Overshadowed by the hubbub of inauguration week, a January 19 decision by an obscure federal agency quietly augured a bleak future for U.S. energy exporters.
The Federal Energy Regulatory Commission (FERC) ruled against Pembina, a midstream oil and gas company, in its appeal of an Oregon state-government ruling denying the company a permit to export liquefied natural gas (LNG). Pembina’s proposal for a project at Jordan Cove, 150 miles southwest of Portland, includes a pipeline, liquefaction plant, and shipping terminal. It would be the first Pacific-facing LNG export site in the lower 48 and received a provisional green light from FERC itself in March 2020, but its hopes now appear to be dashed.
The economic value of a project like Jordan Cove is obvious. The majority of the world’s population and its new energy demand are in Asia. Existing U.S. LNG-export facilities are all situated on the Atlantic and Gulf Coasts, which, while well situated for growing trade with Europe, leaves Asia-bound cargos bottlenecked at the increasingly congested Panama Canal. A shipment from Jordan Cove could reach Tokyo in just nine days, according to Pembina, roughly 50 percent faster than LNG cargos sent from Gulf Coast terminals. This winter’s cold snaps have driven demand for LNG in Asia sky-high, but canal constraints have left cargos languishing in the tropics for weeks as they await passage. The promise of Jordan Cove has never been more apparent.
Contrary to the claims of the project’s opponents such as the Niskanen Center’s David Bookbinder, Jordan Cove would provide an export outlet for gas producers from across the Western United States. Bookbinder claims that the project’s only justification is profit for Canada-based Pembina. “Ultimately,” he told an Oregon public radio station last year, “this is all for the benefit of a Canadian corporation and for moving Canadian natural gas.” If true, that might mean the Jordan Cove project is not in the U.S.’ public interest. But the claim is false.
The project would connect Jordan Cove via a new pipeline to an existing natural-gas hub at Malin, Ore. The Malin hub would link the region and enable producers from states such as Colorado and Wyoming to access the Asian market. Wyoming governor Mark Gordon described the project as “vital” for his state, and Colorado’s Mesa County commissioners said that Jordan Cove would “help stabilize the economies of rural communities in both Oregon and Northwest Colorado for decades to come.”
The Niskanen Center’s opposition to the use of eminent domain to push the project through is valid, but its assertion that there would be no benefit to Oregonians is mendacious. To take just one benefit, the project developer entered an agreement with Coos County to pay $12 million annually toward a Community Enhancement Plan. Further, Jordan Cove would generate thousands of construction jobs in the near term and hundreds of long-term jobs to staff its facilities. Indeed, Jordan Cove exemplifies the sort of project Coos County envisioned when it established its enterprise-zone program.
Of course, the real resistance to Jordan Cove is over climate. No matter how respectful of the local environment, no matter how beneficial to the community, Jordan Cove was bound to face fierce opposition because natural gas violates our new climate catechism. Building a pipeline and export terminal abets global warming — or so the argument goes.
What the opponents of Jordan Cove misunderstand is that LNG shipped to Asia would largely serve their cause. Shipping gas across the Pacific increases the likelihood that China and Japan will reduce their reliance on coal. China, despite its pledge to be carbon neutral by 2060, burns a quarter of all the coal used globally, despite making up less than 20 percent of the world’s population. Japan, wary of nuclear energy after the fiasco at Fukushima Daiichi, now uses more coal than it did 20 years ago. The U.S., on the other hand, has reduced coal consumption by 45 percent since 2008 thanks to domestic production of natural gas. But to Oregon’s activists and those taking control of U.S. policy this month, no analysis beyond “hydrocarbons bad” is admissible.
Even accepting the premises of climate activists, exporting natural gas to Asia is a positive. That’s why Canada — which has a carbon tax — is building 13 LNG terminals in British Columbia alone. Market conditions, such as they are, provide an opportunity for North Americans to export an in-demand commodity. Remove Pompeiian references to “molecules of freedom” and the economics remain.
But whereas the Canadian government has seized the opportunity, the blue wall of legislatures and governors that control California, Oregon, and Washington State have left North American infrastructure developers scrambling. The result is convoluted arrangements such as the deal between San Diego-based Sempra Energy and Mexico to export LNG from a terminal in Baja California. The terminal will be Mexico’s first for LNG export; it will receive American natural gas by pipeline and ship it to Asia from just 40 miles south of the U.S. border.
With allies now taking up posts in the nation’s capital, governors Newsom, Brown, and Inslee have no counterweight against their power over the states of the U.S. interior and the energy producers operating within them. Asia is hungry for natural gas and U.S. reserves are plentiful, but a $10 billion project is now on ice. Thanks to misguided climate politics, a golden energy-export opportunity is slipping away.