Northwest Communities Have Won Key Battles
Can They Win the War?
by Eric de Place and Deric Gruen
“Everybody outside the Northwest thinks that’s where energy projects go to die.” 1 That’s the reputation our region has earned as an increasing number of proposed coal and oil export projects have encountered ferocious opposition. It’s what the backer of a proposed oil refinery2 in Longview, Washington, told reporters earlier this year after his company’s stealth proposal was outed by environmental groups.
The Cascadia region has proven to be extraordinarily challenging for those who would turn it into a major carbon energy export hub — so much so that Sightline has taken to calling it the Thin Green Line.3
Since 2012, a staggering number of schemes have proposed to move large volumes of carbon-intense fuels through Oregon, Washington, and British Columbia to Asian markets. A recent Sightline analysis shows that proposed and newly permitted energy projects in the region would amount to the carbon equivalent of more than five Keystone XL Pipelines.4
But in big ways and small —from Coos Bay, Oregon, to Prince Rupert, British Columbia — the Thin Green Line has held fast.5 Big energy projects have faced delays, uncertainty, mounting costs … and then failure. A review of these projects makes clear just how successful the region has been in denying permission to dirty energy companies as it stays true to its heritage as a center of clean energy, sustainability, and forward thinking.
Coal Export Terminals
Prince Rupert Port Authority:
Ridley Coal Terminal Expansion
(Prince Rupert, B.C.)
Ridley Terminals began an expansion project in 2011 to increase the coal throughput at its northern British Columbia terminal from 12 to 24 million tons per year. The company scaled back operations6 this year to less than 6 million tons — and possibly less than 4 million tons — due to persistently low coal prices. In November 2014, the expansion project was put on hold7 for up to five years.
Port Metro Vancouver:
Fraser Surrey Docks
(Surrey, British Columbia)
Project backers submitted a permit application8 in June 2012, hoping to complete construction of a new 8-million-ton-per-year export terminal for US coal on the Fraser River by the end of 2015.
Local opponents successfully delayed the project by getting officials to conduct a study of previously unaddressed health impacts and to implement a third-party review process. These studies took a total of 26 months and were not approved by the Port9 until August 2014. That approval is now being challenged by opponents, and the project faces multiple legal hurdles.10
Two years after Fraser Surrey Docks had hoped to begin construction, the plans remain stalled, and coal export demand has declined11 dramatically.
Gateway Pacific Terminal
SSA Marine first applied for state and federal permits to build the Gateway Pacific Terminal in February 2011. The plans called for a terminal with the capacity to export 48 million tons of coal per year, with operations commencing in 2017. At the current rate of progress, the date would be closer to 2020,12 according to observers. The project’s draft environmental impact study, which was slated to be issued in mid-2015, has been delayed by at least a year.13 According to project consultants, the delay is tied to late-arriving information14 and more complex research than anticipated, such as the evaluation of health impacts associated with coal dust.
Two major coal companies have established agreements to ship through the terminal, but both are struggling.15 Neither Peabody Energy nor Cloud Peak Energy would make money exporting coal to Asia at current prices, and a string of problems, including unfunded reclamation liabilities, has pushed Peabody’s shares to all-time lows.
The project also faces intense resistance from an array of organizations and local governments. The most serious obstacle is intractable opposition from the Lummi Nation,16 which has vowed to block the project and asserts that the facility would violate its federally protected treaty rights.17
Millennium Bulk Terminals
After Ambre Energy proposed18 in November 2010 to build an export terminal that could move 5 million tons of coal annually from Longview, a legal challenge unearthed documents19 showing that the Australian company actually intended to move 40 to 60 million tons — a serious public relations black eye for the project. The company regrouped and then submitted official permit applications in February 2012. After receiving 215,000 public comments during the “scoping” phase of the review, Washington regulators decided to look at the local and global effects20 of burning coal. Following several contract amendments by Cowlitz County, a draft Environmental Impact Statement (EIS) is likely to be ready in November 2015 for public review,21 although the date is subject to change.
The US Army Corps of Engineers is conducting a separate review of the project.
Ambre Energy originally hoped to begin operations by mid-2014;22 that date has likely moved well into 2017 at the earliest. In the meantime, a series of financial reversals resulted in the firm selling its North American assets23 to its creditor, a risk-hungry private equity firm24 called Resource Capital Funds that has renamed the company Lighthouse Resources. Meanwhile, the project’s minority backer, Arch Coal, has seen its fortunes deteriorate25 so precipitously that some financial analysts believe the firm is at risk of bankruptcy. It is struggling to maintain a share price sufficient to stay listed on the New York Stock Exchange.26
Morrow Pacific Project
(Boardman and Clatskanie, Oregon)
“Oregon state regulators rejected the company’s permit application for the project, recognizing the treaty rights of Columbia River tribes to nearby fisheries.”
Ambre Energy, the same Australian company behind the coal export proposal at Longview, Washington, first filed permits for an 8-million-ton-per-year coal barging project in February 2012, anticipating that it could be operational as soon as mid-2013.27 The project met with furious opposition from environmental groups and nearby tribes, including the Umatilla. In August 2014, Oregon state regulators rejected28 the company’s permit application for the project, recognizing the treaty rights of Columbia River tribes to nearby fisheries. Officials deemed the project “not consistent with the protection, conservation and best use of the state’s water resources.”
Ambre Energy appealed the decision in September 2014, but the U.S. Army Corps of Engineers suspended29 its permitting review of the project in the same month. (The Oregon Transportation Commission also twice killed subsidies30 for the project.) Virtually all observers believe the project is dead.
Initially proposed privately to the Port of Grays Harbor in spring 2010 and announced publicly in July 2011, the plan for the RailAmerica coal terminal31 envisioned operating at full capacity by 2013. But in August 2012, RailAmerica officially told Port commissioners that the project was dead. (The company had actually stopped communicating32 with the Port months earlier.) While the company never filed permits or completed due diligence, they were the target of concerns in two town hall meetings and would have needed a $100 million investment to meet an ambitious schedule of starting construction at the beginning of 2011 and moving the first loads33 of coal by the end of that year.
RailAmerica’s senior vice president told the Daily World,34 “We spent a lot of money. We spent a lot of time, and unfortunately at this point we believe that there are other uses and other opportunities for that terminal that are much more likely to generate jobs, economic development, tax revenues….” He may have been alluding to the oil-by-rail terminal proposals that began emerging in 2012, including no fewer than three at the Port of Grays Harbor itself.
(Coos Bay, Oregon)
A proposal to build a coal export terminal at the Port of Coos Bay, code-named Project Mainstay, was originally reported in July 2011. An agreement with the Port emerged three months later. The plan envisioned35 commencing operations by 2017 and working at full capacity by 2021, after permitting and railroad rehabilitation. It was called off in April 2013 after the last of the three partners, Metro Ports, let its agreement with the Port lapse.36
Port Westward Coal Terminal
Energy giant Kinder Morgan publicly unveiled plans37 in June 2011 for a coal export terminal on the Columbia River near Clatskanie, Oregon. It called for moving 15 million tons of coal annually38 in the first phase and an additional 15 million tons in a potential second phase. The project was opposed by environmental groups, including Columbia Riverkeeper, as well as then-Governor John Kitzhaber, who called for close scrutiny39 and transparency. Sightline research exposed Kinder Morgan’s poor track record40 of operations and highlighted chronic and severe coal dust problems at its terminals in other regions.
Kinder Morgan’s plans relied on subleasing land for the terminal from Portland General Electric (PGE), an Oregon utility, in a Port-owned energy park, but PGE rejected the proposal41 in May 2012 over concerns about coal dust. This proved to be the beginning of the end for Kinder Morgan’s Northwest coal export dreams. In May 2013, the firm announced it could not find a suitable site in the area,42 scrapping plans for a $150 million terminal.
Northern Gateway Pipeline
(Bruderheim, Alberta, to Kitimat, British Columbia)
Enbridge first announced preliminary plans43 for the Northern Gateway oil sands pipeline in March 2002. In April 2005, it inked a deal44 with a Chinese company to build the pipeline, only to have the partnership dissolve45 two years later. In 2009, Enbridge announced its intention to seek regulatory approval and published a timeline46 that showed construction starting in mid-2014 and operations commencing in 2018.
The project received approval from Canada’s National Energy Board in June of 2014, but the approval came encumbered with 209 conditions,47 including that 60 percent of the pipeline capacity be confirmed six months before the beginning of construction and that transportation shipping agreements be in place by June 2016, or else the project’s permits would expire.
While Enbridge has consulted with more than half of the First Nations that would be affected by the project, many remain staunchly opposed. The project faces lawsuits48 from First Nations, environmental groups, and unions — driving up the project’s costs — and the new premier of Alberta has been forthright in calling the project unlikely.49 (“Quite frankly,” she said, “anyone who knows how these things unfold knows nothing is happening there for decades.”)
“The project faces lawsuits from First Nations, environmental groups, and unions.”
Although construction has not started, the project has already cost Enbridge around $500 million50 Canadian, and the company’s CEO has said that the earliest possible start date is now 2019.51 Enbridge has cut advertising for the project and failed to mention the project52 in recent earnings reports and other communications, giving rise to rumors that the company has shelved the project.
Trans Mountain Pipeline Expansion
(Edmonton, Alberta, to Burnaby, British Columbia)
In 2012, Kinder Morgan Canada began initial environmental assessment work to add a second pipeline. The project would be twice the size of the original Trans Mountain pipeline and would carry heavy oil sands crude, sometimes called bitumen, from Alberta to the Pacific coast for export. In December 2013, project backers filed permits53 that showed construction starting fall 2015.
That timeline has already slipped.54 Regulators have delayed the review date for approvals to January 2016, but aboriginal community members say that any permitting would lack standing without their approval. The City of Burnaby, where the pipeline would terminate, has refused to cooperate55 with the project, going as far as to ban project workers from city property, thereby preventing studies required for local permit applications. These and other delays have had a cumulative effect and are likely to push the project well beyond its target start date56 of late 2017.
Oil by Rail
East Gate Rail Project
Shell attempted to fast-track an oil train facility project in 2014 after earlier projects at north Puget Sound refineries sailed through permitting in 2012 and 2013. But after legal appeals57 from local community groups, the Skagit County Hearing Examiner decided58 in February 2015 to require Shell to undertake a full environmental impact statement.
Shell countersued, but the Skagit County Superior Court rejected59 the suit in May 2015. Observers believe that the draft statement will be submitted for public review in late 2015. Meanwhile, the Swinomish Indian Tribe is suing BNSF,60 the railway that would transport oil trains to the site, arguing that large-scale oil train movements would violate the terms of an easement that the tribe granted to the railroad.
Grays Harbor Rail Terminal
The Port of Grays Harbor entered into a property agreement with Grays Harbor Terminal LLC in September 2012, a fact that was first discovered61 through a public records request. An FAQ62 document issued by the project proponent, US Development, in early 2013 anticipated that the facility could be operational within two years, but the City of Hoquiam and the state’s Department of Ecology have yet to develop a timeline or process for preparing the EIS63 that would allow regulators to evaluate whether to permit the project. In September 2014, the Aberdeen City Council voted unanimously to reject the proposal,64 as well as the nearby Westway and Imperium projects (see below), although the city lacks the regulatory authority to actually block the project.
Grays Harbor Terminal Expansion
In February 2013, Westway applied for a permit to expand its terminal at Grays Harbor to include an area for receiving, storing, and shipping crude oil. The company called for65 completing construction and starting full operations by January 2015. That date has slipped drastically. The state Shorelines Hearings Board withdrew initial permits66 in
November 2013 after the Quinault Indian Nation and conservation groups appealed.
The project then underwent a self-initiated Environmental Impact Statement process starting in January 2014. Although the company is now calling for construction to begin in March 2016 67 (and to last one year for the first phase), the draft version of the EIS, which represents the first stage of evaluating the project, will not be available until late summer of 2015. This raises serious questions about the feasibility of the revised timeline. The Quinault Indian Nation has hired legal representation to block the project, and the project is opposed by a coordinated campaign involving local and statewide public interest groups.
Bulk Liquid Terminal Facility (Hoquiam, Washington)
The Imperium story parallels that of Westway. The project backers’ initial schedule68 called for construction running from June 2013 to December 2014, but the work will not be commencing soon. State regulators withdrew permits69 in November 2013. The proposal is now undergoing an EIS process in tandem with Westway, with the first stage of public review scheduled to begin in the late summer of 2015. The Quinault Indian Nation and numerous environmental groups are seeking to block the project.
Vancouver Energy Project
NuStar applied for permits in April 2014 to retrofit an existing terminal so it will have the capacity to receive crude oil delivered by rail, store it, and transfer it to marine vessels. In April 2015, the City of Vancouver opted to require a full EIS70 for the project. The Vancouver City Council approved a six-month moratorium on expanding crude oil facilities (a moratorium they subsequently extended through the summer of 2015), but NuStar had submitted a pre-application for permits just one day before the rule was passed, making its proposal exempt.
“Cascadia now will call the shots for the western coal industry, huge swaths of fracked oil and gas development, and Canadian tar sands extraction.”
Vancouver Energy Distribution Terminal
The Port of Vancouver began talks71 with backers of this project in February 2013, and in July 2013 it unanimously approved the development of what would be the biggest oil-by-rail facility in North America. Tesoro had initially expected to complete the project72 in 2014 at a cost of $100 million, but after repeated delays and fierce local opposition,73 it increased the estimate to $190 million74 by May 2014. Subsequent news reports indicated that the estimated cost had risen to $210 million,75 and the company now admits that operations are not scheduled to start until 2016 at the very earliest—and that projection is probably wildly optimistic.
Observers believe that a draft EIS will be available in November 2015, with a public comment period to follow. After that, state regulators will draft a final review of the project and then make a recommendation to Washington Governor Jay Inslee, who will decide the project’s fate. Even then, the decision could be appealed to the Washington State Supreme Court.
Tesoro anticipates76 that construction of the facility will take six to nine months after it is approved, but approval is not at all certain. One analyst described progress on the terminal as “incredibly slow”77 and gave it less than a 50 percent chance of gaining approval. Tesoro has publicly expressed disappointment78 at the timeline and review process of the state’s regulators.
Propane by Rail
Propane Export Terminal
Pembina Pipeline initially contacted79 the Port of Portland around April 2014, and the parties signed an agreement in August of that year. In announcing the agreement,80 Pembina officials said they anticipated beginning operations at the new propane export terminal in early 2018. The project needed building permits81 from the city, as well as an air quality permit and possibly a water quality permit from the state.
The company applied for approval from the Portland Planning Commission to construct a pipeline crossing public land near the Port and received it in April 2015. But just as the project looked certain to win approval from the Portland City Council, Portland Mayor Charlie Hales, formerly a backer of the project, publicly voiced his opposition. In June 2015, he refused to put the proposal on the City Council agenda.82
Pembina continues to push the project and posted marketing materials on its website83 in June 2015.
Propane and Butane Export Terminal
In April 2014, the Port of Longview announced a one-year option agreement with Haven Energy to explore a proposed propane and butane rail terminal. Haven expected construction to take 21 months84 after the approval of a lease and permits. But after the Port Commission considered the scope of the proposal, it delivered a 3-0 rejection in March 2015. The commissioners’ votes bucked the Port chief executive’s recommendation to approve the project. They were clearly responding to the primarily negative feedback85 they received at a public hearing, as well as other concerns raised by some labor86 and environmental87 advocates.
What’s next for the thin green line?
The next year may prove the most challenging yet in the contest between big energy companies and Northwest communities. In Washington, officials will weigh plans for at least five oil-by-rail terminals and two major coal terminals, while British Columbia’s leaders evaluate a third coal terminal and at least one of two large crude oil pipelines.
“The next year may prove the most challenging yet in the contest between big energy companies and Northwest communities.”
Plus, another fight is brewing, one that is in evidence in both B.C. and Oregon, but that we did not cover here: the natural gas industry’s plans to construct at least six new export pipelines and liquefaction sites from Prince Rupert to Coos Bay. Although Cascadia has so far proved largely resistant to these plans, the outcomes of each project remain highly uncertain.
Finally, it is likely that in 2015 and 2016, the Northwest will face yet another tsunami of export schemes as new developments in the energy industry make available light hydrocarbon fuels and petrochemicals in unprecedented volumes. The defunct propane-by-rail proposals at Longview and Portland were the leading edge of this wave, and these projects may wash up in different locations. This trend will also include a new xylene processing unit at an Anacortes refinery,88 new methanol refineries in Oregon and Washington, a so-called biorefinery at Longview,89 and other projects not yet in public view.
Though each project proposal is unique, they observe a few fundamental similarities: they represent a transformation of an environmental leadership region into a globally consequential center for shipping carbon fuels. Sitting squarely astride the most economical and, in some cases, the only possible path from the vast energy reserves in the interior of North America to the world’s fastest growing energy markets in Asia, decision makers in the Northwest are in an unprecedented position. To a large extent, Cascadia now will call the shots for the western coal industry, huge swaths of fracked oil and gas development, and Canadian tar sands extraction — to say nothing of the global climate implications of unleashing five Keystone XLs’ worth of carbon fuels90 into foreign markets.
This article originally appeared on the Sightline Institute (sightline.org) and is reprinted with permission of the authors.