Inner BG

An energy golden age, if we can maintain it

Newsday | Dan Eberhart | March 11

After spending much of its history as “energy helpless,” the United States today is experiencing an energy golden age. But amid record-setting production of both traditional and renewable resources, we still face challenges.

With the oil industry facing unprecedented market disruptions from the spread of the coronavirus, to a fierce national election that will largely determine if the energy sector will continue to grow or be hit with limitations on their license to operate, we need to start applying some “energy realism” to our plans for the future.

Because despite the extraordinarily strong hand that the United States has been dealt when it comes to energy, the efforts of a few misguided policymakers have proven more than sufficient to derail investment and stop progress in its tracks.

Americans can listen to progressive presidential hopefuls call to restrict fossil fuel activity on television daily, but to see the real-world effect of such efforts in action, look no further than Whatcom County in Washington state.

For years, Whatcom County’s economic center has been the Cherry Point Industrial Complex. The companies operating at Cherry Point support 10,000 jobs, pay around $200 million in state and local taxes, and invests millions more in the surrounding communities in the form of philanthropic giving, volunteer time and other direct contributions to causes like wetland resources and environmental sustainability.

Never content to let a good thing go undisturbed, local officials in Whatcom County are pushing for drastic changes to the permitting and approval process that has long effectively governed investment and expansion at Cherry Point.

The proposed changes are being justified by a majority of the County Council as environmental reforms — a common argument that has been regularly leveraged across the United States to stop development, expansion and investment. Whether it’s a pipeline in Northeast, a wind farm in the Midwest, or a transmission line in the Southwest, the country is littered with important projects that were abandoned due to misguided local policy — often with serious negative repercussions for those that call the communities home. (Just ask New Yorkers how they feel about a recent pipeline impasse that led to a temporary moratorium on new natural gas connections.)

In the case of Whatcom County, the changes proposed are particularly self-defeating. In placing new restrictions on the companies operating and investing at Cherry Point, the County Council is in effect implementing a de facto ban on expanding and improving, not just the huge refineries operating at the site but also on the renewable and green energy companies vying to produce clean energy at the site.

Stakeholders in Washington have warned for months that the changes proposed by the County Council threaten future growth at Cherry Point. And if anyone was tempted to dismiss their concerns as nothing but alarmist messaging, a recent announcement shows just how warranted those concerns were.

After years of work, the developers of a joint renewable biodiesel project proposed by Phillips 66 and Iowa-based Renewable Energyannounced in a press release that they would abandon their efforts to build a major facility at Cherry Point. The reason for the withdrawal? Lengthy permitting delays and uncertainty. While Whatcom’s years-long effort to make permanent this plan was not specifically cited as the main cause, the County Council’s efforts coupled with Washington state’s continuing war against fossil fuels couldn’t have helped.

It’s a real loss for the community — an unforced error that will cost jobs, tax revenue and investment. The withdrawal will also take a promising expansion of the county’s green energy sector out of commission — a troubling sign given the fact that the council’s new rules also make it harder for traditional refineries in the area to invest in advanced emissions reducing technology.

But as harmful as these effects may be, perhaps the greatest damage caused by Whatcom County’s proposal — and others like it nationwide — is in the message it sends to investors and developers. Steps like these show companies that Whatcom County — and other communities pursuing similarly misguided policies — isn’t a favorable place to do business. That much is clear. But through a broader lens, the dynamic in Washington state also serves as a case study for the type of action that can undermine and undo all the good things the nation’s energy sector has going for it today.

Ample resources and favorable federal policy matter a great deal, but as Whatcom County shows, local policy is a wildcard that can derail even the most powerful economic engine — a blueprint for failure that nobody wanted.

The future is still positive for the American energy sector. But as we move forward, investors and other stakeholders must account for the fact that a handful of county bureaucrats can stop it all on a dime.

Dan K. Eberhart is CEO of Canary, an independent oilfield services company in Denver. He wrote this for InsideSources.com.

Hepner: A cautionary tale unfolds in Whatcom County

Puget Sound Business Journal | March 17, 2020

In Northwest Washington the Cherry Point Industrial Zone is the epicenter of Whatcom County’s economy.

Cherry Point and Whatcom County is a cautionary tale we should all be aware of as local governments engage on energy issues and the use of our industrial lands.

Companies at Cherry Point in Whatcom County support more than 3,000 direct jobs — family-wage jobs that pay an average of $110,000 a year. Around 11 percent of all Whatcom County jobs depend on the operations at Cherry Point Industrial Zone. Cherry Point companies generate around $240 million in local tax revenue every year.

Matthew Hepner is the executive director of the Certified Electrical Workers of Washington.

Families in Whatcom County look to Cherry Point to earn a good living that helps them support their families, put down roots and be part of the community. The economic strength and stability provided by Cherry Point is something to support and cultivate. And in a favorable business and investment environment, the opportunities at Cherry Point can and should continue to grow well into the future.

Unfortunately, changes under consideration by the Whatcom County Council threaten not just to undermine future growth, but to endanger the existing jobs, revenue and output that Cherry Point provides.

The proposed changes by the Whatcom County Council governing expansion, investment and operations at Cherry Point are currently being pushed through the county council. And while thoughtful, periodic review of the policies under which Cherry Point industry operates is worthwhile, both the process and the substance surrounding these proposed changes are poised to inflict harm across Whatcom County and the region.

The root of the problem is the increased use of “Conditional Use Permits” in the revised plan. In a break with the well-established and effective regulatory framework currently in place, the new plan would require Cherry Point refineries to hold off on potential facility expansion and upgrades to wait on deliberation and judicial action and approval.

This is a major break from the permitting processes that typically govern such facilities — and it represents a huge disincentive for companies looking to expand in Whatcom County. The proposed revisions pose an uncertainty in both timing and approval prospects. Consequently, the proposed new regulations will make investment in Whatcom a much harder sell and have a regional ripple effect in the development of such projects.

This concept is inherently flawed and self-defeating. No governing body truly representing its constituency should set out to eliminate good-paying jobs and hundreds of millions in tax revenue.

The technical aspects of the changes are also confusing and complex. The language of the changes uses subjective criteria to determine approval or denial that is far from clear. This is a major problem, and a strong argument in favor of taking more time to understand the full impact of these changes before taking action.

The Whatcom County Planning Commission in its review of the county council’s proposed changes has listened to industry and made a good faith effort to rework the council’s proposed changes. As a result of the Planning Commission review, it’s become apparent that the county council is attempting to re-regulate very complex issues within an industry they don’t understand.

If enacted as written, the proposed changes will significantly erode the business climate in Whatcom County and the region. In seeking to replace a well-functioning, existing framework with an ill-conceived and flawed plan, the county council is sending a bad message to both businesses and would-be investors.

If a business can’t bank on regulatory stability and certainty in a community, they are far less likely to place their bets there.


Matthew Hepner is the executive director of the Certified Electrical Workers of Washington — IBEW.

My Ferndale News: County Council’s Cherry Point Plan is Killing Growth in Whatcom County

Andrew Gamble, a Marine and Safety Operations Advisor to Petrogas as well an Energy Industry Representative on the Whatcom County Business and Commerce Advisory Committee, recently wrote an op-ed for My Ferndale News speaking out against the County Council’s proposed changes for Cherry Point and the devastating impact they’d have on the county.

The changes “would be among the most radical and sweeping regulatory revisions in decades,” Gamble wrote in the piece. “And while the Council may seek to portray their efforts as narrowly targeted and impacting only the refineries at Cherry Point, the fact of the matter is that this proposal’s impact would be felt far beyond one critical sector.”

Gamble also discusses the air of uncertainty for business investment in Whatcom created by their proposed changes and the eight times Council has passed interim moratoriums on new fossil fuel projects at Cherry Point in the last two years.

“My experience working for operators at Cherry Point who have made substantial investments in this community, has taught me that an uncertain regulatory environment causes unintended ripple effects with negative impacts. Take for example, the recent cancellation of a huge renewable diesel project at Cherry Point that, while maybe not a direct result of the proposed Cherry Point amendments, they absolutely add to the general regulatory uncertainty that has permeated Whatcom County over the last few years,” Gamble wrote.

Added Gamble, “The new plan will make it next to impossible for these companies – which employ thousands – to keep up with their competitors outside Whatcom County who don’t have to bear the burden of such radical requirements.

Cherry Point operators would have no reasonable expectation to receive permit approvals of permit applications even for improved environmental technologies that could make operations more efficient or competitively sustainable, and therefore there will be no future investments that lead to more jobs and higher tax revenues.

And against this backdrop, the notion of any new energy companies throwing their hat in Whatcom County’s ring is laughable. The new regulations would also apply to the renewable energy operations present at Cherry Point. They, too, would face rising costs, restricted investment, and non-existent growth and expansion if the revised plan moves forward. Hardly the most effective way to transition to a cleaner energy future.”

Click HERE to read the entire op-ed in My Ferndale News.

WHATCOM COUNTY STAKEHOLDERS FIGHT FOR CANCELED RENEWABLE DIESEL FACILITY

After over a year of planning, the Green Apple Renewable Fuels facility in Ferndale and 750 jobs were canceled. Legislators, laborers and environmentalists are now scrambling to pinpoint what went wrong and save the project.

The Green Apple Renewable Fuels facility was a partnership between Phillips 66, a company which owns a crude oil refinery in Ferndale in the Cherry Point industrial zone, and Renewable Energy Group (REG), a producer of biodiesel and renewable diesel.

The renewable diesel plant was to be built next to the existing Phillips 66 Refinery and produce about 250 million gallons of fuel made from animal fats and recycled cooking oils each year, said Tim Johnson, director of public governmental affairs for the Phillips 66 Refinery.

View full article in The Western Front.

REG: PHILLIPS 66 AND RENEWABLE ENERGY GROUP WITHDRAW RENEWABLE DIESEL PROJECT IN WASHINGTON STATE

HOUSTON, Texas and AMES, Iowa, Jan. 21, 2020 – Phillips 66 (NYSE: PSX) and Renewable Energy Group, Inc. (NASDAQ: REGI) are discontinuing their joint effort to construct a large-scale renewable diesel plant in Ferndale, Washington, the companies announced today.  

The project has been canceled due to permitting delays and uncertainties.

Originally announced in fall 2018, this 250 million gallon per year project would have resulted in the largest renewable diesel refinery on the West Coast.“While we believe the Ferndale Refinery is a strategic fit for this renewable diesel project, permitting uncertainties were leading to delays and higher costs,” said Robert Herman, Phillips 66 executive vice president of Refining. “Phillips 66 continues to progress its portfolio of renewable diesel projects and evaluate new opportunities to provide consumers with renewable fuels that comply with low-carbon fuel standards.”

View full article in REG.

The Ferndale Record: Proposed Cherry Point Changes Threaten Our Economy

This guest op-ed column is from Mark Riker, executive secretary of the Washington State Building & Construction Trades Council.   

We live in polarized political times. But even against a backdrop defined by ideological differences, public officials of all stripes should still share one common framework that shapes their actions and decisions.

View full article in The Ferndale Record.

The Daily Herald: COMMENTARY: Cherry Point Regulations Could Harm Local Economy

Moving quickly is a virtue in many undertakings. But if there’s one place where faster isn’t better, it’s public policy.

Unfortunately, the Whatcom County Council appears more focused on speed than soundness in its consideration of possible changes to the Cherry Point Comprehensive Plan. And that, for anyone focused on the economic well-being of Whatcom, Skagit and Snohomish counties, is cause for concern. As executive secretary of the Northwest Washington Building and Construction Trades, I represent over 5,000 men and women of the building trades, many of whom rely on Cherry Point industries to provide the family-wage jobs they need to support their households.

View full article in The Daily Herald.

Not All Employers are Created Equal

When discussing job creation, it is clear that some jobs are far more beneficial to the general welfare than others.

That’s the hard-nosed economic conclusion of the independent 2019 Cherry Point Economic Impact Study conducted by Western Washington University’s Center for Economic and Business Research. This research updated the 2014 study previously conducted by Western Washington University and the University of Washington.

Commissioned by the Whatcom Business Alliance and released on March 19, 2019 at a WBA breakfast encouraging fact-based public dialogue on community economic policies, especially those affecting the Cherry Point heavy industrial zone in Whatcom County.

Commissioned by the Whatcom Business Alliance, the study focuses on the economic impacts of 8 companies operating within the Cherry Point zone, which includes the Phillips 66 and BP oil refineries, Alcoa’s Intalco Works aluminum smelter, and several smaller companies, and will serve as a useful reference for other communities examining the merits of heavy industry on their economy. While there are over 7,000 employers in Whatcom County, those 8 Cherry Point businesses and their at least 3,320 employees have a disproportionate affect on the County’s economy, because of the significant “multiplier effects” of business purchases and the spending of high-wage employees.

  • The median home price in Whatcom County was $345,900 in 2017 and has increased since then, while the annual household income required to afford that home is $51,575.
  • The businesses in Cherry Point paid more than $370 million in state and local taxes and $15 million in property taxes of the overall property taxes in the County, 11% of property taxes for County Road Fund, 15% of the Ferndale Schools, and 21% of the Blaine Schools.  The large tax contributions of these industries effectively reduce taxes for everyone else.
  • The businesses in the region donated more than $1 million to local charitable organizations in 2018. This, at a time when local non-profits are in need of support in order to serve the growing poverty rates.
  • Jobs within the Cherry Point zone represent 3.75% of the County’s employment, but support (directly or indirectly) 11.2% of the overall jobs in the County and 17% of all wages.
  • Cherry Point industrial area jobs pay an average of $110,690 per year, 243% more than the average County wage of $45,491.

You can download and read the full study here.