A view of the Blair Waterway at the Port of Tacoma, where ships from Northwest Innovation Works would have departed for China. The company proposed to convert natural gas into methanol and ship it to China for eventual plastic production. Kate Martin kmartin@thenewstribune.com
A view of the Blair Waterway at the Port of Tacoma, where ships from Northwest Innovation Works would have departed for China. The company proposed to convert natural gas into methanol and ship it to China for eventual plastic production. Kate Martin kmartin@thenewstribune.com

Business

Tacoma methanol project canceled

By Kate Martin

kmartin@thenewstribune.com

and Derrick Nunnally

dnunnally@thenewstribune.com

April 19, 2016 06:01 AM

UPDATED April 21, 2016 10:00 PM

A proposal to build the world’s largest methanol plant at the Port of Tacoma is dead.

Amid widespread public criticism of the project and several port commissioners’ signals it had lost their support, the China-backed company behind the $3.6 billion project on the former Kaiser smelter site said Tuesday it had canceled the proposal, just days ahead of a key port vote on its lease.

Murray “Vee” Godley, the president of Northwest Innovation Works, cited regulatory issues for the cancellation. The company’s proposals to build smaller gas-to-methanol facilities at the Port of Kalama and near Clatskanie, Oregon, remain alive.

“Right now, we no longer have a project in Tacoma,” Godley said by phone.

Never miss a local story.

Sign up today for unlimited digital access to our website, apps, the digital newspaper and more.

In the interview and a statement on the company’s website, Godley said the project’s viability had been clouded by three factors: the length of the environmental review process, political uncertainty that included the suggestion of the area being rezoned and the complexity of developing a brownfield.

The environmental review process would require at least three more years to complete, Godley said.

“At the end of the day, to get where we need to be, we’d look at an investment of $30 million to $40 million to get through the environmental review process,” he said.

Godley said previously that the Kaiser site was a good fit for the methanol plant because of its status as an urban “brownfield” where pollution has only partly been cleaned up to prepare for industrial reuse.

But Tuesday, he said the remaining pollution on the site and the complex regulations involved in reusing it were more time-consuming than anticipated.

The port announced the project in May 2014 with statements of support from local and state officials. It has since elicited an outpouring of public opposition over the plant’s requirements for water, electricity and piped-in natural gas, along with the perception of pollution and safety risks of producing up to 7.3 million tons of methanol a year inside Tacoma city limits.

The city of Tacoma’s environmental review process that would have analyzed these concerns was never completed.

Godley said the protests did not cause the cancellation.

“Wherever you are siting a project like this, there’s controversy,” Godley said. “We support a process that gives voice to local citizens.”

A spokeswoman for Gov. Jay Inslee, whose administration held discussions beginning in 2013 to bring the methanol projects to Washington, called Tuesday’s cancellation announcement “the right decision” by the company.

“As the process continued, it became increasingly clear the community was frustrated by the lack of answers on important questions,” the spokeswoman, Jaime Smith, wrote in an email. “Jobs matter, but so does our commitment to safety, clean air and clean water.”

Northwest Innovation Works began as a collaboration between China’s government and the petroleum company BP and had planned three gas-to-methanol plants for the Pacific Northwest. The plants were proposed to draw from the region’s main gas pipeline to create methanol to ship to China for use in making plastics. BP has since sold its stake in the enterprise. Its largest share remains owned by the Chinese Academy of Sciences Holdings, an arm of China’s government.

After discussions that included a series of sites in Washington and Oregon, the plants for Tacoma, Kalama and Port Westward, Oregon, were announced in 2014. At first, all three were similarly-sized. In fall 2015, the company announced it would use cleaner emissions technology at all three and that the Tacoma project would double in size.

The Oregon project has been held up by dealings with its would-be neighbors, but the Kalama site’s environmental review finished its comment period Monday. The Tacoma proposal had formally been suspended since February, when a company statement said it had been “surprised by the tone and substance” of opposition to its proposal.

It had requested an extension of the feasibility portion of its lease, which would have ended April 30. The extension was to be voted on at a special Port of Tacoma commission meeting Monday in Lakewood. That meeting has been canceled, according to a port press release.

A loss of Port support

Godley said Northwest Innovation Works will make a final lease payment to the Port of Tacoma on April 29 of $1.464 million.

Had the lease continued to the next phase, the company’s rent would have increased from $8,000 to around $270,000 per month. It would have had to pay stormwater fees of around $160,000 per year, and the company would have lost the ability to back out of the lease, said Lou Paulsen, Port of Tacoma director for strategic operations projects.

Port of Tacoma commissioners Don Johnson and Dick Marzano said the company made the right decision to pull back from the lease.

Johnson said the company’s statements about the property’s poor condition are overblown.

“Anytime anybody wants to do something difficult, they come up with a good excuse,” he said of NWIW’s reasons for withdrawing from the lease. “We are not the least bit afraid of it (marketing the property). It’s a perfectly good piece of property. …

“They have not handled this process well and (withdrawing from the lease) is their option.”

Jason Jordan, the port’s director of environmental and planning services, echoed Johnson’s assessment.

“I don’t see any reason why the development could not have occurred because of remediation efforts on the former Kaiser property,” Jordan said.

Marzano said he would have been surprised if the lease extension came up for a vote at next week’s meeting.

“They didn’t reach out like they said they were going to,” Marzano said of the company. “I think they saw the handwriting on the wall.”

The commissioners’ views of the project’s backer had soured in recent weeks. Several commissioners had expressed frustration at the lack of information they were getting from Northwest Innovation Works. Commissioner Clare Petrich said the commission had been waiting too long for answers to basic questions.

“You cannot expect them to go on without providing that kind of information forever,” she said last month.

Earlier this month, some commissioners said they were skeptical the company could persuade them to vote for the extension, given the lack of information.

“They could give us any kind of schedule they want, but who’s to say it would be accomplished or done?” Marzano said. “I don’t know what they’ve done — that’s the thing. I haven’t heard one thing they have done yet.”

Reactions to the cancellation

Proponents of the plant had touted its potential as an economic catalyst for the port and region. Northwest Innovation Works had said the Tacoma plant would employ up to 1,000 workers during parts of its two-phase construction period and provide 260 permanent full-time jobs. Last week, the company released a consultant’s economic study that estimated it would bring billions of dollars into the nine-county region surrounding the port.

“We’re disappointed. We thought that this project offered a lot of opportunity for great jobs with high wages,” said Bruce Kendall, president and CEO at the Economic Development Board for Tacoma-Pierce County.

But while the plant’s potential economic benefits for the Tacoma region had long been highlighted by business leaders and labor unions, other groups complained that their public-safety questions had long gone unanswered.

Tuesday morning, just before the cancellation was announced, the nonprofit Citizens for a Healthy Bay came out as an opponent of the proposal after months of positioning itself as a neutral clearinghouse of verified information about the project. In a statement, the organization’s executive director, Melissa Malott, said the lack of response to its repeated inquiries about the consequences of building the plant provoked the opposition.

“NWIW has not demonstrated that they can be a good partner in the Port of Tacoma,” Malott said, “so we don’t want them here.”

State Sen. Jeannie Darnielle, D-Tacoma, who had voiced concerns about the Tacoma plant since 2014, said Tuesday she doubts claims that the port will suffer long-term economic hardship from losing the methanol project. She and others met with Inslee several times to explain their concerns about the project.

“It really brought home the message that this was a project that must not be placed in an urban community,” she said, “especially without providing the necessary answers to questions that people in this community had.”

Public opposition to the facility arose from an array of groups, including the region’s Sierra Club and Audubon Society chapters, several city and town councils in the Puget Sound area, and several groups of activists who built formal organizations around their opposition to the methanol project.

“It’s our city,” said Claudia Riedener, an organizer with RedLine Tacoma, one of the most active groups of methanol opponents, “and we deserve a seat at the table when these decisions are being made.”

Another group, Save Tacoma Water, used the methanol project’s requirement of 10.4 million gallons of water per day to consolidate public interest around water conservation efforts and push a pair of ballot measures.

“This is the best news I’ve heard in six months,” Save Tacoma Water’s co-chair, Donna Walters, said of the methanol project’s cancellation.

What’s next

Even with the Tideflats methanol plant off the table, several related situations remain in motion.

Save Tacoma Water’s efforts to have voters create requirements on new high-demand uses of water remains in progress, Walters said. So, too, Northwest Innovation Works’ projects along the Columbia River, though a debate over air quality that never got the chance to play out in Tacoma is causing some concerns in both Washington and Oregon.

In Kalama, a draft environmental review issued in March said projected diesel emissions from exporting the manufactured methanol by ship and using machines on-site would put the facility over a state limit.

At the Port of St. Helens’ Port Westward property in Oregon, there’s a potential air-quality conflict from emissions related to the proposed Northwest Innovation Works plant and existing port tenant Portland General Electric. Officials are awaiting further analysis before the project can move ahead, said Paula Miranda, business development manager for the Port of St. Helens.

And the Port of Tacoma now has more than 100 acres of waterfront brownfield land for which it wants to find a new tenant.

“An industrial site, with rail access and all the utilities — it’s an amazingly important piece of property for long-term industrial use,” Kendall said.

He added that industrial sites with deep-water access of this size that are ready to be marketed are rare assets.

An open question has emerged during the methanol debate: What future use will Tacoma accept for that site?

“We have an important community conversation to have about the value of industrial investment and industrial jobs,” Kendall said. “That’s an important dialogue for the community to have. We need to have that dialogue more deeply and more often.”

Tacoma City Councilman Robert Thoms said the project’s cancellation gives the city and the port room to reconsider how the former smelter site should be used. In a March op-ed column in The News Tribune, Thoms argued for a “less industrial” future for the port. He also had suggested the city could rezone the area to stop the project.

“There are many options. Now we have an opportunity to figure out what the future looks like,” he said Tuesday.

News Tribune staff writers Adam Ashton and C.R. Roberts contributed to this report.

More Inside

Columnist Bill Virgin asks, if not the methanol plant for the Tideflats, then what? 15A