Dwindling Pipelines in Oregon

Out of several proposed natural gas pipelines in Oregon, only one moves forward
Published: Saturday, September 04, 2010, 3:00 AM
Ted Sickinger, The Oregonian

Before the recession, upbeat developers proposed no fewer than seven new long-haul natural gas pipelines in Oregon.

On paper, the lattice of new pipes crisscrossed the state to fill what developers described as a looming supply gap by importing more fuel from the Rocky Mountains and overseas via liquefied natural gas tanker.

As of last week, however, only one project was definitively moving forward. Several others have disappeared entirely. And the remainder are in regulatory and financial limbo.

A flurry of activity in recent days underscores the shakeout, as a federal court rejected a last-ditch effort to block one pipe, developers of a second sued the state of Oregon and a third simply pulled the plug for lack of demand.

The upheaval is partly a function of a gas market that has turned upside down during the past three years. Gas prices and demand have shriveled. And domestic reserves are burgeoning as drillers access supplies trapped in shale formations.

In Oregon, the long-standing question of how many projects really are needed is coming to a head.

"There's a lot of pushing to see what's going to break," said Ken Zimmerman, a gas industry analyst at the Oregon Public Utility Commission. "There's a lot of man hours, a lot of lawyer hours invested in these projects. ... I know a lot of oil and gas guys, and they don't like to lose or to be told it's not going to work."

A federal appeals court on Thursday rejected an environmental group's request for an emergency injunction to halt construction of El Paso Corp.'s Ruby Pipeline, which will export gas from western Wyoming to a gas hub in the Oregon town of Malin, near the California border.

The project began construction two weeks ago and should be in service next spring. It is designed to ship 1.5 billion cubic feet per day -- more than the combined daily consumption in Oregon and Washington.

Theoretically, some of that gas could serve Pacific Northwest demand. But for now, it's headed to California via an interstate pipeline that runs south through Malin.

That same gas hub in Malin is the terminus point of a second proposed pipeline -- this one a 230-miler connecting a proposed LNG terminal in Coos Bay.

Given the massive new quantities of gas coming to Malin from Ruby, many observers say the Coos Bay terminal has lost its viability. But project backers continue to push for state permits.

Permitting is a Byzantine process that has already frustrated a competing proposal on the Columbia River. And this week, backers of the Jordan Cove terminal in Coos Bay and the associated Pacific Connector pipeline went for the nuclear option, suing the state of Oregon for allegedly using a state law to "unreasonably delay and substantially interfere" with permitting. The lawsuit cited "pervasive opposition" among state officials, singling out Attorney General John Kroger because of his outspoken opposition.

The suit goes to the heart of a long-standing states' rights struggle over who has the ultimate siting authority over energy facilities.

Backers of the various LNG projects have twice floated bills in the Oregon Legislature to change state requirements, saying they amounted to a Catch-22. Neither effort succeeded, but a variety of state officials were supportive of the changes the developers sought.

Jordan Cove's managers didn't return calls late last week seeking comment, but opponents contend the lawsuit is a desperation move.

"I think they've dumped so much money into the project that they don't want to turn away, " said Monica Vaughan, an anti-LNG organizer who lives in Medford. "I have a hard time understanding why they did it, since they have to go back to the same agencies for permits, but their investors must be telling them to push harder or do whatever you need to do."

While industry experts say an LNG import terminal in Oregon makes little sense in the short run, opponents of the projects speculate that Jordan Cove's backers may want to convert their terminal to an export facility, as at least one existing terminal on the Gulf of Mexico is seeking to do. Or they could simply hold the license until a terminal becomes viable down the road.

That could be some time. Earlier this week, Williams Northwest Pipeline pulled the plug on it proposed Blue Bridge pipeline, asking federal regulators to terminate the regulatory process.


That project was supposed to ship more gas through the Columbia River Gorge to customers in Oregon and Washington. After evaluating the project for nearly a year, however, the company determined there wasn't enough demand -- now or in the foreseeable future.

The company also explored a partnership with Northwest Natural Gas Co., which had proposed building yet another cross-Cascades pipe further south through the Mt. Hood National Forest, called Palomar. Palomar was proposed to serve the Bradwood Landing LNG terminal on the Columbia River east of Astoria, but that project died earlier this summer, leaving Palomar in limbo.

The discussions between Williams and Northwest Natural bore no immediate fruit, apparently. Two more projects to import more gas from the Rockies, the so-called Sunstone and Bronco pipes, have already evaporated, And a final LNG terminal and pipeline, called Oregon LNG, still needs virtually all its federal and state licenses.

That leaves Ruby as the only project approaching the finish line.

"Ruby, hands down, is going to win," said the PUC's Zimmerman. "It made sense from the very beginning. It's coming from the right place, and it's going to the right hub, because most of the (demand) is south, not up north."

 

--Ted Sickinger