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Major US methanol export facility canceled

15 June 2021 Kevin Adler

Northwest Innovation Works-Kalama (NWIWK) announced 11 June it is abandoning its attempt to obtain approval from Washington state to build a methanol production and export facility at the Port of Kalama.

"In light of the recent Washington Department of Ecology decision to deny the shoreline conditional use permit, the regulatory environment has become unclear and unpredictable. NWIWK is temporizing its development activities to assess the new regulatory and political landscape and determine an appropriate path forward," the company said in a press release.

The termination of the 3.6 million mt/day methanol export facility, which was proposed in 2014, is the latest example in the US of a costly, high-profile fossil fuel project that has run into strong opposition from environmental groups who challenged both its GHG emissions and its economic value.

Last week, TC Energy announced it was canceling the Keystone XL crude pipeline, as it was unable to obtain a Presidential Permit to cross the US border from Canada. In 2020, Washington state denied the Millennium Bulk Terminal a permit to export coal from a new terminal at the mouth of the Columbia River, a decision which the states of Montana and Wyoming have appealed to the US Supreme Court under the Commerce Clause.

The $2-billion gas-to-methanol Kalama plant would have used up to 320 million cubic feet/day of natural gas delivered by a new pipeline, the Williams Kalama Lateral Project. The methanol plant and the pipeline received the necessary federal permits, including a pipeline permit from the Federal Energy Regulatory Commission. However, the US District Court for the Western District of Washington in November 2020 vacated the US Army Corps of Engineers' permit for the export terminal, representing another permitting hurdle that the facility would have to leap (see Columbia Riverkeeper, et al. v. US Army Corps of Engineers and National Marine Fisheries Service, No. 19-6071).

Environmentalists cheered the developer's decision. "Kalama was a disaster waiting to happen, so this is a crucial victory for our climate and the people and wildlife along the Columbia River," said Jared Margolis, a senior attorney at the Center for Biological Diversity. "We need to move away from these climate bombs that would lock us into an unsustainable future and pollute the air and water we all need to survive."

Opponents pointed to a draft supplemental environmental impact statement by the Washington Department of Ecology in September 2020 that the facility would be one of the 10 largest emitters of GHGs in the state, accounting for 1% of the state's GHG emissions each year. The department denied the request for the shoreline conditional use permit in December 2020, and it declined an appeal a month later, citing "significant environmental impacts from upstream emissions; emissions produced by the facility; downstream emissions from transporting the methanol to its intended destination in China; and emissions associated with the final end use of the product."

The Department of Ecology found that the full lifecycle—production and transportation of natural gas, the methanol manufacturing process, and then exporting by ship to Asia—would generate 4.8 million mt of CO2-equivalent annually. More than 1 million mt/year of the emissions would occur within Washington state. Given the project's anticipated 40-year operational lifespan, by 2050 the plant and terminal would be emitting 20% of the state's allowable carbon budget of 5 million mt of CO2e, which was created by a law passed by the legislature in 2020. (For context, the state's CO2e emissions in 2018 were more than 90 million mt.)

Local supporters of the project expressed frustration over the lost economic opportunity. "This was the kind of innovative, job-creating project that originally was supported by the Governor. Jay Inslee stood on Kalama's waterfront to tout the climate benefits of the project, then turned on us when he ran for president," said Port Director Mark Wilson in a statement. "All the state has accomplished is to encourage more severe greenhouse gas emissions outside the borders of Washington and declare a false climate victory."

The methanol from the plant would have been exported to chemical manufacturers and other industrial users in Asia, and its positive environmental impact globally was one of its selling points. In its permit applications, NWIWK said the gas-based methanol would reduce carbon emissions by up to 90% if it was used in place of methanol produced from coal.

One study conducted for NWIWK, the Port of Kalama, and Cowlitz County by Life Cycle Analysis found that, on a global basis, the plant would reduce CO2e emissions by as much as 6 million mt per year, due to the substitution of methanol produced from coal. That study was accepted by the Department of Ecology as part of its environmental analysis.

According to the permit applications, the export terminal would have been used to load approximately 72 cargoes per year for shipping to Asia.

"The project aimed to convert natural gas into methanol for use in manufacturing plastic products like computers, clothing, plywood, and medical devices," said the Port of Kalama. "Northwest Innovation would have used a new technology to manufacture methanol, thereby meeting consumer needs while helping the world meet carbon-emission reduction targets."

Advanced technology, such as electrification of processes, plus the purchase of carbon offsets, would have mitigated all of the in-state carbon emissions, according to NWIWK, but not the emissions outside Washington state.

The Army Corps' review of the project affirmed a net reduction in GHG emissions because of displacement of coal-based methanol, but that review did not incorporate upstream GHG emissions from the production of the natural gas and the shipping of the methanol to its ultimate destinations.

Port Commissioner Troy Stariha blamed the corporate withdrawal on state agencies' demands, which he said "shifted constantly over the course of the [seven-year] process."

He added: "NWIW did everything right, and their understandable decision to pull out of this project is a real loss for families trying to make ends meet, the future of economic development in our state, and our environment."

NWIWK is owned by Shanghai Bi Ke Clean Energy Technology Co., which is a subsidiary of Chinese Academy of Sciences Holding Company. In statements to US and Chinese media over the last few years, Wu Liben, chairman of Chinese Academy, said the imported methanol might have been used to power vehicles as well as in plastics manufacturing, though the original plan indicated the plastics industry was the sole target market.

In a presentation to investors in 2018, NWIWK said demand for methanol will be driven both by the drive for lower emissions from vehicles, especially in China, and in marine applications. It said demand would increase from about 120 million mt/year in 2020, primarily for industrial uses, to as much as 720 million mt/year in 2035.

Posted 15 June 2021 by Kevin Adler, Editor, Climate & Sustainability Group, IHS Markit

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