Proponents invoke economic recovery in southern Oregon and a smooth global transition to clean energy, but a closer look at a proposed Jordan Cove natural gas export project reveals mixed blessings and hardships.
This piece is the third of a three-part series on China’s natural gas landscape and the trans-Pacific LNG trade. Part 1: Untapped Waste: An Old Technology Sees New Light and Development in southwestern China, Part 2: Local Climate: China’s Natural Gas Imports and the Fight for a Megacity’s Ecosystem
UPDATE 2016/03/12: On Friday 11, 2016, the Federal Energy Regulatory Commission (FERC) rejected Jordan Cove’s application to build its export terminal and the attendant Pacific Connector Pipeline. The commission cited in its decision adverse impacts to landowners and Jordan Cove’s failure to demonstrate a viable market for its LNG exports. The announcement was unexpected, and the decision came as a shock to people on both sides of the fight, as common wisdom held FERC’s approval of the project as a relatively minor obstacle. The commission says that Jordan Cove is welcome to reapply for federal approval if it it can establish reliable demand for its product.
Southwestern Oregon has been hurting for decades now. Until the 1990s, the timber industry supported small towns throughout rural Oregon. But then the fallout of years of overcutting and new restrictions to logging on federal land cut the timber harvest by half, leading to widespread unemployment.
High wage jobs in the tech and sportswear industries have helped insulate the urban central valley from the timber industry’s collapse, but the state’s rural southwestern region has not been so lucky.
Proposed by Canadian gas company Veresen, Inc., Jordan Cove LNG would export natural gas from North American gas fields to Asian markets. There would be three main components of the project’s infrastructure. Jordan Cove, near Coos Bay on Oregon’s south coast, would be the site of its central terminal, where the gas would be processed, liquefied, stored and loaded into ships bound for Asia. The Pacific Connector Pipeline would link the Jordan Cove facility to existing pipeline networks that supply natural gas from fields in Canada and the Rocky Mountains, while a dedicated 420 megawatt power plant would fuel the liquefaction process.
Taken together, they would be the largest commercial venture in state history.
Jordan Cove originally applied in 2007 for federal approval for an import terminal at the same location. After the US fracking revolution led to shifts in the global energy market, the company changed its plans. Construction of the export terminal was initially slated to begin in 2014, but delays in permitting process have pushed the timeline back time and time again.
The project received its final environmental impact statement last September, but public comment periods on state permits are ongoing. The Federal Energy Regulatory Commission, normally a rubber stamp organization, was expected to release its final approval for the project by the end of 2015, but so far has failed to do so. Their decision could be further challenged by suits from Oregon governor Kate Brown or other parties. Veresen now says it plans to make its final investment decision by the end of 2016.
For supporters, the project is hope for a long overdue reinvigoration of the local economy. According to the website of Boost Southwest Oregon, a group formed with Veresen funding to campaign for the project’s approval, “For over 20 years now, the communities of Southwest Oregon have been experiencing chronic financial distress…families in Southwest Oregon are struggling to make ends meet. Cities and counties are making difficult and painful cuts in education and community services. Our people need work, our businesses need customers, and our counties and schools need resources to provide the basic services our communities need and deserve.”
Connie Stopher of the South Coast Development Council, a local organization based in Coos Bay, portrays the community’s relationship with Jordan Cove as a positive one. “Whenever a big company comes to a town, especially to a small town…I’ve seen in the past where companies have kind of used that to get whatever they want. But that hasn’t been the case with Jordan Cove.”
The project would bring 150 direct jobs and more than $400 million in community service fees over 20 years. Supporters suggest that the project could give the region increased natural gas access and lead to increased industrialization in the region, though Veresen has not indicated that it plans to sell any of the gas locally.
Despite its potential for positive impacts on the south coast, not everyone in the community is on board. Skeptics minimize the 150 jobs associated with the project, and some see it as the latest in a long line of projects that have come to the region, promising economic transformation and community revitalization, only to fall through or fail early.
Opposition to Jordan Cove is widespread among landowners along the pipeline route. Williams Pacific Connector, the builders of the project’s main pipeline, said in a November 2015 letter that they had obtained only 9.6% of the easements they needed from landowners.
Francis Eatherington is an affected landowner through her position on the board of Oregon Women’s Land Trust. The proposed pipeline route passes through the trust’s 147-acre property. She cites safety as a major concern in the fire- and landslide-prone region. Federal law puts less stringent requirements on pipelines that pass through rural areas like southern Oregon, and Williams has a worrying history of safety violations and accidents.
A video of pipeline incidents in the U.S. going back 30 years. Note the legend and statistics at the base of the screen.
Stacey McLaughlin, who lives on a 357-acre property along the pipeline route, says the project would impact her and her husband financially by devaluing their property. Eatherington and other landowners have alleged that initial offers for easements were insultingly low, and “came with a sheet explaining that [Jordan Cove] would get eminent domain.”
Eminent domain is the power of the US federal government to take control of private land for public use, and is perhaps the most contentious issue for landowners.
Says McLaughlin, “Eminent domain is a process that’s supposed to be for the public good and the common good and the greater good. And this is not. This is a private, for-profit corporation exploiting a component of the law in order to secure their way and their means to make a buttload of money.” The fact that the main investor in the project, Veresen, is Canadian, is also a point of opposition for many.
Michael Hinrichs, a spokesperson for Jordan Cove, said in an email “our primary focus is to continue to engage landowners to achieve the best possible outcome and use of eminent domain is not the desired path.”
But for McLaughlin and Eatherington, it seems there will be no other.
“We’re outraged,” says Eatherington. Part of the mission of the Oregon Women’s Land Trust is to “protect the ecological value of lands in its care,” a duty she sees as counter to the pipeline’s presence there.
Says McLaughlin, “It’s not about the money.”
“When we bought our land about 15 years ago, it was an unbelievable mess…The house wasn’t really habitable, but we lived in it for a couple years until we could get the money together to fix it up.”
“The property took us almost 2 years to clean up, and that was literally every day leaning over and picking up trash. We planted close to 10,000 new trees.”
“For the first few years we lived here, we never really saw anything but a few deer. Now we have a herd of elk that comes through upwards of 8 to 10 times a year.
“So this place is very sacred to us.”
“When we started this whole thing it was about keeping people out of our land and off our property who didn’t belong here. It was about preserving the hard work that we have invested in. And it’s grown way beyond that. It’s now not about us. It’s about protecting this planet.”
“Our view,” says spokesperson Michael Hinrichs, “is that as world economies move off of coal, natural gas will be the key transition fuel—a much cleaner alternative to coal.”
This is a common view among those in the oil and gas industry: that natural gas is a fuel that will help countries, especially those particularly dependent on dirty fuels like coal, transition to the cleaner energy of the future.
Opposing this line of reasoning are activist groups such as 350.org and Rising Tide North America. They have campaigned worldwide to limit fossil fuel extraction with the aim of “confronting the root causes of climate change.”
They point out that the purification and liquefaction processes make LNG a dirtier fuel than domestic natural gas. Indeed, Jordan Cove’s dedicated gas-fired power plant would have enough generating capacity to power more than 400,000 homes.
David Fridley, a staff scientist with Laurence Berkeley Labs’ China Energy Group and the Lead author of Key China Energy Statistics 2014, refrains from black and white portrayals of the LNG’s impact.
First, while CO2 emissions from LNG processes are significantly lower than coal’s, their total greenhouse gas (GHG) emissions may be comparable. The key is to look beyond the actual combustion of the gas and consider the “full cycle” emissions, beginning with initial extraction.
Methane, the primary component of natural gas, is a powerful greenhouse gas in its own right. It only sticks around in the atmosphere for a few decades, but is about 100 times as potent a greenhouse gas as CO2.
According to Fridley, “There’s methane leakage during extraction, transport, liquefaction, and regasification” of natural gas, and extraction by hydraulic fracturing, or fracking, may lead to increased leakage.
Indeed, the US environmental protection agency recently increased its estimates of the methane emissions of oil and gas extraction and transportation. The biggest increase came in “production and gathering,” which the EPA now thinks is 125% higher than previous estimates. In a statement to IHS CERAWeek, the annual gathering of global oil executives, EPA chief Gina McCarthy said “Methane emissions from existing sources in the oil and gas sector are substantially higher than we previously understood.”
On the other hand, says Fridley, coal extraction in China itself runs on coal power, and is much more energy-intensive than in the US. “So for full-cycle comparisons, you have to consider that as well…Certainly, it is suggested that particularly in the case of fracked gas, leakage in measured cases is sufficient to offset the CO2 advantage of natural gas versus coal.”
But a full cycle analysis for any given fuel, including the natural gas flowing through Jordan Cove, would require extensive and ongoing research, and fossil fuel companies have not been forthcoming. According to Reuters, “only 8 out of the nearly 8,000 U.S. natural gas producers” have responded to an EPA request to voluntarily disclose their methane emissions—and that’s only one piece of the puzzle.
(UPDATE 2016/03/11 The White House announced yesterday that the EPA will begin a process next month to require oil and gas companies to release their methane emissions figures, as part of a recently announced plan to reduce methane emissions 40-45 percent below 2012 levels by 2025. For more on the rules, their impacts and the industry’s reaction: 1, 2, 3)
Why not renewables?
With renewable energy from wind and solar growing cheaper by the year, the question many are asking is: Why not just replace coal with renewables?
In many parts of the Chinese energy sector, that is exactly what is happening. The size of China’s renewable energy market is already more than double that of the US, and the Chinese government has set the goal of generating 20 percent of its energy from renewable sources by 2030 (which will require the installation of enough renewable energy capacity to power the entire US power grid).
The country’s efforts have already had a significant impact on coal power. Coal use has declined for two consecutive years, and the International Energy Agency (IEA) has said that it is “feasible” that China has already passed peak coal.
The major problem with switching directly from coal to renewables is that only about half of China’s coal goes to generating electricity (the U.S. uses almost all of its coal for electricity). Most homes in China’s northern region keep warm through the winter using district heating schemes, in which water or steam is heated in a central location and then piped throughout the neighborhood. Many people cook with propane or coal.
So many areas of energy use must first be electrified to even use renewables. This is straightforward, at least in theory, for sectors like transportation, heating and water heating (China already has millions of square meters of Chinese-invented solar hot water heaters, the most in the world). According to Fridley, though, “there are many sectors that require high-temperature heat (e.g. cement, primary iron & steel, chemicals) that can’t be electrified since such processes haven’t been developed yet.”
With uncertain, but likely high, full-cycle emissions from LNG, it could make sense from a climate perspective to simply invest in renewables and in engineering new and better means of electrification. And China’s long-term risk from global warming is high: sea level rise will threaten the very existence of many of the country’s population centers, and volatile weather will continue to threaten its water and food security.
But climate change is not the only reason to get off coal. According to a study published last year in Nature, air pollution contributes to 3.3 million premature deaths each year—more than HIV and malaria combined—and more than a third of those deaths occur in China. Without a change of course, say the study’s authors, the number could well double to 6.6 million by 2050.
Finally, the coal mining industry has been deadly to its workers, and has been associated with both forced labor and extreme environmental destruction in the regions it calls home. (For more on coal’s impacts in China, check out this Guardian story.)
On the other side of the Pacific, fracking brings environmental destruction to the communities it visits (but not necessarily employment) and cheap energy to the United States. Fracking would produce most of the natural gas supply for projects like Jordan Cove, and push the growth of an industry that has contributed to unsustainable water use in water stressed areas, as well as groundwater contamination.
“Economics is a different issue”-David Fridley
Jordan Cove and Veresen remain optimistic about the project’s chances in world markets. “Jordan Cove LNG is in advanced negotiations with potential customers,” says Michael Hinrichs, “and those discussions are proceeding well.”
The last year has taken a toll on the project’s outlook, however.
Japan is the world’s largest LNG importer, and its share of the market was driven up by nuclear power plant closures in the wake of the 2011 Fukishima disaster. But in August of last year, facing a major trade deficit, it began to reopen those plants.
And while the Chinese government aims to increase the share of natural gas in its energy supply to 10% by 2020 (in 2012 it was 4.9%), there are greater market forces at play for Jordan Cove.
Asian countries have historically paid a premium on natural gas imports. Now, with a global fuel supply glut concentrated in Asia, it is a buyer’s market. Between the development of LNG supply lines by Australia, Qatar and other Middle Eastern Countries, and China’s 2014 pipeline deal with Russia, Jordan Cove LNG faces stiff competition.
Says Fridley, “China, for one, would welcome an additional supplier to give it more negotiation options (for lower prices). Although US gas is currently fairly cheap, liquefaction isn’t…Already, proposed Gulf Coast LNG exporters (e.g. Cheniere) have found the US price advantage has pretty much disappeared in Europe with lower oil prices, undercutting its projected profitability. With all the LNG under construction and new projects online today, any new entrant is going to find a very tough market situation.”
Jordan Cove plans to sign contracts with its customers covering a period of 20 years, insulating both parties somewhat from volatile gas prices.
But already, long-term natural gas projects such as Russia’s $400 billion pipeline deal with China are being called into question. On January 15, Reuters quoted a source close to Gazprom, the Russian oil and gas giant, as saying that Russia will likely scale back natural gas export volumes due to falling global energy prices and uncertainty in the Chinese economy.
Delays could be deadly for a project like Jordan Cove. On top of uncertainty in Asian markets and gas and oil prices, analysis by researchers at the University of Texas at Austin suggests natural gas supply may dwindle much sooner than previously thought.
Industry estimates tend to agree with the US Energy Information Administration in thinking that the shale gas supply will continue increasing until 2020, and then plateau until at least 2040. However, the University of Texas team uses higher resolution estimates, and their results suggest that shale gas’s decline may come sooner.
Some of those involved in the research think that shale gas will contribute significantly for a few decades yet. However, Tad Patzek, head of the University of Texas-Austin department of petroleum and geoengineering, suggests that shale gas could peak in the next decade, and decline rapidly from there.
If that is the case, then there is yet another source of instability on the horizon for Jordan Cove.
A fossil fuel project the size of Jordan Cove will inevitably have myriad human and environmental impacts. And with so much at stake, there are often false hopes and doomsayers.
Some unanswered questions can be resolved by better disclosure and research: How much methane is released through fracking and transportation? How can we help electrify the world’s energy mix, and incorporate more renewables?
But not every solution is technical. For David Fridley, values are just as important. “The ultimate conundrum,” he says, “is that the Chinese have embraced the fetish of growth as deeply and strongly as we have: as long as [we] measure our well-being by the amount of economic consumption we record, and insist that that number rise every year forever, we are not going to be successful with dealing with our climate challenges.”
And with Jordan Cove, value judgments extend well beyond the climate. How are the lives of communities near Rocky Mountain fracking fields (or for that matter, in the east Siberian oil fields) to be weighed against those of Chinese coal miners? When jobs and land rights are pitted against each other, who wins out?
Those judgements may produce the most tension at a local level, between communities desperate for jobs and those who rely on their land. But I was struck, too, by the way people on each side of the LNG fight worked to understand the other’s point of view.
Stacey McLaughlin told me in a phone interview:
“I get they want to take care of their families. My dad was an electrician. And I grew up in the feast or famine kind of world. Sometimes we had benefits and sometimes we didn’t…My dad actually worked on a nuclear power plant because my family was hungry. And it violated everything I stood for or he stood for. So it’s about how you do that. How you balance the need to care for your family and be responsible, and still have your ideals.”
UPDATE 2016/03/11 The White House announced yesterday that the EPA will begin a process next month to require oil and gas companies to release their methane emissions figures, as part of a recently announced plan to reduce methane emissions 40-45 percent below 2012 levels by 2025. For more on the rules, their impacts and the industry’s reaction: 1, 2, 3
To hear more from either side of the discussion:
Further resources used in the article:
3 thoughts on “Pacific Balancing Act: Jordan Cove and the Global LNG Trade”
An excellent piece. Comprehensive, well researched and well argued. Relevant in larger context even in face of yesterday’s FERC rejection of Jordan Cove as a particular project. Don’t give up this journalistic approach to your whole effort. Carry on!
Thanks! The timing was unfortunate, but I learned a lot in the process. I think that’s more important at a personal level than exposure.