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Oregon Energy Report: LNG Not Needed

It would be less expensive and less carbon-intensive to get additional future natural gas supplies via interstate pipelines from the Rocky Mountains rather than imported liquefied natural gas (LNG), according to a recent report from the Oregon Department of Energy. Rockies supplies can be produced with significantly less life cycle greenhouse gas (GHG) impact than gas from LNG imports, said the report, which was ordered by Gov. Ted Kulongoski.

Report authors concluded that the Federal Energy Regulatory Commission (FERC) needs to complete a review of all the options for the Pacific Northwest, and that at this time a case cannot be made for siting a new LNG facility in the state. It was also concluded that gas demand will continue to rise in the state during the next 20 years and new supply sources will be needed.

When he wrote FERC in February seeking a more complete review of alternatives to the state's proposed LNG projects, Kulongoski asked the state energy unit to review three areas: Oregon's future demand for gas, alternatives for providing the state's gas and LNG's life cycle carbon emissions compared to coal and non-LNG gas sources.

There are at least three active proposals for building LNG receiving facilities in Oregon, and none of the backers had any immediate reaction to the Oregon energy report. A Portland-based spokesperson for the most advanced project -- NorthernStar Natural Gas' Bradwood Landing project along the Columbia River -- told NGI late Thursday that it was taking the company longer to digest the report, and in the meantime he reiterated statements by NorthernStar's Senior Vice President Joe Desmond, including one in which he committed to meet all Oregon state requirements whether or not the lead federal regulators require them.

Conceding that Oregon's report accurately describes the need for natural gas in the region and the increasingly important role that natural gas will play to meet Oregon's future clean energy needs, Desmond said the report represents "a snapshot in time and is not a forecast of future market conditions. Accordingly, there are limits to the types of conclusions that can be drawn from such an analysis."

NorthernStar said several assumptions regarding alternative domestic pipelines have already changed since the report was being prepared, and said some statements are based on what Desmond called "erroneous information." The U.S. energy situation is "volatile and subject to sudden change," wrote Michael Grainey, director of the state's energy department, in a letter sent with the report to the governor. He said his staff evaluated the western U.S. gas markets and examined almost 40 federal, state and industry sources.

"Decisions made that commit major financial and environmental resources may prove wise or imprudent in the future, based on totally unforeseen and unpredictable circumstances," Grainey said. "At minimum, our findings emphasize the need for FERC to undertake the comprehensive review that fully weighs the economic and environmental costs and benefits of all the competing proposals."

Regarding demand, the report concluded that a new pipeline from the Rocky Mountains or one LNG terminal would "more than meet" the state's increasing natural gas needs. Oregon imports all of its natural gas from either Western Canada or the Rockies now, primarily for firing electric generation plants, industrial loads and residential heating.

In assessing the alternatives, the report concluded that LNG might lower the price of pipeline supplies to an Oregon utility, but that was unlikely, because it said Pacific Basin LNG is "not currently competitive from a price standpoint with U.S. and Canadian-produced natural gas."

On the question of life cycle GHG emissions, Oregon's report concluded that the liquefaction, shipping and regasification steps make LNG more carbon-laden than pipeline delivery of western gas directly to power plants. Analysts used shipments of LNG of more than 10,000 nautical miles from the Middle East as part of its life cycle emissions assessment, noting that forecasts for future growth in LNG were centered on that region.

More than 80% of Oregon's natural gas consumption goes for commercial, industrial and electric generation plant uses; 18% goes to residential loads. In 2006, 220 Bcf of natural gas were consumed in the state, according to the energy department report. Industrial customers and electric generators used 65% of the gas. In the same year, 2006, some 770 Bcf came into Oregon through various interstate pipelines, but 530 Bcf of that gas was shipped through to California.

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