, in the same auditorium, that they had already discussed the pros and cons of an LNG plant.
But there was one big difference this time around: the 2006 plan was designed to bring gas in, while the current project calls for shipping gas out.
This literal change in direction illustrates how quickly the shale gas glut upended the U.S. energy balance, and how critical ports in the Pacific Northwest could be to the country's re-emergence as an energy exporter, drawn by Asian demand.
While Asian LNG prices may be four times current U.S. prices, selling energy abroad is a controversial topic in the United States - still by far the world's top consumer of oil. Plus, building infrastructure to move gas, coal and maybe even oil from the interior West to the coast is a huge undertaking that clashes with the region's environmental ethic.
"It's newer here. People are not accustomed to it," said Bill Vander Lyn of Williams Cos Inc, which would build the associated pipeline to Coos Bay. "That's the difficulty."
Oregon is a very green place in more ways than one, with the region boasting the densest forest cover in the country, and a leftward bent to its politics.
Steered away from California by the cost of living, progressives now flourish there alongside a growing movement for locally grown food and renewable energy, despite the state's long tradition of logging.
The overall $5.4 billion project, backed by Canada's Veresen Inc, would include the first U.S. LNG export plant on the West Coast, handling 1 billion cubic feet of gas a day - equivalent to about 1.5 percent of U.S. daily consumption.
The Pacific Connector pipeline would run 230 milesfrom the emerging gas hub of Malin, Oregon, on the California border. It would traverse dense mountain forests that are home to endangered species such as the Northern Spotted Owl to reach a coastline known for its rugged beauty and abundant salmon.
Meanwhile, coal companies working in Wyoming and Montana are eyeing exports via Washington and Oregon, at half a dozen sites including Coos Bay, though one plan was recently dropped. Canadian ports are considering coal export facilities as well.
Canada represents a backup plan for would-be coal exporters, said CLSA analyst David Lipschitz, though he felt a U.S. Pacific Northwest project would get built eventually, even if it took five years. "It seems like it's always two years away," he said.
The cost for all the proposed coal projects is in the range of $1.5 billion, based on numbers from the companies planning to fund construction of the coal loading facilities at the ports.
As with their coal mining counterparts, U.S. gas producers also want to secure profitable prices for their output, via LNG projects like the one in Coos Bay, known as Jordan Cove.
Williams will fund $900 million for the pipeline and Veresen is seeking partners to help fund the balance, such as Asian LNG buyers or gas producers. The plans prompted four public meetings hosted by the Federal Energy Regulatory Commission, the lead agency on the required Environmental Impact Statement (EIS).
"HOPE WE DON'T DO IT AGAIN"
When Coos County resident Holly Stamper shuffled up to a microphone at the first meeting on August 27, she carried the weighty EIS for the now-defunct import plan, which explained in its 1,123 pages why the United States needed more natural gas.
"Those arguments now become arguments against the project for exporting our gas," she said, before telling the officials: "Welcome back to Coos Bay. I hope we don't do it again."
Jordan Cove's capacity is half that of Cheniere's $5 billion Sabine Pass LNG export plant in Louisiana, which was approved in April ahead of a 2015 startup that analysts said alone would do little to lift gas prices.
Coos Bay would welcome about 90 LNG ships every year. Jan Dilley of nearby North Bend found the idea of exporting energy jarring in light of the planned Keystone XL pipeline from Canada. "Even our presidential debate now is we're too dependent on foreign oil," she told the meeting of about 80 people.
Nine of the 31 speakers supported LNG exports as a boost to the area, where median incomes are only three-quarters of the state level and unemployment is running at 11 percent. "There's no work here unless you want to flip burgers, or some other minimum wage job," said Adam Foxworthy, an electrician by trade.
Only three among two dozen written statements submitted to FERC favored the project. Many worry about an LNG plant across the bay from an airport in an area threatened by quakes and tsunamis, to which Coos Bay resident Shannon Coates replied: "Nothing is earthquake proof or asteroid proof or volcano proof. The chances are there for a natural disaster, but it's a chance I think we have to take for the economic benefits."
Vander Lyn, an environmental adviser, said FERC approval - which could take a year or more - was clearly a significant step for the pipeline, though various agencies from U.S. Fish and Wildlife to Oregon Coastal Zone managers would still have a say.
COAL'S COOS BAY COMEBACK
While Coos Bay is associated with wood products, having been the world's largest lumber shipment port until the 1970s, signs on its waterfront tell of its history with energy: Euro-American settlers were drawn there in the 19th century to mine coal.
The Oregon coal may now be gone, but six sites for exporting inland coal -- including Coos Bay -- had been under study in the Pacific Northwest before one was scrapped last month at Grays Harbor, Washington, when another export type was deemed better.
"One down, five to go," said Laura Stevens, regional organizer for the Sierra Club's Beyond Coal campaign.
As for the Coos Bay coal project, backed by Japan's Mitsui, it could export 10 million tons a year in a decade.
Environmentalists and politicians want an area-wide EIS from the Army Corps of Engineers that would cover all coal exports from the region, and 100 people recently staged a protest at the their regional headquarters in Portland to demand it.
The Army Corps said there was no timetable for a decision on whether to do an area-wide EIS, but each single project would remain on their regulatory courses. The coal project where it is closest to a decision is in Bellingham, Washington.
Australia's Ambre Energy, which flirted with an initial public offering of shares in Australia this year, is behind two other coal projects on opposite sides of the Columbia River.
One is Longview, Washington, where coal would be moved off trains to ships, and the other is St. Helens, Oregon. Starting in 2014, Ambre would load coal up river on to barges and only transfer it to Asia-bound ships at St. Helens, a historic but modest town 30 miles outside the hip urban bustle of Portland.
Earl Fisher, a county commissioner, says there is limited local opposition to that proposal. More controversial is Kinder Morgan's plan to rail it to St. Helens, leaving little room on the tracks for much else, he said. Yet there was always a risk a rival port deal could clog the rails anyway. "Then we would just wave at the trains as they go by," Fisher said.
For many, however, the logistics of exporting energy sources are beside the point in a country that has had to import large amounts of oil for half a century. "The American people want energy independence," North Bend resident J.C. Williams told the meeting on Jordan Cove. "This will defeat that goal."
(Reporting by Braden Reddall; Editing by Jonathan Weber, Patricia Kranz and Bernard Orr)