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Taxpayers May Soon Be on the Hook for a $2 Billion Fracked Gas Refinery

Northwest Innovation Works promises to bring jobs to rural Washington—but at what cost?
The Port of Kalama property, where Northwest Innovation Works hopes to build a methanol plant.

The Port of Kalama property, where Northwest Innovation Works hopes to build a methanol refinery.

Northwest Innovation Works (NWIW), a proposed fracked-gas-to-methanol refinery in Kalama, Washington, would be the largest of its kind in the world. The project's investors include the Chinese government and a New York-based private equity firm with $15 billion in capital—a fact that's prompted critics to ask: Why should American taxpayers be liable for the refinery's $2 billion construction?

According to government documents obtained by Columbia Riverkeeper, a non-profit organization dedicated to protecting its eponymous waterway, NWIW is applying for a loan guarantee from the Department of Energy (DOE) to cover the project's completion. Despite being heavily redacted, a draft DOE presentation obtained by Riverkeeper nevertheless provides insight into NWIW's financing and the costs that may be borne by United States taxpayers. The presentation identifies the size of the refinery's proposed loan guarantee to be more than $2 billion; should the DOE accept NWIW's application, taxpayers nationwide could be on the hook for that entire amount. (Citing its policy against disclosing business-sensitive information, including loan applications, the DOE declined to comment for this article.)

"A federal loan guarantee means that the U.S. government—ultimately taxpayers—would agree to pay back NWIW's creditors if NWIW can't repay the loan that it took out to finance the construction of the refinery," says Jasmine Zimmer-Stucky, a senior organizer with Riverkeeper.

Those creditors include the Chinese government. As the draft DOE presentation outlines, the Chinese government is one of the principle backers of NWIW. The first investor listed in the presentation is Pan-Pacific Energy, which was established by Shanghai Bi Ke Clean Energy Technology in 2013. The majority shareholder in Shanghai Bi Ke Clean Energy Technology is the Chinese Academy of Science Holdings, which the DOE presentation describes as a "wholly owned state company." In other words, a significant portion—if not the majority—of NWIW will be owned by the Chinese government, while the risk of financing its construction could be put on U.S. taxpayers. (Contacted for this article, NWIW declined to comment.)

If completed, NWIW would become part of an extensive operation to provide methanol to China. Pipelines from Canada and the Rocky Mountains would deliver fracked gas to the refinery for conversion into liquid methanol. NWIW's proposed location in the Port of Kalama—in Southwest Washington on the Columbia River, which empties into the Pacific Ocean—has access to a natural shipping route to China, where methanol is used to manufacture plastics or burned as fuel.

Besides the Chinese government, the other principle backer of NWIW is Wall Street. After Pan-Pacific Energy, the DOE presentation obtained by Riverkeeper lists Stonepeak Infrastructure Partners as the only other investor in NWIW. Stonepeak is a New York City-based private equity firm that boasts of managing "over $15 billion in capital" and describes itself as specializing in "low-risk" infrastructure projects. Although figures regarding Stonepeak's investment in NWIW are redacted from the DOE presentation, a loan guarantee could mean that the firm's investors are repaid at the taxpayer's expense—whatever the amount.

In addition to the possible $2 billion loan guarantee, NWIW is seeking hundreds of millions of dollars in grants, loans, and tax breaks. According to Riverkeeper, the Port of Kalama has asked the federal government and Washington state for a total of $23 million in grants to build a dock and a road for the refinery, as well as a $15 million loan to drill it a well. In addition, Riverkeeper points to NWIW's lobbying against the closure of loopholes that would have resulted in the refinery paying $143 million in state and local sales taxes.

Aside from the financial cost, NWIW also poses significant environmental risks, according to Riverkeeper. In a report that it prepared about the refinery, Riverkeeper identifies hazards related to extracting fracked gas from across North America, storing millions of gallons of highly combustible methanol in one location, and transporting toxic chemicals via the Columbia River, which people rely on for water, food, and recreation. And although NWIW claims that it would reduce global greenhouse gas emissions by replacing coal-based methanol operations in China, there is no certainty that those overseas refineries would actually close—only that a huge new source of greenhouse gases, NWIW, would open.

"NWIW would emit over a million tons of greenhouse gases each year, making it one of the largest drivers of climate change in Washington," Zimmer-Stucky says.

While the wheels appear to already be moving, there is still time to oppose NWIW. Riverkeeper was able to successfully appeal the supposedly final Environmental Impact Statement that allowed the refinery's construction to continue. The result is a court-mandated Supplemental Environmental Impact Statement, expected out in November. Until then, Riverkeeper urges concerned citizens to contact DOE representatives and elected officials to voice their opposition to NWIW.

"Community opposition forced Northwest Innovation Works to withdraw a methanol refinery proposal in Tacoma, Washington," says Zimmer-Stucky, referring to another project by NWIW. "Committed Tacoma residents attended port and city council meetings, wrote letters to the editors and to elected officials, and rallied to block the Tacoma methanol refinery. Southwest Washington can do the same."