China is aiming to construct and operate three methanol refineries in Oregon and Washington in a move that would turn the Northwest into the nation’s leading producer and exporter of methanol. The Chinese officials promoting the projects are working in partnership with senior US officials, including Washington Governor Jay Inslee.
A new company called Northwest Innovation Works—an offspring of the Chinese Academy of Sciences Holdings, which develops and markets new technologies—has hatched plans to develop three methanol production plants with storage facilities in the region. Many analysts predict that methanol use will increase dramatically in the coming years and industry backers argue that it presents an economic opportunity. Yet methanol is little understood by most of the public, and its production raises some risks and concerns.
In this article and a companion piece to follow, Sightline will explore some of the fundamentals about these new methanol facilities—and what they mean for the Northwest.
The nickel summary
If they are built, the Northwest refineries would receive US and Canadian natural gas transported by pipeline to newly-built facilities in Kalama and Tacoma, Washington and Clatskanie, Oregon where the natural gas would be converted to the chemical methanol, sometimes known as wood alcohol. The methanol would then be shipped to Asia, where it will be used primarily as a “feedstock”—the raw material—to create olefins, petrochemicals that are in turn used to make polymers for the manufacture of plastics.
The three plants planned for the Northwest would produce a combined 10.8 million metric tons annually (mmta), far more than the entire 3.5 mmta methanol stream that is currently produced by the seven operating methanol facilities nationwide, according to Dave McCaskill at Argus DeWitt. Construction could cost as much as $5.4 billion—around $1.8 billion per facility—and the project backers hope to begin initial operations in early 2019.
Of these three proposed projects, the refinery at Kalama is the furthest along.
In April 2014, the Port of Kalama awarded a lease agreement for the refinery to Northwest Innovation Works along with a separate three-year lease agreement for the company to locate its corporate headquarters in Kalama. In a spring 2014 newsletter, the Port boasted about the project creating 1,000 construction jobs during the three year build-out of the site plus 200 ongoing jobs during operations, as well as reducing carbon emissions by producing methanol from natural gas, rather than from petroleum and coal. Once both phases of the plant are completed, the facility operators will aim to produce 3.6 mmta of methanol. The finished product will be stored in 200,000 metric ton storage tanks and then transferred by pipeline to a new deep-draft marine terminal on the Columbia River—a new concrete dock, plus dredging the river bottom to accommodate larger ships—that would see 3 to 6 vessel calls per month once the plant is operational.
Like most major industrial projects, the facility plans will undergo a review process requiring state officials to prepare and assess an Environmental Impact Statement (EIS), a process that provides several opportunities for public comment. The first phase of that process, the “scoping” document that outlines the parameters of the review, was issued in January 2015. Officials outlined key features of the project in a scoping meeting presentation. The second phase of the review process, publication of a draft EIS, is slated for mid-2015.
In addition, Northwest Innovation Works will have to secure an air permit, a water quality permit, and a stormwater discharge permit from the Washington Department of Ecology. Provided that the plans pass muster with regulators over the 18- to 24-month review period, the site would then be issued a 30-year lease on the Kalama property. The Port hopes to complete the permitting processes by early 2016, beginning construction of the first phase immediately thereafter. On its website, Northwest Innovation Works says that it hopes to complete a first phase in early 2018 and a second phase by early 2019.
The Kalama Refinery would be fed by a new 3.1-mile, 24-inch diameter natural gas pipeline that will divert natural gas from the existing Northwest Pipeline. As with other pipelines, the project must first clear several regulatory and permitting hurdles, the most significant of which is approval by the Federal Energy Regulatory Commission (FERC). The pipeline backers submitted initial paperwork to FERC in 2014, and were issued an Environmental Assessment report on July 13, 2015. Regulators opened up a 30-day public comment period extended until August 12th, during which time members of the public were able to provide formal feedback on the project’s potential impacts, alternatives to it, and measures to avoid or lessen any harms associated with it. If the pipeline and the methanol plant projects are both approved, construction of the pipeline would begin in 2017.
In Tacoma, Northwest Innovation Works has already obtained a 30-year lease agreement with the Port of Tacoma for a $1.8 billion, two-phase methanol plant very similar to the one in Kalama, and the project plans are now undergoing an EIS review process that may take up to two years. Although the Tacoma project is not as far along in its review process, Northwest Innovation Works hopes to adhere to the same schedule as at the Port of Kalama, with construction of phase one beginning in 2016 and ending in 2018, and a second phase completing in 2019.
As in the case of the Kalama project, natural gas would arrive at the Tacoma refinery via a newly constructed lateral pipeline, but the firm is still involved in discussions with gas suppliers to reach an agreement on building this new segment.
The third Northwest methanol facility is planned for Port Westward, a publicly owned industrial park near Clatskanie, Oregon. In February 2014, the Port of St. Helens and Northwest Innovation Works signed an Option to Lease agreement for the site. According to Paula Miranda at the Port, both Northwest Innovation Works and the Port will conduct due diligence exercises, which may eventually result in a lease agreement between the two parties. This project is the least developed of the three and does not yet have any permits secured.
Although the Port Westward project is not far along its path to establishment, Northwest Innovation Works recently published a FAQ-style document that hinted at an interest in even more methanol development than is already underway, perhaps with yet another site or expansions to the existing plans for Port Westward and Kalama.
What are the risks and benefits of methanol refining?
In its Port Westward FAQ, Northwest Innovation Works acknowledges that methanol production can have potentially negative effects. These plants produce waste that includes nickel, copper, and zinc oxide from the catalysts used in the refining process; air pollution that includes carbon dioxide, carbon monoxide, nitrogen oxide, sulfur dioxide, volatile organic compounds, and fine particulate matter; and roughly 200 gallons of wastewater per minute.
Methanol is flammable in liquid and gas states, and it is considered highly toxic to humans and animals. The company argues, however, that according to a 2011 study from Duke University, “methanol poses little long-term threat to ecosystems because it is biodegraded quickly in both aerobic and anaerobic conditions and therefore is unlikely to accumulate in the environment.”
“Methanol is flammable in liquid and gas states, and it is considered highly toxic to humans and animals.”
Each of these facilities would use more than 2,500 gallons of water per minute for cooling and gas forming, 90 percent of which is consumed during the process or lost as vapor to the atmosphere. The Port Westward plant alone would draw as much as 2,750 gallons per minute from the Columbia River. To run the refinery, the plant operators also need 200 megawatts of electricity per day, and they will combust 30 percent of the natural gas—about 96 million cubic feet per day— that enters the facility for use in chemical reactions.
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The project backers argue that Northwest methanol production is good for the environment. They reason that exporting US methanol made from natural gas will reduce China’s overall dependence on coal and petroleum, the primary inputs currently used to produce methanol in China. In fact, Northwest Innovation Works claims that methanol from natural gas rather than coal reduces carbon emissions by 70 percent.
What is the political landscape for these projects?
On June 24, 2015, Washington Commerce Director Brian Bonlender signed a Memorandum of Understanding with the Chairman of the Chinese Academy of Sciences Holdings, pledging cooperation on opportunities to develop clean and low-carbon energy technologies. And Washington Governor Jay Inslee has said, “I’m very happy that the port and NW Innovation Works have reached this milestone.”
The Governor frames the development as part of a transition to a clean energy economy.
Other elected officials have also expressed interest in the projects for the sake of lowering carbon emissions relative to current oil and coal methanol production. Other local leaders, including Cowlitz Economic Development President Ted Sprague, Port of Kalama Commission President Alan Basso, Director of Economic Development for Pierce County Denise Dyer, and Port Commissioners from Kalama, Tacoma, and St. Helens, to name a few, have said they are excited at the job prospects associated with these methanol projects. In Tacoma, for example, many of these individuals voiced their support during a May 1, 2014 public comment period at a Port of Tacoma Port Commission meeting.
“Methanol is little understood by most of the public and its production raises some risks and concerns.”
At the same meeting, however, many Tacoma residents expressed a range of concerns including the potential for catastrophes, the proximity of the methanol site to homes, carbon and other chemical emissions, implicit support for fracking to extract natural gas, and a “lack of notice and dearth of information.” At a separate event at Port Westward on September 24, 2014, when a representative of Northwest Innovation Works failed to show up to present updates on the proposed project, many community members voiced similar concerns to those of Tacoma’s residents.
So far, the primary dissent from advocacy groups has come from Columbia Riverkeeper and the Northwest Environmental Defense Center. In December 2014, these NGOs submitted 319 pages of comments to the FERC and the state EIS scoping processes at Kalama, urging “the Port to prepare an EIS that fully and accurately discloses the wide reaching impacts of the proposed methanol export facility.” They also distributed published a list of five landscape-changing impacts associated with the construction of Northwest Innovation Works’ methanol plant at Kalama.
Update: September 25, 2015: After this article was published, the Seattle Times’ Hal Bernton reported that the Tacoma methanol refinery proposal will double in size.