How climate and business woes are sinking a natural-gas project

The Trump administration recently touted its approval of America’s first terminal on the West Coast to export liquefied natural gas. There’s just one problem: It probably won’t be built.

Why it matters: The project in southern Oregon faces political and business hurdles serious enough that those who are following it say it will be shelved. Its problems embody the struggles facing a once-promising sector that's now struggling under the weight of the pandemic and more.

What they’re saying: “It’s not going to be built,” Sen. Jeff Merkley (D-Ore.) told Axios in a recent interview. “I’ve talked to a whole number of folks — several people who have been deeply involved in international finance of energy projects — and they don’t believe that the company can lock down the sales needed to justify the $6 billion investment.”

• He declined to share who he has spoken with, but independent analysts agree with that general assessment.
• “The circumstances around Jordan Cove have materially changed and the advancement of this project seems unlikely,” said Rob Rains, senior energy analyst, Washington Analysis.
• Rains cited permitting problems, including a denial of a vital permit in February, land issues, and growing opposition to the project among the state’s politicians (like Merkley).

For the record: The company behind Jordan Cove, Canada-based Pembina Pipeline Corporation, declined to comment. It will provide an update on the project during its second-quarter earnings call with investors this Friday.

Driving the news: In early July, Energy Secretary Dan Brouillette announced a key federal approval of the project. At that time, Brouillette said it “encapsulates what the Trump Administration has been working hard on for the past three years — providing reliable, affordable, and cleaner-burning natural gas to our allies around the world.”

• Last week, President Trump announced an Energy Department policy change that would grant export approvals for liquefied natural gas (LNG) projects out to 2050.
• Although that move could help those already operating, it “doesn’t alter the outlook for a terminal that is trying to get off the ground” like Jordan Cove, said Erin Blanton, who leads the natural-gas program at Columbia University's Center on Global Energy Policy.
• Industry officials have been trying for the last 15 years to export LNG from America’s West Coast. Its closer proximity to Asia’s energy-hungry markets is a key advantage of Jordan Cove, according to Fred Hutchison, president and CEO of LNG Allies, a trade group representing the sector.
• The project has faced competition from newly operating LNG export terminals on the west coasts of Canada and Mexico.

The big picture: With America becoming the world’s biggest producer of oil and natural gas, companies have raced to build massive, multibillion-dollar facilities to liquefy and ship natural gas all over the world. Several have begun operating in recent years, leading to a boom in LNG exports.

Where it stands: But more than a dozen projects are still either awaiting government approval or not yet complete, according to government data.

• Although it’s not uncommon for fewer projects to be built than are initially proposed, today’s circumstances are uniquely bad, analysts say.

• Trump’s ongoing trade war with China (a huge market for the fuel) together with the pandemic, which is sapping global energy demand, is creating a one-two punch that has deflated a sector that was promising just a couple of years ago.

How it works: Jordan Cove’s struggles reflect the convergence and evolution of two national trends: Democrats and environmental activists increasingly opposed to natural gas, and oil and gas producers drilling their way into abundance — and therefore a glut and financial trouble.

• Several years ago, the project was supported by most of the state’s leading Democratic politicians. Today, it’s opposed by most of them.
• It had a window of potential approval in 2014, "but now it is past,” Rains said.
• Other liberal states have rejected other fossil-fuel infrastructure projects in recent years on similar grounds, including New York and Washington state.

The intrigue: In our interview, Merkley said deciding to oppose the project — which he did in 2017 — was one of his “toughest examinations. I knew how much this infrastructure could do to that part of my state. I knew how many good-paying jobs would be in a $6 billion–$8 billion project.”

• Ultimately, though, he said his concerns about natural gas’ impact on global warming, along with other concerns regarding the company, outweighed the imminent job creation.
• The state’s other senator, Democrat Ron Wyden, once praised a federal government approval of the project in 2014, only to oppose it in March of this year.

What we’re watching: Whether the company pulls the plug — more likely when, given what I just laid out here — and which other companies seeking to export LNG do the same.