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New Direction for Natural Gas: Northwest by Drew DeSilver Seattle Times, November 15, 2005

PUGET ISLAND, Wahkiakum County -- The energy future of the Pacific Northwest is headed straight for Frans and Mieke Eykel's backyard.

The Eykels have lived on this low-slung, bucolic strip of land in the Columbia River for 11 years. Frans, a retired aviation maintenance engineer and former Seattleite, says they can identify the different vessels that ply the river -- grain barges, cruise ships, oil tankers -- by sound alone.

But the prospect of new ships -- transports carrying millions of gallons of liquefied natural gas (LNG) to a proposed terminal across the Columbia -- has the Eykels fuming.

Four separate LNG terminals have been proposed for the mouth of the Columbia River, prompting opposition from many nearby residents. Mieke Eykel said she can't believe "they could even think about putting something so ugly in such a beautiful place."

But the Eykels may be fighting an even larger battle than they realize. Encouraged by soaring prices, projections of increased demand and recent changes in federal law, the natural-gas industry has big plans for the Northwest:

• For the first time in 20 years, test wells are being drilled in the high, dry country of Eastern Washington. EnCana, Canada's largest gas producer, is leading the way; others have leased vast tracts nearby.
• A Canadian start-up has drilled five test wells in the Coos Bay area in Oregon, looking for gas. Another company has proposed an LNG terminal there to unload and store the liquefied fuel before it's pumped into gas pipelines.
• Puget Sound Energy is in the midst of a major expansion of its Jackson Prairie gas-storage field near Chehalis, already the third-largest such facility in the world.
• Energy Northwest, formerly the Washington Public Power Supply System, has proposed building a $1 billion complex at the Port of Kalama, in Cowlitz County, that would synthesize gas from crushed coal and use it to generate electricity. Many of these projects could be done in by politics, economics or both. But the Energy Policy Act passed this summer, which gives federal rather than state regulators the main authority over siting decisions, increases the odds that new LNG terminals will be built.

"The Northwest is competing with other markets for natural gas," said Kent Robertson, a spokesman for San Jose, Calif.-based Calpine, a national operator of gas-fired power plants that has two Pacific Northwest sites. "The pipelines that serve the Northwest have the ability to send gas to Chicago, too."

Demand is growing

For decades, this region has enjoyed relatively cheap natural gas because it is one of the few markets connected by pipeline to two major gas-producing areas: western Canada and the Rocky Mountain states.

Almost 60 percent of the gas used in the region generates electricity or powers paper factories, food-processing plants and other industrial facilities; less than a quarter of it heats homes or cooks food.

After peaking in 2001 during the West Coast power crisis, regional gas demand fell as the Northwest aluminum industry all but vanished. Now gas use is rebounding, driven by population growth and economic recovery.

The Northwest Gas Association, which represents major gas utilities and pipeline operators, expects total gas use in Washington, Oregon and Idaho to hit a new peak in the 2006-07 heating season. And the association projects that consumption will increase 19 percent by 2009-10, driven mainly by power generation and home use.

Not everyone agrees. The Northwest Power and Conservation Council, a federally authorized regional planning agency, thinks the high cost and price volatility of gas will limit its use in power plants. Terry Morlan, the council's director of power planning, says conservation and alternative energy sources, such as wind and coal gasification, will also help meet energy demand. Meanwhile, Northwest gas exploration is stirring after two decades of slumber.

The hunt for gas

Calgary-based EnCana, which specializes in producing gas from unconventional sources, has leased 800,000 acres of private and public land in and around Grant County, drilling one 14,000-foot test well and planning at least one more, spokesman Alan Boras said.

Back in the 1980s, Shell found gas in the Columbia basin, but not enough to extract commercially. Since then, Boras said, technology has advanced to make it easier, and cheaper, to recover gas from the tight sandstone beds beneath much of southeastern Washington.

Speculators have been snapping up oil and gas leases near where EnCana is drilling. More than 175,000 acres of federal land has been leased in Grant County alone in the past three years, according to Bureau of Land Management records. In Coos Bay, Vancouver, B.C.-based Torrent Energy is searching for coalbed methane, a form of natural gas that nestles in coal seams. Torrent has leased 99,000 acres of public and private land in the Coos Bay area. With an Australian partner, it is leasing an additional 100,000 acres for exploration in Southwest Washington from Weyerhaeuser.

Early this month, the state Department of Natural Resources (DNR) leased 65,000 acres of state land in the Columbia basin for gas and 16,500 acres near Chehalis for coalbed methane exploration.

"Industry is keenly interested in finding new accumulations [of gas], and the Columbia River basin has that potential," said Bill Lingley, DNR's chief geologist.

But, Lingley cautioned, exploration is a long way from production. "I think the odds of a commercial discovery are good, but I also think the odds of your readers getting into a traffic accident tonight are better."

Tankers and terminals

Another way to increase Northwest gas supply is to import it, in the form of LNG.

LNG is natural gas that has been cooled to 260 degrees below zero, condensing it into a liquid 1/600th the original volume. It can then be loaded onto tankers and shipped around the world to the highest bidder. Along the West Coast, LNG would most likely be imported from Pacific Rim nations such as Australia and Malaysia, and perhaps from Alaska as well.

Until recently, LNG wasn't economically competitive, but technological advances and high gas prices have changed that. The federal Energy Information Administration projects that LNG imports will grow more than eightfold by 2025, and account for a fifth of the nation's gas use.

One LNG terminal could supply 1.5 billion cubic feet a day -- enough to meet the entire current demand from the three Northwest states, said Gary Coppedge, vice president of permitting and development for Northern Star Natural Gas. Northern Star is developing the Bradwood LNG terminal -- the one that would be a half-mile across the Columbia from the Eykels' house.

By creating a third major gas source for the region, besides Canada and the Rockies, LNG would bring down prices and level out the price peaks and troughs, Coppedge said.

"We will be putting very competitively priced natural gas into the Pacific Northwest," he said.

But new LNG terminals have proved hugely controversial along the Columbia and around the nation, with opponents assailing them as eyesores, ecological threats and potential targets for terrorists.

"What this would do is turn this stretch of the river into an industrial ditch," said Ted Messing of Brownsmead, Ore., one of the activists fighting the proposed LNG terminals on the Columbia.

Of the four LNG proposals, Bradwood is the only one that has made a formal proposal to the Federal Energy Regulatory Commission. It could handle two to three tankers a week, each carrying 26.4 million to 66 million gallons of LNG.

LNG would be piped to two onshore storage tanks, gradually warmed to a gaseous state, then sent through a proposed 35-mile pipeline under the Columbia to Longview, where it would connect with the existing pipeline that runs from the Canadian border to Medford, Ore.

Perhaps the biggest fears of the LNG opponents on Puget Island are a gas explosion or tank rupture that could release a cloud of combustible natural gas. A January 2004 explosion at an Algerian LNG production plant killed 27 people. The U.S. now has one LNG production plant, in Alaska. There are four terminals for LNG imports on the East and Gulf coasts, but none on the West Coast.

A report on LNG ship safety released last December by Sandia National Laboratories noted that in 40-plus years there has never been a major shipboard accident. If there were a major LNG release, the report said, the biggest danger would be to people within a third of a mile; the risks would be considerably lower beyond a mile.

"The LNG industry is one of the safest industries the United States has ever seen," Coppedge said. "There hasn't been an accident that has impacted the public since 1946."

But, opponents say, since Puget Island's 800 residents -- many of whom are older and don't drive -- are connected to the mainland by one narrow bridge, a major accident would leave them exposed and vulnerable.

"You'd be doing the same thing they did in New Orleans, sacrifice the old and disabled," said Frans, 69. "If that happens, forget it -- I'm moving to Canada."