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News / Clark County News

Inslee’s early support of Kalama methanol plant has him in pickle

By Zach Hale, The Daily News
Published: February 19, 2018, 7:43pm

LONGVIEW — On a sunny day in August 2015, Gov. Jay Inslee stood in a grassy park next to the Port of Kalama and extolled a plan to build one of the world’s largest natural gas-to-methanol plants on the banks of the Columbia River.

Inslee was flanked by a gathering of local politicians, government workers, and executives from Northwest Innovation Works, the Chinese-backed company behind the $1.8 billion project.

“This partnership, I think, highlights China’s growing confidence in the people in the state of Washington,” he said. “I think this bodes well for Washington’s future.”

The plant — which would use a new ultra-low emissions technology to make methanol for plastics manufacturing — “moves our clean energy future forward at a very rapid pace,” the governor said at the time.

But since then, Northwest Innovation Works has abandoned a similar proposed plant in Tacoma and its project at Port Westward, Ore., is in limbo. And after the state shoreline hearings board yanked two key permits for the Kalama plant last fall, the Port of Kalama now is pursuing an additional environmental review for the project.

Inslee’s full-throated support for the project, meanwhile, has turned to measured caution.

“As with any project like this, it will need to go through a rigorous environmental review process and the governor’s office will examine it then,” spokeswoman Tara Lee said in a statement to The Daily News earlier this month. “It is unlikely that we’d go through an evaluation prior to that.”

The governor — who has won plaudits as a leader in the fight against climate change — now appears to find himself in a pickle. Northwest Innovation says the cutting-edge plant would displace China’s dirtier coal-to-methanol refineries, which emit roughly 90 percent more carbon than gas-to-methanol facilities. The project would also create 1,000 construction jobs, hundreds of permanent family-wage jobs and pump millions of dollars into a local economy that’s technically considered economically distressed.

But environmental groups say a full life cycle analysis of greenhouse gases related to the project will show that the plant would create far more emissions than originally estimated. In addition to local concerns about the project, they say the Kalama plant is inconsistent with a truly low-carbon future.

The project is now in the midst of an open public comment period on the proposed scope of a supplemental environmental impact statement, or SEIS, which ends March 1. The California-based firm hired to conduct the study, called Life Cycle Analysis & Environmental Consulting, is already planning to measure emissions related to the mining, transport and leakage rates of natural gas, as well as the export of methanol to Asian markets. The firm will also assess Northwest Innovation’s claim that the plant would lead to a net decrease in global greenhouse gas emissions compared to projected levels.

The findings of the SEIS are bound to raise a challenging set of questions.

Should this be the new standard the state applies to major fossil fuel projects? And should Washington — a state that Inslee is striving to position as a global leader on climate change — hold companies accountable for emissions that occur outside of the state’s borders?

‘Carbon fudging’

Local pollution concerns aside, the most crucial question in the debate over the SEIS is whether Washington should hold itself responsible for greenhouse gas emissions that occur outside of the state’s boundaries, said University of Washington professor Aseem Prakash.

As a close observer of environmental politics for the past 25 years, Prakash has written extensively on the economy-vs.-environment debate.

While the project’s final environmental impact statement, or FEIS, estimated the plant would increase statewide emissions by 1.24 percent, the life cycle analysis that includes the fracking process would likely show total emissions would be much higher.

Indeed, a report published this week by the Stockholm Environment Institute’s Seattle office estimated that the project would be responsible for between 3.7 million to 7 million tons of greenhouse gas emissions annually — between two to six times higher than its original estimate. However, its authors acknowledged that most of the additional emissions would come from fracked natural gas wells and pipelines in British Columbia and Alberta, Canada.

“There’s a bigger issue here, and it’s that we don’t have a systemic method of carbon accounting,” Prakash said in an interview.

The Kyoto Protocol and Paris Climate Accords were based on countries reducing their own territorial emissions, but many countries have simply shifted industrial production to China to meet their emissions targets, he noted. That’s allowed many European countries to look good on paper, but it hasn’t really solved the problem.

“We are creating incentives for reducing territorial emissions, but we are not creating systems of reducing the consumption of carbon in consumer goods, so our carbon footprint doesn’t change. This is called carbon fudging,” Prakash said. “If you look at it from a political perspective or the perspective of Gov. Inslee, this is a huge problem. Even if this project is killed, fracking will not end.”

Prakash said Inslee’s second political challenge is signaling to blue-collar workers that he’s not their enemy.

“If he’s supporting Kalama and Cowlitz County, I think that’s quite reasonable,” he said. “As a politician who’s catering to multiple political constituencies, including blue-collar labor and people who want jobs, I can understand why he’s supported (the project),” he said. “That doesn’t make him less green. It makes him more pragmatic.”

Wrong course?

Of course, there are environmentalists who disagree with that assessment.

“For a project of this magnitude, there’s no good excuse to stick our heads in the sand and pretend there are not upstream emissions,” said Miles Johnson, an attorney with Columbia Riverkeeper.

Johnson noted the project would consume enough fracked natural gas to power about 1.57 million average homes — more than Washington’s entire industrial sector currently uses.

“It would be really hard to see how this project fits into Washington’s goals to reduce its own climate footprint,” he said in an interview. “It’s just not going to get us where we need to be in terms of climate.”

The Legislature has committed Washington to reducing its emissions by 1.7 percent per year. The goal is to reach a statutory target of 50 percent below 1990 emission levels by midcentury.

Under Inslee’s leadership, Washington has also joined the Pacific Coast Collaborative, a West Coast initiative with the shared goal of limiting greenhouse gas emissions to between 80 and 95 percent below 1990 levels by 2050.

In addition, lawmakers in Olympia are currently debating a statewide carbon tax that would place a $10 per ton price on carbon pollution.

The Stockholm Environment Institute’s report also questions Northwest Innovation’s claim that the Kalama plant would curb China’s demand for coal-based methanol, arguing the project could just as likely displace less carbon-intensive methods of manufacturing plastics.

“For (Northwest Innovation) to say that this plant in Kalama would be a reason for not building coal-to-methanol plants. … It just didn’t hold up to us when we looked at the industry reports,” said Pete Erickson, one of the SEI authors, in a recent interview.

Erickson said policymakers like Inslee need to consider whether major new industrial facilities are consistent with the lofty goals they have set.

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“If you’re really concerned about going to a deeply low carbon future, it looks like the Kalama plant would fall short in that regard,” he said.

‘The bleeding edge’

Nevertheless, the fact remains: Chinese demand for methanol is only projected to grow in the near-term.

By 2021, China will account for nearly 70 percent of global methanol demand, followed by North America at just 9 percent and Western Europe at 8 percent, according to a recent IHS Markit analysis.

“China has quickly become the dominant force in the global methanol market, and continues to be the focal point with its coal-based production setting the global market price,” said Mike Nash, an IHS industry analyst who helped author the report. “The impact of Chinese demand growth for methanol cannot be overstated.”

About two-thirds of China’s methanol is produced from coal, while the remainder is made from coking gas (a byproduct of steel production) and natural gas, according to the U.S. Energy Information Administration. China has abundant coal resources, and for more than a decade, the country has increased its capacity to manufacture methanol using coal as a feedstock.

“We actually have the ability to displace and move the needle in terms of market growth with methanol as the new feedstock for materials manufacturing,” said Vee Godley, Northwest Innovation’s chief development officer in Kalama.

Kent Caputo, the company’s chief commercial officer, said the company is confident because the supplemental review will also analyze the global market for methanol production and consumption.

“We feel pretty confident on the market impact we can have where you see exponential growth in reliance on coal and bend that curve,” he said in a recent interview.

Caputo added that the company is excited about being part of a life cycle analysis as policymakers in Washington debate the state’s policy on greenhouse gas emissions.

“We’re out on the bleeding edge here,” he said.

Meanwhile, a once-bullish Inslee is waiting on the results before deciding how to balance the state’s climate change goals against pleas from environmentalists and calls for economic growth in rural Washington.

“Where do we draw the line?” said Prakash. “I think that’s the crucial issue.”