noLNG

Is FERC rushing Bradwood?

This article appeared in the Energy Economist.

Posted on July 11, 2008
By Ehud Abadi
Filed Under Uncategorized |

In what comes as a surprise to virtually every party involved in the project, FERC has announced that it will meet on Thursday, July 17 to consider and possibly vote on the fate of the proposed Bradwood LNG terminal on the Columbia River in Oregon. The announcement comes much earlier than state leaders, project opponents, and even the project’s backers had expected, according to an Oregonian article published on Friday. FERC had just issued its environmental impact statement on the plant last month, and according to its own rules, Thursday’s meeting is the very first in which the commission is allowed to vote on the project. Bradwood is a name that’s attracting a lot of attention recently in the Northwest, and not much of it is positive. Virtually everyone that lives at or near the plant’s proposed site on the Western Columbia River is vehemently opposed to its location there. Environmental groups claim that even beyond the impact of having more heavy industry and gas tankers on the river, the plant will further endanger already suffering salmon populations. According to the Oregonian, the state government has been consistently critical of FERC’s handling of the Bradwood proposal, stating that the Federal agency has moved forward in a rushed manner, without regard for Oregon’s concerns. Both Gov. Ted Kulongoski and the state’s congress have requested that FERC take into account more recent research and data to update their environmental assessment, to no avail.

Should FERC’s rushing of this approval really come as a surprise, though? It doesn’t take more than a cursory look at the current status of LNG in this country to see that there are currently far too many re-gasification plant proposals for all, or even most of them, to be feasible. In Oregon alone, there are 3 proposals in the works, including Bradwood. Economist Samuel Van Vactor points to the notion that FERC is obviously aware of this. According to Van Vactor, FERC’s policy standpoint right now is to get as many LNG proposals approved as they can, and let economics dictate which ones actually get built. NorthernStar Natural Gas, the company proposing the Bradwood Landing facility, is going to need a lot of capital to actually break ground after all the regulatory hurdles are jumped. Will it get that capital? At the heart of that question lies another question: Will the demand for the gas be there? A look farther south, past the US-Mexico border, sheds some light on this. Sempra’s $875 million Energia Costa Azul LNG plant in Northern Mexico, completed this past spring, has so far been a relatively successful venture. Markets for the incoming gas are close, transportation is cheap, and the gas sells. Between Energia Costa Azul and the recently beefed up pipeline capacity linking California to the Gulf, the West Coast is not currently under any significant supply constraint, nor will it be for a while. This makes the Bradwood Landing proposal dubious to potential investors. Furthermore, Bradwood’s site is not currently connected to any major pipeline. In order to get incoming gas to market, that will have to be built, adding to the price-tag of the project. Northwest Natural Gas, mainly a local delivery company, has already come out in favor of Bradwood, leading one to believe that they must envision some future for gas coming out of the plant, at least as far as its Mist storage facility located very conveniently close by.

It would be the place of a different post to also explore the supply side of the issue, and how that relates international gas prices to those in the U.S. Will the price differential between the two be great enough to justify the imports? These are questions that many economists are probably laboring over as investors, likely the ultimate deciders, consider Bradwood Landing.

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