A Chinese-backed joint venture is planning to invest $5.2 billion in Washington state to develop plants that would convert large volumes of natural gas into methanol at the ports of Kalama, in Cowlitz County, and Tacoma.
The methanol would be shipped to China and used as a feedstock for a plastic industry that has been rapidly expanding to meet the demands for consumer goods.
The projects would add a significant new component to Washington’s long-standing economic ties with China, a relationship that will be highlighted this week as President Xi Jinping makes the state his first stop during a visit to America.
The joint venture’s majority partner, CAS Holdings, is a commercial offshoot of the Chinese Academy of Sciences, which is owned by the government. The chairman of CAS Holdings, Wu Lebin, is expected to sit at the head table at a banquet that Xi will attend Tuesday night in Seattle.
The methanol projects, which were first announced in 2014, have been embraced by Gov. Jay Inslee, who mentioned them in a letter of invitation to Washington that he extended to Xi last April.
This week, the joint venture, Northwest Innovation Works, plans to release new details for the Tacoma project that would double the scale of its previously announced methanol production and boost the total investment from $3.6 billion to $5.2 billion.
“We are extremely pleased with our progress and also the support we have had,” said Simon Zhang, a former BP executive who now serves as the Hong Kong-based chief executive officer of Northwest Innovation Works. “The overall pace of development has been pretty rapid for the size of the projects.”
But skeptics are concerned about the impacts of the plant, and about using Washington ports to send a chemical derived from fossil fuels to China.
“They haven’t gotten anywhere near the public attention that they deserve,” said Eric de Place, policy director at Sightline Institute, an environmental policy think tank based in Seattle.
The economics of the projects are based on North American natural gas, which is far cheaper and more available than natural gas in China.
The methanol produced from that natural gas will be shipped by tankers to China. There it will be turned into olefins, which are used in multitudes of products ranging from plastic containers to cellphones to carpet fibers.
Currently, much of China’s olefins are produced from coal in a process that generates far higher carbon-dioxide emissions than when natural gas is used in the process, according to Zhang.
So, even though the Tacoma and Kalama projects would increase Washington state’s use of a fossil fuel, Inslee and other state officials have promoted the deal as a way to reduce the global release of greenhouse gases, which scientists say are driving climate change.
“This is one of the largest investments by a Chinese-led company in the United States and one of the most innovative clean manufacturing projects in the nation,” Inslee said during a visit to the Port of Kalama last month.
“Chinese companies are investing aboard, and the country is seeking new sources of energy but also cleaner sources of energy,” said Kristi Heim, executive director of the Washington State China Relations Council in Seattle.
In addition to the two Washington plants, Northwest Innovation Works also proposes a third plant in Oregon. The projects also could grow over time to expand capacity, joint-venture officials say.
So far, the Kalama plant is furthest along in development. If all state reviews and permits are obtained, construction could start in late 2016 and require 1,000 workers. About 200 permanent positions would be needed to operate the plant, according to a project fact sheet.
The natural gas is expected to be drawn largely from Canadian fields. And, collectively the projects, even without the expansion of the Tacoma plant, could boost demand for the fuel in the Northwest and British Columbia by at least 20 percent, said Daniel Kirschner, executive director of the Northwest Gas Association.
“It would be a phenomenal amount of gas,” Kirschner said, and likely would spur new investment in the Northwest’s natural-gas infrastructure, such as storage facilities.
Initial state estimates said converting the gas to methanol at the Kalama plant would release up to 1.3 million metric tons of carbon dioxide a year, largely because gas also was expected to power the plant’s operations. That would bump up the state’s overall greenhouse gas emissions by more than 1 percent a year at a time when Inslee wants to reduce overall emissions.
But in August, Northwest Innovation Works announced an agreement with the British company Johnson Matthey to employ a technology that would use more electricity — and less natural gas — to power the conversion process to methanol.
Zhang forecasts that the use of electricity can reduce carbon emissions from the plant by about 75 percent.
That design change drew praise from state officials.
“We can have family-wage manufacturing jobs, and build strong and enduring communities while reducing carbon pollution,” Brian Bonlender, director of the Washington state Department of Commerce, said in a statement released in August.
But some say that a full accounting of the projects’ climate-change impacts has yet to be tallied, since the production and transport of natural gas can result in the release of unburned methane — a potent greenhouse gas — and the fuel to power tankers that would transport the methanol to China also releases carbon emissions.
Critics also cite the risks of explosions from the natural gas that will flow through the state to feed the plants.
“I do not believe that the permanent jobs that this plant will create warrant the kind of community or environmental impacts we are going to see,” said Diane Dick, with Longview’s Landowners and Citizens for a Safe Community, which has been tracking plans for the Kalama plant.
Hal Bernton: 206-464-2581 or [email protected]