KALAMA MANUFACTURING AND MARINE EXPORT FACILITY€¦ · 15/07/2019 · EXECUTIVE SUMMARY ... From the access trestle, the berth face of the dock will extend approximately 530 feet

Project Title: Kalama Manufacturing and Marine Export Facility

Location: Kalama, Cowlitz County, WA

Urban/Rural: Rural

Applicant: Port of Kalama

Project Cost: $23,000,000

BUILD Request: $11,500,000

KALAMA MANUFACTURING AND

MARINE EXPORT FACILITY

U.S. DEPARTMENT OF TRANSPORTATION

NATIONAL INFRASTRUCTURE INVESTMENTS BUILD DISCRETIONARY GRANTS

Kalama Manufacturing and Marine Export Facility

Table of Contents Page

EXECUTIVE SUMMARY ....................................................................................................... 1

PROJECT DESCRIPTION ...................................................................................................... 4

Methanol Plant ................................................................................................................................ 4

Export Dock ...................................................................................................................................... 5

Road and Parking Improvements .................................................................................................... 7

Project Cost ...................................................................................................................................... 9

PROJECT LOCATION ......................................................................................................... 10

Location of Export Dock ................................................................................................................. 10

Rural Grant ..................................................................................................................................... 10

Opportunity Zones ......................................................................................................................... 10

About the Port of Kalama .............................................................................................................. 11

GRANT FUNDS, SOURCES AND USES OF PROJECT FUNDS .................................................. 12

Grant Request and Local Match .................................................................................................... 12

Leverages Investments .................................................................................................................. 12

MERIT CRITERIA............................................................................................................... 13

Economic Competitiveness ............................................................................................................ 13

Environmental Sustainability ......................................................................................................... 18

State of Good Repair ...................................................................................................................... 20

Quality of Life ................................................................................................................................. 21

Innovation ...................................................................................................................................... 21

Partnership .................................................................................................................................... 22

PROJECT READINESS ........................................................................................................ 23

Technical Feasibility ....................................................................................................................... 23

Project Schedule ............................................................................................................................ 23

Required Approvals ....................................................................................................................... 24

Assessment of Project Risks ........................................................................................................... 25

Natural Gas Pipeline ...................................................................................................................... 25

BENEFIT-COST ANALYSIS .................................................................................................. 26

Transportation Cost Savings .......................................................................................................... 26

No Transfers Between U.S. Ports ................................................................................................... 27

Benefits not Evaluated by the BCA ................................................................................................ 27

Capital and O&M Costs .................................................................................................................. 27

SUPPORTING MATERIALS ................................................................................................ 28

Kalama Manufacturing and Marine Export Facility 1

EXECUTIVE SUMMARY

EXECUTIVE SUMMARY

Executive Summary

The Kalama Manufacturing and Marine Export Facility project (Project) will construct a deep-

draft export dock on the Columbia River. Key reasons to fund the Project include:

Secures a Massive Private Investment in Exports and Jobs

The Project is needed to ensure a $1.8 billion private investment in a new methanol

manufacturing plant in Kalama, a rural community. The output of the new methanol plant

will be exported to overseas markets. This private investment and related manufacturing jobs

will be secured with the construction of the publicly funded dock.

Increases Exports from the United States to China

Growing overseas demand represents a substantial new export opportunity for methanol

manufactured in the United States. The Kalama Manufacturing and Marine Export Facility will

export 3.6 million metric tons of methanol each year. The primary destination for these

exports will be China, reducing the annual U.S. – China trade deficit by approximately $1.65

billion.

The Project builds upon Kalama’s position as a leading U.S. export gateway. Port of Kalama

terminals exported 13.4 million metric tons of cargo in 2018, making Kalama the largest

export port in the U.S. Pacific Northwest (in terms of tonnage).

Moves Manufacturing Jobs Back to the United States

The new dock will support the creation of 192 family-wage jobs at the methanol plant and a

total of 668 new jobs within the local rural community. The average wage for a plant worker

is projected to be $71,353 per year, which is 43 percent above the

median household income for Cowlitz County, WA. Each plant job is

also expected to generate another $38,084 in benefits and payroll

taxes, bringing the total annual compensation for each plant job to

$109,437.


EXECUTIVE SUMMARY

EXECUTIVE SUMMARY

Transforms an Economically Distressed Rural Area

The Project is in an economically distressed rural area. Manufacturing jobs in Cowlitz County

have declined 30 percent since 2000. The County’s unemployment rate is 70 percent higher

than the national average. The County’s per capita personal income is 26 percent lower than

the Washington State average.

Kalama - Population 2,500

The new methanol plant will significantly increase funding for County and local services,

increasing the tax base for the County by 18%, the school district by 165%, and the fire district

by 169 percent (estimated). The new plant will also increase the tax base available to maintain

local roads.

Benefits Workers in Opportunity Zones

The project site is within five miles of two Opportunity Zones. The methanol plant will draw

workers from these Opportunity Zones, providing new job opportunities to low-income

communities.


EXECUTIVE SUMMARY

EXECUTIVE SUMMARY

Energy

North American natural gas production has boomed over the past ten years. The new

abundance of natural gas has created the opportunity for the low-cost manufacturing and

value-added conversion of derivative products such as methanol both for domestic use and

for export. The Project will leverage this energy revolution to generate stable, high-paying

jobs in a rural community.

Promotes Geographic Diversity of National Infrastructure Investments

Despite having nationally important marine, rail, and road infrastructure, Cowlitz County has

not received funding from any of the previous TIGER or BUILD rounds. Even though there

have been numerous awards in earlier rounds to projects in the Puget Sound and the eastern

portion of Washington State, there has been only one award to a project in the southwestern

part of Washington State.1

1 West Vancouver Freight Access Project, Port of Vancouver, TIGER 2010, urban project.

Note: The Port of Kalama plans to also apply for a

Port Infrastructure Development Grant.


PROJECT DESCRIPTION

PROJECT DESCRIPTION

Project Description

The Project will construct a deep-draft dock on the Columbia River. The dock will be used to load

methanol onto vessels for export to overseas markets. The dock will serve a new methanol

production plant that will be constructed on adjacent Port property.

In addition to the new dock, the Project also will

construct roads to connect workers to the new

methanol manufacturing plant and adjacent

industries and to provide the local rural community

access to waterfront recreational opportunities.

METHANOL PLANT

The Port of Kalama and Northwest Innovation Works

(NWIW) are planning to construct the Kalama

Manufacturing and Marine Export Facility, which

would consist of a privately funded methanol

manufacturing facility and a publicly funded export

dock on approximately 90 acres along the Columbia

River.

The privately funded $1.8 billion methanol manufacturing plant would convert natural gas to

methanol, which would be stored on site and exported via marine vessel to global markets,

primarily in Asia.

The methanol is expected to be used to produce olefins, a building block of plastics.

The proposed methanol manufacturing

facility will produce up to 10,000 metric

tons of methanol per day when operating at

full capacity (approximately 3.6 million tons

per year). All the methanol produced by the

plant is expected to be exported over the

dock.

The new development has received strong

local and state support. Additional

information about NWIW can be found at

https://nwinnovationworks.com/project/.

KALAMA Cowlitz County, WA

NWIW moved its corporate offices to a 6,000 square foot office

space leased from the Port of Kalama in 2015.

https://nwinnovationworks.com/project/


PROJECT DESCRIPTION

PROJECT DESCRIPTION

EXPORT DOCK

The new export dock is designed to accommodate both existing and future generations of

methanol carriers.

The dock will generally be 530 feet long and 36 feet wide and would be designed to accommodate

vessels ranging in size from 45,000 deadweight tonnage (DWT) to 127,000 DWT, measuring from

600 to 900 feet in length, and 106 to 152 feet in width. The dock will consist of a transition

platform, trestle, and turning platform. From the access trestle, the berth face of the dock will

extend approximately 530 feet downstream and will consist of an approximately 100- by 54-foot

transition platform, a 370- by 36-foot berth trestle, and a 104- by 112-foot turning platform.

NWIW will equip the dock with loading arms and methanol piping and racks; this dock equipment

is not included in the BUILD project.

Methanol Plant Drawing


PROJECT DESCRIPTION

PROJECT DESCRIPTION

A New Dock is Needed

The Port considered exporting the methanol over the existing North Port dock, which is

immediately upstream of the location of the proposed methanol dock. The existing dock is

currently used by Steelscape to import steel coil. This alternative was rejected for the following

reasons.

Given the projected call frequency and berth utilization for the methanol plant (60 ships per

year), it is expected that vessels calling the methanol facility, as well as vessels calling Steelscape,

would experience berthing delays if only the existing dock were used. Steelscape has preferential

berthing rights to the dock, which would shift the burden of the berthing delays to the methanol

plant. Delays in the berthing of methanol vessels would have the potential to lead to methanol

storage problems, which would, in turn, affect the manufacturing process. A lack of available

storage would result in a need to reduce production, which would affect the efficiency of the

Kalama Manufacturing and Marine Export Facility Project

Grant improvements shown in red


PROJECT DESCRIPTION

PROJECT DESCRIPTION

operation. These berthing delays would represent an unreasonable economic burden for the

methanol plant. Delays could also result in the need to accommodate vessels waiting to load at

the dock at existing anchorages in the river resulting in congestion and overuse of anchorages.

Additional factors that make the existing dock infeasible include the fact that the methanol

loading equipment (including marine loading arms, fire protection and monitoring equipment,

and piping) would interfere with Steelscape’s ability to unload steel coils from the dock. The

overhead equipment would represent a potential safety hazard to Steelscape’s operations. Also,

the size of the largest vessels that could potentially call on the proposed facility, which includes

vessels up to 127,000 DWT, are larger than those that can currently be accommodated by the

existing dock and berth.

ROAD AND PARKING IMPROVEMENTS

Two roads will be constructed or improved as part of the Project:

• Road “A” will be a new 720-foot long road that will provide emergency response access to

the methanol plant. The new road will also offer worker access to Air Liquide, an existing Port

tenant, and to the Port’s wastewater treatment plant.

Export Dock Drawing

A set of design drawings for the dock is included in the Supporting Materials.

https://www.dropbox.com/s/bgrj730uqyohjeb/Engineering%20-%20Dock%20Drawings.pdf?dl=0

https://www.dropbox.com/sh/2jo6f2r7e2d4ocw/AAAIMFpJLpEG5CCa-C0NyqZaa?dl=0


PROJECT DESCRIPTION

PROJECT DESCRIPTION

• Road “B” will be a 3,400-foot long improvement to an existing gravel road that today is not

capable of handling general road or bike traffic. A new parking area for approximately

21 vehicles will also be constructed. The upgraded road and parking will allow recreational

users to access the beach, river, and trails located immediately downstream (north) of the

methanol plant and dock.

Road “B” will be constructed to the standard currently used at the Port’s other industrial park

properties. The roadway width will accommodate on-street biking for recreational and

commuting uses. Paving the current graveled section of the road will minimize dust during

dry conditions and turbid stormwater runoff during wet conditions. The improved road will

also provide improved emergency vehicle access to a recreational area.

Typical unimproved condition of Road “B”

Site of future turnaround and parking area

Typical Roadway Section


PROJECT DESCRIPTION

PROJECT DESCRIPTION

PROJECT COST

The grant project components, totaling $23.0 million, have been vetted with a comprehensive

review of construction costs, schedules, permits, and related issues.

The original cost estimate from 2015 has been adjusted to 2017 dollars using a factor of 1.0310

and then rounded up to nearest $100,000.2 A more detailed cost estimate is posted on the

Supporting Materials web site.

2 Bureau of Economic Analysis, National Income and Product Accounts, Table 1.1.9, “Implicit Price Deflators for Gross Domestic Product” (March

2018).

Engineering Cost Estimate

Item Cost

Dock

Mobilization $773,000

Concrete Trestle, Platform $12,564,000

Mooring Dolphins $2,120,000

Breasting Dolphins $640,000

Walkway Supports $120,000

Contingency, Sales Tax, Other Costs $5,242,109

Total Estimated Cost - Dock $21,459,109

Roads

Road “A” $110,554

Road “B” $500,965

Contingency, Sales Tax, Other Costs $169,391

Total Estimated Cost - Roads $780,910

Total Estimated Cost $22,240,019

Adjusted from $2015 to $2017 $22,929,460

Total Project Cost - Rounded $23,000,000

https://www.dropbox.com/s/lxmquud6kmhr9nc/Engineering%20-%20Cost%20Estimate%20Updated%202015.pdf?dl=0



PROJECT LOCATION

PROJECT LOCATION

Project Location

The Project is located at the Port of Kalama’s North Port Marine Industrial Site in unincorporated

Cowlitz County, Washington.

LOCATION OF EXPORT DOCK

The Port would construct the proposed

export dock at approximately River Mile

(RM) 72 of the Columbia River

Navigation Channel.

The authorized channel is 43 feet deep

and generally 600 feet wide from RM 3

to RM 105.5 (Portland/Vancouver). At

the Mouth of the Columbia River, the

north reach of the channel is 2,000 feet

wide and 55 feet deep, and the south

reach 640 feet wide and 48 feet deep.

RURAL GRANT

The Project is located outside of an

Urbanized Area and is eligible for rural

grant funds.

OPPORTUNITY ZONES

The project site is near two Opportunity

Zones. While the private investment in

the methanol plant is not eligible for

Opportunity Zone tax incentives, the

low-income communities within the

nearby Opportunity Zones are expected

to benefit from the development of the

export dock and methanol plant.


PROJECT LOCATION

PROJECT LOCATION

ABOUT THE PORT OF KALAMA

Organized in 1920 by a vote of the people, the Port of Kalama is

governed by a three-member Port commission and administered

by an executive director. Currently, the Port employs 17 full-time

and several part-time employees. The Port's sources of revenue

include leases of various Port properties including marine

terminals; services associated with grain terminal and breakbulk

docks; and the Kalama marina. The Port does not tax its port

district and is financially self-sufficient. There are over

30 industries located at the Port of Kalama, employing about

1,100 people.

The Port of Kalama's industrial area has five miles of riverfront

property adjacent to the 43-foot deep-draft navigation channel of

the Columbia River. The BNSF Railway and Union Pacific Railroad

serve the Port.

Port of Kalama Mission

“To induce capital investment in an environmentally responsible manner to create jobs and to enhance

public recreational opportunities.”

Port of Kalama Industries and Properties


GRANT FUNDS, SOURCES AND USES OF PROJECT FUNDS

GRANT FUNDS, SOURCES AND USES OF PROJECT FUNDS

Grant Funds, Sources and Uses of Project Funds

GRANT REQUEST AND LOCAL MATCH

The total cost of the BUILD grant project is $23.0 million. The Port of Kalama will contribute

$11.5 million, or 50% of the necessary funding. This local match represents a significant

commitment of financial resources available to the Port. The application requests $11.5 million

in BUILD Transportation Discretionary Grant funds to complete the Project.

LEVERAGES INVESTMENTS

New Investments. As described above, BUILD grant funds will support a private investment of

$1.8 billion by NWIW in a new methanol plant. In addition to the dock, contributions by the Port

to the project will include the construction of a $10 million well to supply non-potable water to

the methanol plant, a new $500,000 stormwater system, and security improvements (video

surveillance, fencing, gatehouse, etc.) estimated to cost $250,000.

Prior Investments. The BUILD project will leverage nearly $250 million of investments in the

North Port Marine Industrial Site by private, local, and state entities. These investments include

the construction of the existing dock and Steelscape plant (commissioned in 1997).

The Port has already invested nearly $20 million in land and infrastructure on the 90-acre

methanol plant site. The site is filled, pre-loaded, and has many utilities in place, including

electrical (114 KV service available), industrial gases (hydrogen, nitrogen, and UHP oxygen), and

telecommunications.

The Project will also leverage investments to deepen the Columbia River navigation channel to

43 feet. The final portion of the deepening project was completed in November 2010. Funding

for the $182.8 million project came from federal appropriations ($29.6 million ARRA funding and

$107.1 million USACE construction funding) and the sponsor states of Oregon and Washington

($46.1 million). The deepening project has already stimulated over $1 billion in new investments

at Columbia River marine terminals.

Project Funding

Category Source Funding Percentage

Non-Federal Port of Kalama Local Match $11,500,000 50%

BUILD BUILD 2018 Grant $11,500,000 50%

Other Federal Not Applicable $0 0%

Total Project Funding $23,000,000 100%


MERIT CRITERIA

MERIT CRITERIA

Merit Criteria

ECONOMIC COMPETITIVENESS

Supports Private Economic Development

The Project will support massive private investment that will have a transformative effect on a

rural community. The new dock is needed to secure $1.8 billion of private investment in the new

methanol production facility. This private investment will bring new jobs to the local community

and a new flow of exports from the U.S.

Creates Long-term Job Opportunities and Other Economic Benefits

The Project will have a transformative impact on the local rural community by supporting the

creation of much-needed long-term jobs and by significantly increasing the local tax base for

roads, fire protection, education, and local government services.

The Project is in an Economically Distressed Rural Area

Cowlitz County is a rural area that has historically relied on forest products and other basic

industries for an economic base. Whereas urbanized areas in Washington State have thrived, the

County has been hard hit over the past two decades as these traditional industries have been in

decline. The number of manufacturing jobs in Cowlitz County has declined by more than

30 percent since 2000.

Leverages a $1.8 billion private investment

Creates family-wage jobs in a rural community

Increases U.S. exports

Moves manufacturing jobs from China to the U.S

Reduces the trade deficit with China by $1.6B / year


MERIT CRITERIA

MERIT CRITERIA

Because of these economic headwinds, the County’s unemployment rate is substantially higher

than both the state and national averages. Per capita personal income in Cowlitz County lags the

national and state averages, due in large part to the loss of higher-paying manufacturing jobs.

Provides Job opportunities for Opportunity Zone Populations

The new methanol plant and export dock will be located near low-income communities. There

are two Qualified Opportunity Zone Tracts (53015000300 and 53015001100) in Cowlitz County

that located with five miles of the project site.

Supports Significant Long-term Job Creation

The new methanol plant will employ 192 full-time workers, including executive and

administrative staff. Payroll, which includes all benefits, taxes, wages, salaries, and other similar

expenses, will be about $21 million a year.

Vessel activity at the new dock is expected to generate $3.3 million in spending annually,

employing nearly 24 workers. Significant dock-related spending impacts include pilotage,

dockage fees, longshoremen, berthing, ship supplies, and on-shore personal spending by ship

crewmembers.

In total, 668 jobs a year are linked to the new plant and dock operations. This total includes the

192 at the plant itself, jobs tied directly to vessel calls (included in indirect jobs), and all the

indirect and induced jobs elsewhere in the economy.

NWIW is planning to work with Lower Columbia College to develop a program to train skilled

local workers for the plant.

Local Job Impacts

Impacts Direct Indirect Induced Total

Output ($ Millions) $ 1,286.3 $ 42.6 $ 30.3 $ 1,359.2

Labor Income ($ Millions) 21.0 16.1 10.7 47.8

Employment (Job-Years) 192 258 218 668

Source: Table 8, Final Economic Impact Analysis, ECONorthwest. In 2018 dollars.

https://www.dropbox.com/s/wqkboo6z4dc5nb5/Economics%20-%20Economic%20Impact%20Study%20-%20ECONorthwest.pdf?dl=0


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Creates Family-wage Jobs

The average wage for a plant worker is projected to be $71,353 per year, which is 43 percent

higher than the current median household income for Cowlitz County.3 Each plant job is also

expected to generate another $38,084 in benefits and payroll taxes, bringing the total annual

compensation for each plant job to $109,437.

Boosts Local Employment during Construction

Construction of the proposed manufacturing facility and dock will take place over three years.

During the peak of construction activity, there will be an average of approximately 1,000 workers

per day. The average number of workers per day would be about 550 throughout the entire

construction period. The table below breaks down the economic impacts of construction on the

local area.

Increases the Local Tax Base

The new methanol plant will significantly increase the tax base for County and local services.

Using the 2015 assessment year for the tax base, the addition of $1.8 billion of property value by

the new methanol plant increases the tax base for the County by 18%, the school district by 165%,

and the fire district by 169 percent.

The plant will also increase the tax base available to maintain local roads.

3 The median household income is $49,804 (2017 dollars). Source: Census Bureau ACS 5-year Estimate.

Local Economic Impacts of Construction

Impacts

Total Project

Costs and Employ.

Local Direct Impacts

Local Indirect Impacts

Local Induced

Impact Total Local

Impact

Output ($ Millions) $ 1,800.0 $ 625.9 $ 203.4 $ 188.1 $ 1,017.3

Labor Income ($ Millions) 177.7 158.9 65.6 65.0 289.5

Employment (Job-Years) 1,122 1,001 1,129 1,389 3,519

Source: Table 6, Final Economic Impact Analysis, ECONorthwest. In 2018 dollars.

Local Tax Base Impact

Assessed Property Value for General

Levies Methanol Plant

Addition

% Addition to Tax Base

(1st Year)

Cowlitz County $9,771,460,436 $1,800,000,000 18%

Kalama School District #402 $1,090,266,124 $1,800,000,000 165%

Fire #5 ‐ Kalama $1,064,103,240 $1,800,000,000 169%

Source: Table 1, Economic Impact Analysis, BST Associates

https://www.dropbox.com/s/wqkboo6z4dc5nb5/Economics%20-%20Economic%20Impact%20Study%20-%20ECONorthwest.pdf?dl=0

https://www.dropbox.com/s/486mth3ryncig6w/Economics%20-%20Economic%20Impact%20Study.pdf?dl=0


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Helps the U.S. Compete in the Global Economy by Facilitating the Efficient Movement

of Exports

Methanol is a Substantial New Opportunity for U.S. Exports

Growing overseas demand represents a substantial new export opportunity for U.S. methanol

production located on the West Coast.

North American natural gas production has boomed over the past ten years. The new abundance

of natural gas has created the opportunity for the low-cost production and value-added

conversion of derivative products such as methanol both for domestic use and for export.

Meanwhile, global demand for methanol for use in the production of olefins is growing. Economic

forecasts predict an increase in worldwide demand for methanol from 60 million metric tons

(MMT) in 2013 to 109 MMT in 2023.4 Demand is particularly strong in Asia. China’s methanol

consumption is forecast to more than double from 30 MMT in 2013 to 67.5 MMT in 2023. China’s

imports are projected to increase six-fold from more than 4 MMT in 2013 to almost 25 MMT by

2023.

The Kalama methanol plant and export dock would increase U.S. exports by $1.65 billion each

year.5

Market Forces will drive Demand for U.S. Methanol

Market forces would be expected to drive the methanol market to prefer less expensive

methanol manufactured from natural gas in the United States over higher cost methanol from

coal. Producing methanol from coal in China is more expensive than producing it from natural

gas in North America. Natural gas prices in the United States are lower than in China and most of

the world. The cost advantages of producing methanol in Kalama from natural gas and shipping

it efficiently to Asian markets, including China’s coastal chemical complexes, is expected to

displace methanol production from existing coal-based plants in China and should also

discourage the development of new coal-based methanol plants. A very large portion of China’s

increased methanol production is expected to occur in Inner Mongolia near coal mines, which is

well inland and requires shipping the methanol to the coast where China’s petrochemical

facilities are located. Transporting the methanol such long distances overland in China creates

additional cost disadvantages for methanol produced from coal. In 2014, almost two-thirds of

China’s domestically produced methanol for the merchant market came from coal. In 2014, the

expanded methanol capacity was mainly from coal-based plants with one natural gas-based

exception located in Qinghai. In 2015, most of the new methanol plants were coal-based plants

4 IHS Inc. 2014. Newsroom – Driven by China, Global Methanol Demand to Rise Nearly 80 percent by 2023; North America marks return as “Production Powerhouse”. http://press.ihs.com/press-release/chemicals/driven-china-global-methanol-demand-rise-nearly-80-percent-2023-north-americ. 5 Assumes 3.6 million tons and $419 per metric ton (price posted North America methanol price, June 2019 contract, from Methanex web site).

http://press.ihs.com/press-release/chemicals/driven-china-global-methanol-demand-rise-nearly-80-percent-2023-north-americ

http://press.ihs.com/press-release/chemicals/driven-china-global-methanol-demand-rise-nearly-80-percent-2023-north-americ


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located in Inner Mongolia. Also, much of China’s capacity to produce methanol from coal is in

older inefficient facilities with high costs.6

Methanol Exports from Kalama have a Geographic Advantage

Kalama’s location on the U.S. West Coast gives it a geographic advantage that will enable the U.S.

to capture a greater share of the growing global methanol market. U.S.-produced methanol

exports compete with methanol exported from Iran and other counties in the Middle East. Today,

80 percent of China’s methanol imports come from the Middle East, with Iran being the largest

supplier.7 Using Tianjin as an example destination, the Kalama export facility is approximately

800 miles closer to Asian buyers than export facilities in Iran.

This geographic advantage will enable the U.S. to grow its share of the global methanol market,

supplementing current and projected exports from the U.S. Gulf area.

Reduces Shipping Costs by providing a New Layberth

The Project will provide a short duration layberth alternative for loaded dry bulk vessels awaiting

optimal sailing tides during periods between the departure and arrival of methanol vessels. The

availability of the dock as a layberth will reduce vessel-positioning costs and air emissions and

facilitate the efficient transport of Columbia River exports.

The current Columbia River anchorage system was designed decades ago when most vessels

were smaller and could anchor close to shore without swinging into the navigation channel.

However, today’s Panamax-class bulk vessels are too large to anchor in many existing Columbia

6 IHS Inc. 2015. Chemical World Analysis – Methanol. December 2015. 7 Iran accounts for 45% of China’s methanol imports, followed by Oman (14%), Saudi Arabia (11%) and Malaysia (8%). Source: China Customs & ICIS China Methanol Annual Study.

Ocean Sailing Distances


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River anchorages. If suitable anchorage locations or layberths are not available for these larger

vessels, they must remain at berth until river conditions make it possible for them to sail to the

ocean. This blocks the berths for other waiting vessels, bringing cargo movement to a halt,

including, at times, the unloading of barges and rail cars. Alternatively, these larger vessels could

go to an anchorage but will need tug assists to keep from swinging into the channel, costing

hundreds of dollars per hour and increasing emissions in the river system.

In addition to lay-berthing, the dock will also be available for uses such as topside vessel

maintenance.

ENVIRONMENTAL SUSTAINABILITY

Avoids and Minimizes Adverse Environmental Impacts on Air and Water Quality,

Wetlands, And Endangered Species

Minimizes Habitat Impacts

The dock structure will be in deep-water on the Columbia River to avoid and minimize effects to

shallow water habitat where juvenile salmon live. Through the design of the facility and the

choice of construction methods, the Project will avoid and minimize impacts to the extent

practicable.

The upland plant site has already been filled with sand in anticipation of development. The

construction of the upland facilities is expected to avoid direct wetland impacts and protect the

habitat in the nearby backwater slough of the Columbia River.

Avoids and Minimizes Habitat Impacts

Zero Discharge Facility for Stormwater

Protects Endangered Species

Reduces Air Emissions

Innovative, Streamlined Permitting


MERIT CRITERIA

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Zero Discharge Facility for Stormwater

The dock will be constructed to be a zero-discharge facility for stormwater. All stormwater will

be captured and pumped to an upland location for treatment and infiltration, aiding flood control

and water quality.

Protects Endangered Species

The construction of the export dock will avoid and minimize impacts to protected species:

• The dock's structural piles will be concrete and steel so that creosote will not enter

the water.

• The trestle to the dock will be narrow to minimize the amount of near-shore

overwater shading, minimizing effects to ESA-listed salmon and steelhead.

Mitigation related to the export dock is proposed to offset the reduction in habitat function of

the water column due to shading and the loss of benthic habitats from pile installation. Three

compensatory mitigation activities are anticipated:

• Old piles will be removed from the river in an area downstream of the export dock.

• Native vegetation will be planted along the shoreline to recreate natural conditions in

the salmonids migration corridor and to serve as a wetland buffer enhancement.

• Engineered logjams will be installed to increase in-stream diversity and create juvenile

salmon habitat.

Cold Ironing

The Project would provide shore power to allow all methanol tankers to “cold iron” while docked

(i.e., not have to generate their power using auxiliary ship generators), thereby reducing air

emissions while the methanol vessels are docked.


MERIT CRITERIA

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Reduces Air Emissions as Compared to Traditional Methods of Methanol Production

Methanol can be made from a variety of fossil fuel sources, including coal, oil, and natural gas. In

the past five years, over 70 coal-to-methanol plants have been commissioned in China to meet

growing demand. Production of methanol from China’s coal has various environmental impacts,

and China’s leaders have embraced the goal of significantly cutting their country’s coal

consumption over the next decade to eliminate chronic air pollutants and to address long-term

global warming concerns. Replacing

methanol made with coal from

China with methanol made in the

U.S. from natural gas and ultra-low

emissions technology reduces

carbon emissions by up to

90 percent.8

In the summer of 2015, NWIW

selected an ultra-low emission

(ULE) reforming technology for its

Port of Kalama plant. ULE reforming

technology converts natural gas to methanol by using a combination of electricity and process-

generated heat to power production. By using less natural gas, the process produces significantly

fewer carbon emissions. Although ULE technology has been used at sites around the world since

1994, NWIW will be the first to use this clean technology for methanol production in the United

States.

STATE OF GOOD REPAIR

A Sustainable Source of Revenue is Available for Maintenance of the Project

The Port has a well-established tariff mechanism – known as “dockage” – that collects fees from

vessels for the use of a dock. Using these dockage fees, the Port will maintain the berth and the

structural components of the new dock over its life. The Port will also use these dockage revenues

for maintenance dredging, which would likely be needed over time to maintain berth depth. The

volumes and frequency of maintenance dredging events will vary based on the needs of the

facility and the rate of shoaling. Maintenance dredging of the berth would be undertaken as part

of the Port’s maintenance dredging program.

The Project will also contribute to a state of good repair by increasing the tax base available for

the maintenance of local roads.

8 Northwest Innovation Works web site, http://nwinnovationworks.com/environment.

http://nwinnovationworks.com/environment


MERIT CRITERIA

MERIT CRITERIA

QUALITY OF LIFE

Connects Workers to Jobs

In addition to providing improved

access to recreational opportunities,

the improved Road “B” will also

serve as the primary access road to

the new methanol plant and the

Port’s export dock.

Worker access will also be provided

by a new road (Road “A”) that the

Project will construct. The footprint

of the new methanol plant will

require the removal of an existing

access road within the Port’s North

Port industrial area. Road “A” will re-

establish this access to existing

businesses, including Air Liquide,

while also providing a secondary

access point to the methanol plant.

Improves Access to Recreational Opportunities for Rural Communities

The Project will construct a road and new parking area to provide community access to the

Columbia River. The new facilities will allow for both general vehicle access and on-street biking.

Access to the waterfront and natural areas is an important community value for rural populations

living along the Columbia River. However, this recreational river access is limited to a large degree

by existing rail and freeway corridors and by industrial development along the river. The Project

will help to address this situation by providing improved access to the waterfront and a natural

area immediately downstream of the project area.

Expanding community access to the waterfront is part of the Port of Kalama’s mission to

“enhance public recreational opportunities.”

INNOVATION

Used an Innovative Approach to Streamline Environmental Reviews

The Port used an innovative arrangement with federal agencies for expedited permitting of the

Project. Using provisions available under Section 214 of the Water Resources Development Act

(WRDA), the Port funded US Army Corps of Engineers and National Marine Fisheries Service

permitting personnel, greatly improving permit review timelines while ensuring that use of the

funds did not impact impartial decision-making.

Access to the waterfront is an important value

for rural communities living along the Columbia River.


MERIT CRITERIA

MERIT CRITERIA

PARTNERSHIP

The Project demonstrates a strong collaboration between private and public entities to increase

U.S. exports and to bring manufacturing jobs to a rural community. The agreement between the

NWIW and the Port defines the responsibilities of both parties to bring this transformative

project to completion: NWIW will invest $1.8 billion to construct a methanol manufacturing

facility, and the Port will construct a dock over which the methanol will be exported.

The Project has received strong collaboration and support from the local community.

Cowlitz County granted $500,000 in funding from the Rural Public Facilities program for

engineering and permitting for dock design. Cowlitz County is also one of the permitting agencies

for the Project and has been supportive of the Port’s economic development activities. The

County’s funds were expended several years ago and are not part of the local match but do speak

to local support for the Project.

The Port of Kalama’s Comprehensive Plan and Scheme of Harbor Improvements supports the

strategy to complete the development of the North Port Marine Industrial Site.

https://www.dropbox.com/s/2b0sedbduf39jax/Other%20-%20Port%20of%20Kalama%20Comp%20Plan%202015.pdf?dl=0


PROJECT READINESS

PROJECT READINESS

Project Readiness

TECHNICAL FEASIBILITY

Preliminary design of the dock by BergerABAM (now WSP USA), a qualified engineering firm, is

complete. Both the design and related cost estimates were completed in 2015. The cost

estimates include a 20 percent contingency, which is appropriate for preliminary design

estimates for facilities of this type.

The need for the dock construction to proceed during an annual in-water work window,

established for fish protection, is considered in the schedule and cost estimates.

The project site is owned by the Port, and no real property or right-of-way acquisition is needed

for the Project to proceed.

The Port has the financial resources on hand to fund both its local match and the proposed grant

portion of the Project before reimbursement. According to the Port’s most recent audited

financial statement, the Port had $23 million in cash and cash equivalents as of December 31,

2017. The Port will be able to move quickly to construction once a BUILD grant is awarded.

PROJECT SCHEDULE

Project elements have been carefully reviewed to ensure the obligation of funds and project

completion in a timely manner. The schedule roll-up is shown below.

Permitting is expected to conclude by the third quarter of CY 2019. Construction work on the

dock is expected to start in the third quarter of CY 2020 (or before) and end in the fourth quarter

of CY 2021. Dock construction will coincide with the in-water work window established for fish

protection.

Construction of the first phase of the methanol plant is projected to start in the second quarter

of CY 2020 and be complete in the first quarter of CY 2023, at which time export of methanol

over the new dock will commence.

Schedule

https://www.dropbox.com/s/5s4c1jrrd2n2cqk/Other%20-%20Audited%20Financials%202018.pdf?dl=0

https://www.dropbox.com/s/5s4c1jrrd2n2cqk/Other%20-%20Audited%20Financials%202018.pdf?dl=0


PROJECT READINESS

PROJECT READINESS

REQUIRED APPROVALS

The Project is expected to have all permits in hand by the end of the 3rd quarter of 2019,

following the completion of the Supplemental EIS process.

List of Approvals

Permit / Authorization Agency(s) Status

Federal

Endangered Species Act

Section 7 Consultation

National Oceanic &

Atmospheric Administration

(NOAA) Fisheries / US Fish &

Wildlife Service (USFWS)

Permit Issued

Marine Mammal Protection Act NOAA Fisheries Permit Issued

Rivers & Harbors Act Section 10 /

Clean Water Act Section 404 and

Section 408

United States Army Corps of

Engineers (USACE)

Permit Issued

National Environmental Policy

Act

USACE Permit Issued

Private Aids to Navigation United States Coast Guard To be issued prior to construction

Section 106 of the National

Historic Preservation Act

USACE Permit Issued

State

Hydraulic Project Approval WA Department of Fish &

Wildlife

Permit Issued

NPDES Waste Discharge

/Construction Permits

WA Department of Ecology Permit Issued

Air Containment Discharge

Permit

Southwest WA Clean Air

Agency

Permit Issued

Section 401 Water Quality

Certification

WA Department of Ecology Permit Issued

State Environmental Policy Act Port of Kalama and Cowlitz

County

Final EIS released September

2016; Supplemental EIS Pending

Local

Shoreline Substantial

Development Permit / Conditional

Use Permit

Cowlitz County Permits Issued. Supplemental EIS

Pending

Critical Areas Permit Cowlitz County Permit Issued

Floodplain Permit Cowlitz County Permit Issued

Engineering and Grading Cowlitz County To be issued prior to construction

Building, Mechanical, Fire, etc. Cowlitz County To be issued prior to construction


PROJECT READINESS

PROJECT READINESS

Environmental Impact Statement

An Environmental Impact Statement (EIS) for the Project, prepared under Washington’s SEPA

process, has been completed. The Final EIS was released on September 30, 2016. A Supplemental

EIS on greenhouse gas emissions is now in process and is expected to be complete by the

3rd quarter of 2019. For more information about the EIS process, including a complete library of

EIS documents, please visit the Kalama SEPA website.

NEPA Review

The U.S. Army Corps of Engineers issued a Finding of No Significant Impact (FONSI) in Spring 2019.

Legislative Approvals

No legislative approvals are needed for completion.

ASSESSMENT OF PROJECT RISKS

On September 15, 2017, a decision by the State of Washington’s Shoreline Hearings Board

reversed Cowlitz County’s Shoreline Substantial Development and Shoreline Conditional Use

permits and remanded the matter to the County and Port for further analysis. On May 8, 2018,

Cowlitz County Superior Court reinstated the shoreline permits and clarified and limited the

further analysis (Supplemental EIS) to greenhouse gas analysis. The project schedule described

above includes time to perform supplementary analysis, which is in process.

NATURAL GAS PIPELINE

Northwest Innovation Works and Northwest Pipeline have signed a pre-construction agreement

for Northwest Pipeline to construct a 3.1-mile, 24-inch diameter natural gas pipeline and related

facilities (“Kalama Lateral Project”). The pipeline will extend from Northwest Pipeline’s mainline

to the methanol production facility. Northwest Pipeline has filed an application with the Federal

Energy Regulatory Commission (FERC) requesting a certificate of public convenience and

necessity authorizing the pipeline project. FERC completed its Environmental Assessment of the

project in July 2015. On April 11, 2016, FERC issued a certificate authorizing the construction and

operation of the pipeline. On April 11, 2018, FERC issued an extension of time to construct the

Kalama Lateral Project to April 11, 2019. On April 10, 2019, FERC issued an extension of time to

construct the Kalama Lateral Project to April 11, 2020.

Additional information about the proposed Kalama Lateral Project can be found online at the

Kalama Lateral Project website.

http://kalamamfgfacilitysepa.com/

http://kalamapipeline.com/


BENEFIT-COST ANALYSIS


Benefit-Cost Analysis

An economic benefit-cost analysis (BCA) was conducted for the Project using the methodology

described in USDOT’s 2018 Benefit-Cost Analysis Guidance for Discretionary Grant Programs. The

analysis found that the Project will generate an estimated $367 million in present-value benefits

(discounted at 7 percent), resulting in a benefit-cost ratio of 16 to 1.

Spreadsheets containing the calculations and assumptions used in the BCA are posted on the

Supporting Materials web site.

TRANSPORTATION COST SAVINGS

The benefit-cost analysis for the Project quantifies the benefit of reduced vessel operating costs

resulting from shorter vessel sailing distances.

In the “with-project” condition, the Project is constructed on the Columbia River. The methanol

is shipped 5,310 miles by Panamax tanker vessel from Kalama to Tianjin, China.

The “without-project” or baseline condition assumes the dock and methanol plant would not be

built at the project site. It assumes that U.S. Gulf Coast facilities would supply methanol to the

growing Asian market with methanol that would otherwise be supplied by the Kalama facility.

The sailing distance from New Orleans to Tianjin is 10,214 miles.

Other assumptions used in the BCA model include:

• Shipment size of 60,000 metric tons.

Benefit-Cost Analysis Summary

Category Undiscounted Present Value @ 7%

Costs

Capital Cost $23,000,000 $20,792,209

Maintenance Cost $4,830,000 $2,176,759

Total Costs $27,830,000 $22,968,968

Benefits

Vessel Operating Cost Savings $866,125,879 $367,167,360

Layberthing * *

Emissions * *

Residual Value * *

Total Evaluated Benefits $866,125,879 $367,167,360

Net Present Value $838,295,879 $344,198,392

Benefit-Cost Ratio 31.12 15.99

* Not Evaluated





• Daily vessel fuel consumption of 45 tons of IFO 380 (3.5%).

• Vessel sailing speed of 14.5 nautical miles per hour.

• Bunker fuel price of $405 per ton, the global average price in December 2017.

• In the first year of dock operations, it is assumed that 50 percent of the plant’s capacity will

be achieved (1.8 million tons). After that, it is assumed that 100 percent (3.6 million tons) of

the plant’s capacity will be exported each year.

NO TRANSFERS BETWEEN U.S. PORTS

The BCA assumes the Project will not result in transfers of cargo and benefits between U.S. ports.

The global methanol trade is projected to grow rapidly, and the methanol exports from Kalama

are expected to generate new benefits for the national account. Kalama methanol exports are

expected to compete with China’s domestic methanol production and methanol shipments from

Iran and the Middle East. By reducing transportation costs to Asia, the Kalama project will

increase the overall level of U.S. exports.

BENEFITS NOT EVALUATED BY THE BCA

The reduced sailing distances are expected to reduce fuel consumption and vessel emissions, but

this benefit is not monetized in the benefit-cost analysis.

The new export dock will also provide a layberth benefit to the Columbia River system, reducing

vessel delay costs and emissions. This layberth benefit is not quantified in the benefit-cost

analysis.

CAPITAL AND O&M COSTS

The BCA assumes a project cost of $23.0 million (in 2017 dollars). Dock construction will take two

years to complete and that the capital cost in the BCA is split evenly in those first two years.

Life-cycle maintenance cost is included in the analysis.


SUPPORTING MATERIALS

SUPPORTING MATERIALS

Supporting Materials

For supplemental project information, copies of materials referenced, and letters of support,

please visit the Supporting Materials.

COST ESTIMATES / ENGINEERING

Cost Estimate

Dock Drawings

Road Drawings

Site Build-out Drawing

ECONOMICS

Kalama Benefit-Cost Analysis Model - 2019

Economic Impact Study – 2015

(ECONorthwest)

OTHER

Port of Kalama Comprehensive Plan (2015)

Port of Kalama Financial Statement

Press Release – Northwest Innovation

Works Lease Agreement

SUPPORT LETTERS

U.S. Senator Patty Murray

U.S. Senator Maria Cantwell

U.S. Representative Jaime Herrera Beutler

State Representative Ed Orcutt

State Senator John Braun

Cowlitz County Commission

Cowlitz County Economic Development

Council

Cowlitz-Wahkiakum Council of

Governments

American Association of Port Authorities

Washington Public Ports Association

Pacific Northwest Waterways Association

Washington Maritime Federation

Washington Building Trades

Building and Construction Trades Councils,

Washington State and Cowlitz County

Great Northern Corridor Coalition


Documents

KALAMA MANUFACTURING AND MARINE EXPORT FACILITY€¦ · 15/07/2019 · EXECUTIVE SUMMARY ... From the access trestle, the berth face of the dock will extend approximately 530 feet