Friends and Foes Alike 'Stunned' as Feds Nix Natural Gas Terminal in Oregon

This is turning out to be a very bad year for the "clean" image of natural gas. It's only mid-March, and the episodes are piling up: earthquakes in Oklahoma, water pollution in Pennsylvania, continued fallout from a massive natural gas leak in California, and new federal scrutiny of methane emissions from drilling sites on public and tribal lands.

In the latest development, a proposed liquefied natural gas (LNG) export terminal on the Oregon coast called the Jordan Cove Energy Project has failed to achieve approval from the Federal Energy Regulatory Commission.

The Jordan Cove LNG facility and fracking

As described by the Federal Energy Regulatory Commission (FERC) timeline, the company behind the project filed its application for the Oregon liquified natural gas terminal in 2013. The facility is slated for Coos County on the Oregon coast, at the site of a former Weyerhauser paper mill.

The sole source of supply for Jordan Cove would be a yet-to-be-constructed natural gas pipeline, which would supply up to 1.03 billion cubic feet per day. The natural gas would be liquified at the terminal, resulting in a maximum of 6.8 million metric tons yearly of liquified natural gas.

As for the pipeline, about one month after the Jordan Cove application, the company Pacific Connector Gas Pipeline, filed for construction. The pipeline is planned to be 232 miles and 36 inches in diameter, running from east to west across four Oregon counties: Klamath, Jackson, Douglas and Coos.

The source of the gas would be a terminal at the eastern edge of Oregon near the town of Malin, providing access to two existing points, the Ruby Pipeline and the Gas Transmission Northwest systems.

That's where the fracking comes in. The Ruby pipeline was constructed on the heels of the Western fracking boom, to transport natural gas from Wyoming and Colorado to California, Oregon and Washington state (Gas Transmission Northwest is a much longer pipeline originating in Canada).

It's also worth noting that when Jordan Cove was first proposed in 2004, it was to be a natural gas import facility. The U.S. natural gas industry had not yet taken off with the advent of fracking, which came about only after the Bush administration engineered a loophole in federal water-safety regulations.

However, fracking was not the issue that ultimately doomed the Jordan Cove LNG project, at least not directly.

Jordan Cove and greenhouse gas emissions

Once the export facility and pipeline applications came to light, environmental groups and property owners quickly objected to the project. By 2014, local newspaper the Oregonian was sounding the alarm. Under the heading "Jordan Cove LNG in Coos Bay could quickly become one of the largest greenhouse gas emitters in Oregon," reporter Ted Sickinger noted that the only remaining coal-fired power plant in the state is slated to shut down in 2020, leaving Jordan Cove in the lead:

"Most of Jordan Cove's carbon emissions would come from energy used to liquefy natural gas for shipping," Sickinger noted. "That requires a dedicated power plant on the North Spit of Coos Bay with a capacity of 420 megawatts – enough to serve more than 400,000 homes.

"Jordan Cove also needs to purify incoming gas before liquefying it, and the carbon dioxide extracted would be vented to the atmosphere, accounting for about 20 percent of overall emissions."

The only other comparable single source of greenhouse gas emissions in Oregon would be another proposed LNG facility near the town of Warrington.

However, greenhouse gas emissions didn't do in Jordan Cove, either.

Follow the money

The project received a conditional federal approval to export gas in 2014, but the Oregon Department of Land Conservation and Development issued a series of holds over the project's application for coastal management certification.

Though the project initially passed its federal environmental review last fall, last week the Federal Energy Regulatory Commission (FERC) lowered the boom in a move that "stunned supporters and critics alike," the Oregonian reported.

Actually, FERC's argument was quite simple. The export facility was aimed at markets in Asia, but demand for natural gas has plummeted in that part of the globe.

With no clear customer base for the project, FERC was practically forced to deny the permit for the LNG facility. The alternative would be to give the go-ahead for the pipeline, which according to the Oregonian would have been a complex and highly contentious undertaking, to say the least:

"Meanwhile, the companies had been unable to negotiate easements with more than 90 percent of 630 landowners along the 232-mile pipeline route, and would have required the widespread use of eminent domain to secure the necessary rights of way. The commissioners noted the landowners' concerns with land devaluation, loss of revenue and harm to business operations, including timber, agriculture and oyster harvesting."

FERC took into consideration comments by property owners, the Sierra Club and other environmental organizations, but in the end it was the global natural gas market that made the difference.

Ironically, the natural gas industry has been lobbying furiously for the Obama administration to approve construction of more natural gas export terminals in order to sustain growth in a glutted domestic market, made more challenging by the skyrocketing increase in domestic renewable energy production. The approvals have been coming, but slowly.

Only one new LNG export facility in the mainland U.S. has been completed and is in operation, the Sabine Pass facility in Louisiana. Its first LNG shipment set sail just last month, but the export market might not save the domestic natural gas industry from the doldrums after all.

In January, the Wall Street Journal noted that in addition to weak markets in Asia, increased natural gas production overseas is posing new challenges for U.S. LNG exports.

Natural gas: From clean to unclean

In the meantime, evidence is piling up that natural gas is not a "cleaner" alternative fuel compared to coal and petroleum.

Natural gas has been promoted as a clean-energy source due to its relatively low emissions when burned. However, the natural gas lifecycle is peppered with opportunities to do a great amount of environmental damage, including water and air pollution from drilling sites, pipelines and vehicular transportation, as well as storage facilities.

The gas industry's adoption of fracking (short for hydraulic fracturing) has intensified water resource issues, because the practice involves pumping massive amounts of chemical brine underground. The use of fracking was once limited mainly to relatively unpopulated areas in the Western states, but it flourished after the Bush administration loophole and spread to more populated regions. In addition to the potential for improperly drilled wells to enable methane gas and other pollutants to travel from fracked wells into drinking water wells, disposal of wastewater from fracking operations has been linked to water contamination and earthquakes.

Aside from local impacts, researchers are also becoming concerned about the contribution of methane leakage from natural gas drilling sites to global warming. In January, Interior Secretary Sally Jewell announced that the Bureau of Land Management would update its 30-year-old regulations, which predate the advent of widespread fracking, with the aim of reducing fugitive emissions and wasteful flaring from oil and gas sites on federal property and on tribal lands:

"... Venting and leaks during oil and gas operations are major sources of harmful methane emissions, a powerful greenhouse gas about 25 times more potent than carbon dioxide. U.S. methane emissions are projected to increase substantially without additional steps to lower them. The proposal announced today is consistent with the Obama administration’s goal to cut methane emissions from the oil and gas sector by 40 to 45 percent from 2012 levels by 2025."

Secretary Jewell's announcement makes it clear that the issue is an economic one as well as an environmental one:

"Currently, vast amounts of natural gas from public and Indian lands are lost through venting, flaring and leaks from oil and gas operations. Between 2009 and 2014, enough natural gas was lost through venting, flaring and leaks to power more than five million homes for a year. States, tribes and federal taxpayers also lose royalty revenues when natural gas is wasted – as much as $23 million annually in royalty revenue ..."

As for the Jordan Cove LNG export facility, property owners are not quite off the hook yet. FERC has said it may revisit its decision if the project's backers can provide evidence of public benefit that would counterbalance the objections -- namely, increased demand for natural gas in Asia.

That could be a long way off.

Image (screenshot): via FERC, section 1, page 7.