Post 1195: Oregonian: 2 Remaining LNG Terminals in OR Face Uphill Battles

[Hans Laetz, Newsgroup Editor]

After six years and $100 million spent in a regulatory odyssey for
terminals in Oregon and California, NorthernStar's investors saw
little prospect of success, and pulled their support.

"The extended delays in the processing of state and federal permits
for Bradwood Landing and the difficult investment environment have
forced us to suspend development," said NorthernStar Natural Gas
President Paul Soanes in a news release. "In particular, the
challenging regulatory environment gives investors pause..."

To be sure, spending $100 million before ever driving a nail is a
staggering sum -- one that offers a cautionary note for the two
remaining LNG proposals in Oregon -- one in Coos Bay and the other in
Warrenton. To reach the regulatory finish line, each of those projects
still faces a daunting lineup of interdependent state, local and
federal permitting processes.

Meanwhile, the economics of importing natural gas are looking bleak.
Financial backers are more reluctant than they were a few years ago.
And domestic competition is coming on strong, with a proposed pipeline
from Wyoming on the verge of final approval and nabbing the same
customers an LNG terminal in Oregon would need.

Yet the moral of NorthernStar's story isn't necessarily that an LNG
terminal isn't viable in Oregon, or that the permitting process is
impossible, observers say. Rather, it may be that NorthernStar went
about it in the wrong way, and ultimately sank its own ship.

The fatal flaw for Bradwood may have been the Bradwood location
itself. The problem was there from the get go.

Site selection is primarily a process of eliminating unsuitable sites
and defining locations where the project is the best fit.

From the beginning, Clatsop County's planning department said
unequivocally the LNG project was inconsistent with the county's land
use law. Instead of resolving those issues up front, the company
convinced the Clatsop County Board of Commissioners to ignore its own
staff and approve the project.

The Oregon Land Use Board of Appeals remanded the project twice to the
county. The land use approval is the most fundamental piece of the
project, the certification that the facility meets county and
statewide planning goals. After six years and $100 million,
NorthernStar didn't have it.

The idea of dredging that stretch, driving supertankers full of a
volatile commodity upriver to unload, then allowing ships to suck up
millions of gallons of ballast water for a return journey across the
Pacific, was anathema to conservation groups. It also raised serious
concerns among state and federal regulators, who have overseen
billions of dollars worth of salmon restoration efforts on the river.

NorthernStar never subscribed to the notion that its site was
particularly sensitive habitat, and tried to convince regulators its
mitigation efforts were more than adequate to deal with the "minimal"
impact the terminal would have.

One fundamental piece of its salmon protection plan was to screen
ballast water intake to protect juvenile salmon. Federal regulators
made fish screening a condition of its license. But NorthernStar never
came up with anything beyond a conceptual design for a fish screen.

Meanwhile, it argued with scientists.

"That's lesson 101 in project development," said Bob Braddock, project
manager of the Jordan Cove Energy LNG project in Coos Bay. "You don't
make the rules, you comply with them."

Until recently, NorthernStar's experts second-guessed regulators' data
requests for modeling the river's hydrology. It protested the Oregon
Department of Environmental Quality's requests to conduct additional
sampling. And it complained about regulators continually moving the
goal posts to the point that they would never have a definitive
answer.

Nina DeConcini, Northwest Region administrator at DEQ, acknowledges
that the LNG terminal permitting has taken a long time, but she said
that without any prior experience with an LNG terminal, the impacts
are largely unknown.

"DEQ is obligated to conduct the most scientifically rigorous
evaluation of the impacts of these kinds of projects," she said. "We
will have the same standards, and the same information requests for
the other LNG projects. We try to treat everyone equally."

Peter Hansen, chief executive of Oregon LNG, says he too worries about
a permitting process in which all the agencies want to be last. He
believes there are circular references among state, local and federal
permitting processes that make it difficult to get started.

"It's a bring-me-a-rock, no-I-don't-like-that-rock, bring-me-another-
rock kind of approach," he said. "It becomes enormously complicated
because there are no firm rules."

On the surface, neither Oregon LNG nor Jordan Cove terminals appear to
have the same degree of ecological issues as Bradwood, and state
regulators say their relations with the companies have generally been
smoother.

Still, each project faces significant hurdles. Oregon LNG is early in
its permitting process, and opponents are protesting its potential
impact on nearby Young's Bay fishery, and the public safety of
locating an LNG terminal close to an airport or the city of Astoria.
The company's lease with the state may become an issue, and it has
angered landowners along the pipeline that would connect the terminal
with a gas hub in Molalla.

Jordan Cove has its own pipeline problems, in addition to a potential
market problem. With a 230-mile pipe, Jordan Cove is an expensive
project that would send gas into the same hub that would be served by
the new pipeline from Wyoming. That competition would make both
projects less competitive -- or one of them not feasible.

No matter how those specifics play out, opposition to LNG isn't
backing off.

"We don't need LNG," said Brett VandenHeuvel, executive director of
the conservation group Columbia Riverkeeper. "There are massive
environmental impacts and pipelines crisscrossing the state.

"The reasons why people opposed Bradwood still carry over to Jordan
Cove and Oregon LNG."

--Ted Sickinger



LNG projects still pending
Project: Jordan Cove LNG terminal and Pacific Connector Pipeline
Location: Coos Bay
Status: The project has received conditional federal approval, though
Oregon has asked regulators to rehear that decision because state
permits were not in place when it was granted. Developer still working
through clean air, clean water and coastal zone management permits at
the state and federal level.

Project: Oregon LNG terminal and pipeline
Location: Warrenton
Status: Developer awaiting a draft environmental impact statement and
biological assessment from federal energy regulators this summer. Also
working through local land-use compatibility, clean air, water and
coastal zone permits. Administrative law judge is examining the
company's conduct with landowners during the environmental review
process for its pipeline.Bradwood, an abandoned mill site 25 miles
east of Astoria, sits atop what many biologists say is important
salmon habitat, if not a critical nursery.

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