Background about SCDC Inc. Report and Its Coverage by News Media
Is the SCDC Inc. Commissioned Report Realistic?
.......Problem with SCDC Report: Limited Scope
.......Problem with SCDC Report: Unrealistic Language
.......Problem with SCDC Report: Unreasonable Certitude
.......Problem with SCDC Report: LNG Terminals May Quickly Become Obsolete
.......Problem with SCDC Report: Only a Best Case Scenario
.......Problem with SCDC Report: No Accounting for Competition with Coos County Pipeline
.......Concluding Remarks
Footnotes
The South Coast Development Council Inc. (SCDC, http://www.scdcinc.org/) has links to the Port of Coos Bay Commission, since three of the five Port Commissioners have ties to the SCDC. Jeff McKeown (husband of Port Commissioner Caddy McKeown [Footnote A1]) and Port of Coos Bay Commissioners David Kronsteiner and Dan Smith (http://www.portofcoosbay.com/commstaff.htm) serve on the SCDC board, with Kronsteiner representing the Port (http://www.scdcinc.org/about.htm). The SCDC was instrumental in attracting the Jordan Cove LNG developers (see Timetable for Port Commission's Land Deal).
On 9 October 2006, Sabrina Rodriguez reported for KCBY-TV Channel 11 in Coos Bay that (A2):
"SCDC has hired EcoNorthwest, an independent research company to analyze and develop a white paper that will measure the economic impact of the Jordan Cove Project being in the area. Ron Opitz, Executive Director of SCDC, says there already are statistics about LNG's economic impacts, but this study will be tailored to the [Coos] bay area and very reliable."
On 20 October 2006, the Coos Bay newspaper, The World, included a story by The World's editor Kathy Erickson and reporter Carl Mickelson (B) about the ECONorthwest paper (C) commissioned by SCDC Inc. The World's article stated (B):
"Siting a liquefied natural gas facility on the North Spit will have a positive local economic impact - and the ripple effect will be felt regionally and even statewide. That's the conclusion of an independent study commissioned by the South Coast Development Council. The SCDC hired ECONorthwest to do the economic impact analysis. According to SCDC Executive Director Ron Opitz, the cost of the study was $25,000. The Portland firm also produced the SCDC's white paper on transportation on the South Coast economy in 2005."
The World's article also included the major economic benefits cited by ECONorthwest and also reported (B):
"Opitz, who stressed the report was produced independently and that Jordan Cove didn't direct it, commission it or participate in it, said he was pleased but not surprised at its conclusions."
I do not know if The World's president and publisher Greg Stevens' board membership representing the "Media" in the SCDC (http://www.theworldlink.com/staff_directory/, http://www.scdcinc.org/about.htm) may be a factor in why The World favorably reported the SCDC commissioned report without balance.
On 23 October 2006, KCBY's Britt Carlson reported the economic benefits projected by the ECONorthwest report, including (D):
"The economic impact analysis conducted by ECONorthwest, an independant research company, focused on how the LNG project would affect property values, job creation and the overall economy."Executive Director of the South Coast Development Council says, 'In the study we found it will have a very dramatic, positive impact in our economy. The research firm picked out one year in the future, 2016, as a test year, and found that over time 1000 jobs would be created and over $400 million dollars in revenue would be raised for different businesses.' The report used a variety of research methods to show the true economic impact the operating LNG terminal would have in the future. [SCDC Director] Opitz says, 'The study not only weighed the effects of the existing LNG facilities it also took a very scientific look at the economy and general dollars generated, and economic multipliers that affected those numbers. Opitz says he hopes this analysis will calm the theory of no economic gain for the area."
On 25 Oct. 2006, KEZI-TV's Ben McKee also reported about the financial benefits of the SCDC report (P):
"A few weeks ago, the South Coast Development Council had a question. They wanted to know what kind of an economic impact the proposed Liquefied Natural Gas terminal would have on Oregon's Bay Area. The results are in. In a nutshell? It's nothing all that surprising for proponents of the LNG terminal. More jobs, cheaper energy, and a half-billion dollar impact on the state's economy."The report looked ahead to the year 2016, taking a look at how the terminal would affect the Oregon economy. So, assuming we're in the year 2016, the report found Oregonians would save 17 million dollars in their energy bills. Businesses would save more than 31 million dollars in energy costs as well.
"The LNG terminal would mean another 400 new jobs with wages above the state average, and more than 1,100 jobs statewide.
"The terminal would have an economic impact of close to 500 million dollars statewide. Again, this is assuming the year is 2016, not right away.
"The next step is sharing that report with the public.'In the hands of proponents, opponents, it doesn't matter,' said South Coast Development's Ron Opitz. 'It was developed by an independent company, Eco-Northwest, to answer question[s] about the LNG terminal and what effects it would have here.' "
However, The World, KCBY-TV, and KEZI-TV did not report that SCDC Executive Director Ron Opitz formerly worked for NW Natural gas or that Opitz and the SCDC had worked to attract a LNG terminal to the Coos Bay area as reported in August 2004 (E). Accordingly, Opitz and the SCDC could be expected to have a pro-LNG stance.
On 27 November 2006, I emailed Winston Ross (reporter) and Dave Baker (managing editor) of the Eugene Register-Guard newspaper. I questioned the objectivity of the SCDC commissioned report and the lack of public participation in the Port Commission's land deal for the LNG terminal. I included links to this web page about the SCDC report and the Port Commission's handling of the LNG terminal and other issues. On Dec. 3, Ross' article (Q) appeared in the Register-Guard. It identified the SCDC as pro-LNG and listed several of the conclusions of the report to support the LNG terminal. It did not report that this report has been criticized (e.g., Ron Sandler [N], this web page).
A pro- or an anti-LNG group could commission a study that is truly independent and realistic. For example, the anti-LNG Save Passamaquoddy Bay group commissioned an economic report critical of projected economic benefits (R). So, how realistic is the ECONorthwest paper?
At first glance, the ECONorthwest Report (C) seems solid and is well presented. In trying to read the ECONorthwest report, noneconomists may cower because of a lack of knowledge about economics and just accept what is written as fact. However, a reasonably informed reader would read this report like any report commissioned by a pro- or anti-LNG group--with skepticism. Such a reader would attempt to understand what the reader could, so a noneconomist reader may not be able to read and question the economic portions. But a prudent reader could be struck by the Report's limited scope as given on p. 1 (C):
"What would be the effect on the local economy if an LNG terminal were built in Coos County rather than in Northern California?"
That scope is unrealistically narrow. An Oregonian informed about current LNG issues is apt to ask why the proposed Bradwood Landing LNG facility (F) along the Columbia River is neither mentioned (as revealed by an Acrobat search of the Report) nor included in the forecast? The Bradwood facility is further along in the permit process than Jordan Cove (G), and if it is built it would certainly affect the price and availability of natural gas in Western Oregon. Indeed, if it was built, the benefits to Oregon stated in the ECONorthwest report (C) with such certainty may largely evaporate because the Bradwood facility would also supply lots of natural gas to Oregon. The omission of Bradwood Landing or three other proposed LNG terminals in Oregon (e.g., see G, links to proposed and potential sites at H, and O) is an oversight that raises a red flag about the scope and how realistic the ECONorthwest Report is. Was the scope set so small in the ECONorthwest report to show economic benefits for the Jordan Cove LNG facility? Further, it is possible that LNG terminals could be built in both Coos Bay AND Northern California--why isn't this scenario included?
A prudent reader could also look to the tone and choice of words used in the ECONorthwest Report (C) to see if it is realistic. Forecasts are notorious for being "squishy" and using "weasel" words to not make any solid conclusions because in most cases there are too many uncertainties for a prediction to be 100% accurate or more than an educated, best guess. However, the ECONorthwest Report is written with a tone of certitude about forecasted economic benefits. For example, I did an Acrobat whole word search count of the Report (C) and found that certitude words "would" and "will" were used 137 and 14 times, respectively. Equivocal words commonly used in more realistic forecasts such as "could," "can," "might," and "may" were only used, 14, 14, 3, and 5 times, respectively. Using "would" 137 times seems very excessive. The total of 151 certitude words to 36 comparable, equivocal words is a tip-off to a cautious reader that this Report may not be realistic, especially since a pro-LNG group commissioned it.
The abundance of statements with certitude and exactitude in this Report should raise red flags among prudent readers. For example, p. 2 of the report (C) states:
"Statewide, the terminal would raise annual employment by 1,173 and, in the year 2016, total economic output would be $488 million greater."
1,173? Such exactitude stated with a "would." Why isn't there any allowance for known uncertainties? Reports often give a range in predictions and round off numbers because of uncertainties, but not the ECONorthwest Report.
How can ECONorthwest be so certain of the economic benefits that they forecast in the year that they selected, 2016? They did not include the obvious possibility that other LNG terminals may also be built to supply Oregon and/or California (see links to proposed and potential sites at H). For example, in October 2006, a new LNG terminal is already half-built in Baja California that is projected to supply California and the West and to outcompete other proposed LNG facilities in California (I).
Page 9 of the ECONorthwest report states their projections are based on computer modeling. However, computer modeling of natural gas economics for 2016 depends upon input variables that are variable and unpredictable. Why isn't there any allowance for uncertainties in the number of LNG terminals that may be constructed in the West (see links to proposed and potential LNG terminals in H), production of natural gas, oil prices that are linked to natural gas prices, demand for natural gas, and hurricane damage to Gulf Coast natural gas facilities (e.g., J)? U.S. Energy Information Administration data indicates that natural gas prices have fluctuated in Oregon (K), and the Oregon Public Utility Commission notes that "It is likely that price fluctuations will continue or even increase in the future" (J). Further, the Energy Policy Act of 2005 has increased the likelihood of LNG terminals, so legislation in the next 10 years could also be reasonably expected to affect natural gas regulation and consequently supply and demand. Regulation and world events affecting LNG supplies are also uncertainties. Jordan Cove Energy Project could also change the amount of LNG they import because of financial reasons that may vary between now and 2016, which would affect the amount of financial benefits that ECONorthwest states with such certitude.
A good guide to the unpredictability of LNG terminals by 2016 is the recent history of LNG terminals in the United States. In 2001, the U.S. Department of Energy's Energy Information Administration (L) stated:
"LNG in the United States has a sketchy past. Because of rising natural gas prices in the 1970s, LNG project sponsors anticipated large profits and constructed the four U.S. LNG receiving terminals in existence today. Dreams of high profits never materialized, however, because natural gas prices began a precipitous decline after their 1983 peak, and all but one of the four were mothballed. The facility at Everett, Massachusetts, remained in operation only because it was located in a heavily concentrated market center where demand was high and the cost of bringing conventional supplies to market by pipeline was high enough to exceed the cost of LNG (74). In 1989, the Lake Charles, Louisiana, facility was reactivated (75), mainly to receive spot cargos."For close to 20 years, LNG was not considered to be an economical source of natural gas. As a result of the high 2000-2001 prices and the growing demand for natural gas, interest in LNG has renewed to the point that not only are the other two facilities, at Elba Island, Georgia, and Cove Point, Maryland, reopening (Elba reopened in October 2001), but at least 13 new facilities have been proposed to serve U.S. markets (Table 8)."
ECONorthwest's (C) certainty appears unrealistic. One of their Major Findings on p. 1 is (boldface added):
"Overall, Oregonians would save $17.0 million in 2016 on their energy bills if the terminal were built in Coos County instead of California. Local businesses in the State would save $31.5 million. Savings of this magnitude will occur each year the terminal operates."
There are two "would" statements for 2016 and one "will" statements for each year the terminal is in operation. Each of these statements seems unrealistically certain given so many uncertainties.
In projecting for the proposed Jordan LNG facility at Coos Bay, the ECONorthwest report states on p. 16 (C)(boldface added):
"LNG would lower the cost of energy and assure consumers of a secure, ample supply of natural gas. The flow of ships would enhance the economic viability of the Port of Coos Bay and further improve the area’s attractiveness as a business location."
Is such certitude realistic given the uncertainties of natural gas prices and supply? The source of the LNG supplies has not yet been specified, but may include Brunei, Malaysia, and Indonesia (search for "Brunei" in M). Alaska has been mentioned as a source of LNG, but are there any LNG tankers that could legally transport LNG from Alaska to Coos Bay in compliance with the Jones Act? Coos Bay can be secured, but how can LNG tankers be secured shipping over long distances outside of U.S. jurisdiction and how can supplies can be guaranteed to be "ample" when storms such as Hurricane Katrina (J) or earthquakes and tsunamis may affect production or shipping facilities? Will these LNG supplies be as stable as that for gasoline, which peaks and ebbs?
Robert McCullough is a managing partner of McCullough Research, which "is an energy consulting firm that provides strategic planning assistance, and litigation support to a variety of customers in energy, regulation, and primary metals." The Willamette Week wrote about the controversy of LNG terminals proposed for Oregon (S):
"The irony to all this is that despite all the hubbub over LNG terminals, we may not need them, says Robert McCullough, a Portland energy economist and former PGE executive who has been heavily involved in a number of high-profile energy fights. The natural-gas markets project the new high prices to last through 2010, which in his view means investments in new gas-fired power plants can be expected to cease. That's because photovoltaic cells have suddenly become economical in some parts of the country - i.e., without Portland's rain - and in the others the new generation of 'clean coal'-fired plants will be far cheaper to run. Thus, he says, any LNG terminal built in Oregon may wind up being a 'white elephant.' "
There are other questions about how realistic the ECONorthwest report is (C). On Nov. 9, Ron Sadler's article questioning the ECONorthwest report appeared on The World's web page as an editorial (N). Sadler noted (N):
"The SCDC report can most properly be called a best case scenario. It makes no attempt whatsoever to quantify or even identify the potential negative effects of the proposal, even though several readily come to mind."
Sadler adds (N):
"Think back about what has happened in our area over the past few years. Recall how it was pointed out to us that we had a supply of prime industrial land available on the North Spit, the advantages of a deep-sea port and a willing and available work force. The only thing holding us back from prosperity was the lack of natural gas as an energy source for prospective industrial developers. We were told that several companies, including US Gypsum, Pohang Steel, BHP Steel, Hokishen Wood Products and Project Vision Glass did not locate here because natural gas was not available."Collectively, we reacted. We passed a bond issue to finance the construction of the Coos County pipeline that now is in place and functioning. NW Natural Gas has received the franchise to provide gas service in our area and has established a presence and installed the infrastructure needed to do so. Thus, and it is very important to remember this fact, today NW Natural is ready, willing and able to provide natural gas service to any industry that wishes to locate in our area. This present capability is in no way dependent on LNG development and will remain in place even if the LNG proposal disappears.
"If you keep this fact in mind, you will be properly amused when you read, on page 20 of the SCDC report, that the following 'firms are indicative of the types of manufacturers that LNG would attract - US Gypsum, Pohang Steel, BHP Steel, Hokishen Wood Products, Project Vision Glass.' Do those names sound familiar? It appears proponents are trying to credit LNG with the capability of solving a problem that we already solved ourselves years ago with the Coos County pipeline.
It appears that the proposed Pacific Connector Gas Pipeline may outcompete the taxpayer-funded Coos County natural gas pipeline and may make it obsolete (see Pipeline Competition). This would be a cost to the LNG terminal that ECONorthwest did not include.
The SCDC appears to have been artful in commissioning and presenting their report, so that it would be reported in the news media as if the report was unbiased and realistic (A2, B, D, P, Q).
On Oct. 23, I emailed The World's Erickson and Mickelson that the ECONorthwest projections that they reported in their article were not as certain as they stated (B). I also questioned The World's printing their article without investigation or providing balance. Whether intended or not, their article seems to be the newspaper equivalent of a TV infomercial "selling" readers the economic benefits of the proposed LNG facility. As of 11 December 2006, I have not received a reply.
In my opinion, the KCBY-TV, KEZI-TV, and News-Guard stories (D, P, Q) also appear to serve as infomercials. The KCBY-TV and KEZI-TV stories as well as the one in The World (B) all gave links to the ECONorthwest paper that help promote it.
A1. Erickson, Kathy. 2006. McKeown Starts Mayoral Run. May 26, Coos Bay World. (This is available for a fee--see suggestions for accessing.)
A2. Rodriguez, Sabrina. 2006. LNG Economic Impact Report. Oct. 9, KCBY-TV (Coos Bay). (Accessed on 25 Oct. 2006.)
B. Erickson, Kathy and Carl Mickelson. 2006. SCDC Study Says LNG Good for Area. Oct. 20, Coos Bay World. (This is available for a fee--see suggestions for accessing.)
C. ECONorthwest. 2006. Forecast of the Net Economic Benefits of a Proposed LNG Terminal in Coos County, Oregon. An Economic Impact Analysis prepared for the South Coast Development Council. Oct. 16. (See link to "Jordan Cove White Paper" at http://www.scdcinc.org/ of South Coast Development Council, Inc.; the direct link is http://www.scdcinc.org/documents/ECONW-SCDC-LNG-Impacts.pdf. It may also become available at ECONorthwest's web site at http://www.econw.com/)
D. Carlson, Britt. 2006. LNG Economic Impact Report Makes Future Look Bright. Oct. 23, KCBY-TV (Coos Bay). (Accessed on 11 Nov. 2006.)
E. Sirocchi, Andrew. 2004. Company Eyes North Spit Property. Aug. 20, Coos Bay World. (This is available for a fee--see suggestions for accessing.)
F. Bradwood Landing LLC. (See http://www.bradwoodlanding.com/)
G. Oregon Department of Energy. [2006] Liquefied Natural Gas and Oregon. Energy Facility Siting.
H. Federal Energy Regulatory Commission (FERC). Liquefied Natural Gas (LNG). (Includes links to "Existing and Proposed North American LNG Terminals" and "Potential North American LNG Terminals.")
I. Polakovic, Gary. 2006. Huge Baja Project May Chill Others' LNG Plans: Mexico's Easier Permit Process Allowed San Diego-Based Sempra Energy to Get a Head Start Over Those Considering Plants in California. Oct. 9, Los Angeles Times. (This may also be available at http://groups.yahoo.com/group/LNGsafety/message/3391.]
J. Oregon Public Utility Commission. 2005. 2005 Natural Gas Price Factors.
K. United States Energy Information Administration. 2006. Oregon Natural Gas Residential Price (Dollars per Thousand Cubic Feet) [for 1989-July 2006].
L. U.S. Energy Information Administration. 2001. Natural Gas Markets: Mid-Term Prospects for Natural Gas Supply. Chapter 3: Mid-Term Natural Gas Supply: Analysis of LNG Imports. SR/OIAF/2001-06, Release Date: December 14, 2001. U.S. Energy Information Administration, Office of Integrated Analysis and Forecasting, U.S. Department of Energy.
M. Oregon International Port of Coos Bay. 2006. LNG Terminal & Natural Gas Pipeline Questions & Answers. (This is periodically being updated by the Port; Brunei and other potential LNG sources were available by searching the version available on 19 Oct. 2006 for "Brunei.")
N. Sadler, Ron. 2006. Editorial: Best- or Worst-case Scenario in the LNG Economic Prospectus? Nov. 9, Coos Bay World. (This was listed as an "editorial" on The World's web page. It is available for a fee after 14 days--see suggestions for accessing.)
O. Friends of Living Oregon Waters (FLOW): LNG.
P. McKee, Ben. 2006. Study Shows LNG Terminal Would Benefit South Coast, State. Oct., 25, KEZI-TV (Eugene, but is listed as a Coos Bay TV station at http://en.wikipedia.org/wiki/Coos_Bay,_Oregon). (Accessed on 20 Nov. 2006.)
Q. Ross, Winston. 2006. Opposition Pipes Up: People Who Live Near a Proposed Natural Gas Line Work to Block It. Dec. 3, Eugene Register-Guard. (This was published in the Business section and will be available for free for a limited time.)
R. Yellow Wood Associates Inc. 2006. Report on Potential Economic and Fiscal Impacts of LNG Terminals on the Whole Passamaquoddy Bay. Prepared for Save Passamaquoddy Bay. June 2006.
S. Budnick, Nick. 2005. Welcome to Gastoria! How the Economic Boon Promised by Liquefied Natural Gas Would Bring Mega-tankers, Terror Alerts and Environmental Threats to the Columbia River. Sept. 28, Willamette Week (Portland).
[Go to Has the Oregon International Port Commission of Coos Bay Handled the Shipbreaking, Land Deal for the LNG Terminal, and Other Issues with Due Diligence? or go to Proposed Shipbreaking (Ship Recycling) of U.S. Maritime Administration (MARAD) or Navy Ships in Oregon or Washington]
Email comments to Range (Richard) Bayer, Bayer Research, P. O. Box 1467, Newport, Oregon 97365 USA.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .