The Register-Guard by Winston Ross
“I couldn’t make the economics of that work no matter how hard I’d try,” he told the San Francisco Chronicle in October 2009. “It’s not like someone can just flip a switch. The technical issues are huge.”
Consider that switch flipped.
Braddock, project manager of the Jordan Cove Energy Project, is now hoping to convince local, state and federal regulators to turn his application for a liquefied natural gas terminal on Coos Bay’s North Spit from import to export — four years after energy experts all over the country were scoffing at the idea that the United States would ever ship natural gas from its shores.
“I, and a lot of others, were flat wrong,” Braddock told The Register-Guard. “I’ve eaten my words.”
He’s also eaten through tens of millions of dollars in land purchases and studies to gain what approvals he could for the import terminal, to the ire of landowners and conservationists who fret about the environmental degradation and taking of private property that they say will come with the construction of a 223-mile pipeline across the Coast Range.
Ardent LNG opponents have called Braddock’s change of heart a “classic bait-and-switch,” accusing him of knowing for years that he’d never be able to finance an import terminal on the coast. They allege that he clung to the weak argument that the United States needed to import gas to drive down costs for consumers here and reduce the country’s demand on foreign oil so that he and the pipeline’s developers could get approval for the project from the Federal Energy Regulatory Commission.
“They had to lie,” said Francis Eatherington, conservation director for Cascadia Wildlands, one of at least four such groups opposing the project. “Now that they’ve got control over our properties, they come out and tell the truth.”
Now, even though Braddock has to “start all over again” in some respects, the pipeline is in the bag, unless FERC agrees to the state of Oregon’s request to revisit that approval. Which means the pipeline developers don’t have to demonstrate “need” in order to get it built. Which is a good thing for the pipeline developers, opponents say, because it’d be hard for anybody to make a case that the United States needs to sell off its suddenly abundant supplies of natural gas, pulled from newly tapped shale wells in the Rocky Mountains.
“What’s the public use benefit?” asked U.S. Rep. Peter DeFazio, D-Ore. “It doesn’t make sense to me that the government of the United States wants to enable the taking of private property for private profit to export a limited resource that will drive up domestic prices.”
Which is to say, Braddock’s chance of getting an export terminal isn’t exactly smooth sailing, pipeline permit in hand or not. This time, the Department of Energy will be involved in the decision, and will have to agree that it’s in the country’s best interest to export portions of a gas supply that is now estimated to be able to meet the country’s energy needs for the next century. And Braddock will have to convince buyers, probably from Asia, to sign 20-year contracts to purchase U.S. and Canadian natural gas before he can line up the $5 billion he needs to build a terminal.
In the past, FERC has approved projects on a case-by-case basis and without much discussion of the big picture. That agency’s attitude has always been to approve the project if it meets the technical requirements and let the market figure out which ones get built, Braddock said.
That won’t be the energy department’s approach. The department has already notified LNG developers that the department intends to take a broad look at whether the United States should be exporting this valuable resource, whether it’s worth the price increase that will result if domestic supplies of gas are subject to global market demands.
There’s a robust debate going on in Washington, D.C., at the moment about whether exporting gas is a good idea. On the one hand, energy developers argue it’s good for the economy to export gas. A $5 billion terminal would result in as many as 2,800 construction jobs and as many as 120 permanent ones, along with $2.4 million in annual property taxes in Coos County alone, according to studies commissioned by Jordan Cove.
U.S. prices here are down in the $2 per million British Thermal Units range, far less than $12 or $13 international buyers are paying on other continents.
But it’s almost too cheap now, say energy analysts. Some U.S. producers are actually capping wells, because it is costing them between $4 and $5 per million BTUs just to get the stuff out of the ground. If exports drove up prices, it could alleviate that cost crunch.
Eatherington sees no problem with the price staying low, though. If it costs too much to produce natural gas to make money on it, then perhaps that will spur energy developers to invest in green energy, such as wind and solar, she said. She’s against the pipeline, she said, because it would tear a chunk out of her and many other people’s lands in Coos and Douglas counties. But she also said it would be better for the United States for many reasons to keep that gas on domestic soil.
“The price should be high,” she said. “High enough so that we can mitigate the problems with global warming. If I was the president of the U.S., I’d say ‘Replace all our coal-fired plants with natural gas, instead of exporting it.’ We want to become energy independent.”
On the other hand, keeping the gas here could mean a boom in the U.S. manufacturing sector that was unimaginable five years ago. If the companies feel confident enough that domestic natural gas prices will be kept low for long enough to warrant the expensive investment involved, they could bring manufacturing plants back to American soil from overseas.
“You can either export natural gas, or you can export widgets, which eat natural gas; both those things are going to happen,” said David Pursell, industry managing director with Pickering Energy. But the question is whether U.S. manufacturers are willing to bring their plants back home. “The prices have to stay low for a while, before they’ll invest significant capital.”
Braddock argues that the two options aren’t mutually exclusive, noting that much of the gas that would be shipped out of the Coos Bay terminal would come from Canada.
“If exports occur at all, they’ll amount to no more than a total of 5 to 6 percent of the U.S. production,” Braddock said.
While that may impact domestic prices, it won’t tax domestic supply, and he continues to make the case that a pipeline goes both ways; that if something dramatic were to happen to shift the U.S. needs back to imports again, the infrastructure would be bought and paid for.
So, will it happen? The proposed Coos County import terminal has some tactical advantages over facilities on the Gulf Coast in its proximity to Asia, but it faces competition with a terminal in Kitimat, B.C., that won approval in October to export gas.
“Western Canada has a big advantage over Coos Bay,” Pursell said. “I’d be shocked if your facility got built.”
Braddock says he can get gas to Asia just as cheaply as Kitimat, but he’s much farther behind. He also said there are far more abundant supplies of natural gas in other countries, but that they haven’t developed the technology — yet — to tap into it.
“What we have is a head start in the technology, and they will get it, too, no question,” Braddock said. “If no export facilities are built within the next seven or eight years, export facilities will probably never be built.”