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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.
Kalama Manufacturing and Marine Export Facility 2
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.
Kalama Manufacturing and Marine Export Facility 3
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.
Kalama Manufacturing and Marine Export Facility 4
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.
Kalama Manufacturing and Marine Export Facility 5
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
Kalama Manufacturing and Marine Export Facility 6
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
Kalama Manufacturing and Marine Export Facility 7
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.
Kalama Manufacturing and Marine Export Facility 8
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
Kalama Manufacturing and Marine Export Facility 9
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
Kalama Manufacturing and Marine Export Facility 10
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.
Kalama Manufacturing and Marine Export Facility 11
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
Kalama Manufacturing and Marine Export Facility 12
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%
Kalama Manufacturing and Marine Export Facility 13
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
Kalama Manufacturing and Marine Export Facility 14
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.
Kalama Manufacturing and Marine Export Facility 15
MERIT CRITERIA
MERIT CRITERIA
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
Kalama Manufacturing and Marine Export Facility 16
MERIT CRITERIA
MERIT CRITERIA
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).
Kalama Manufacturing and Marine Export Facility 17
MERIT CRITERIA
MERIT CRITERIA
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
Kalama Manufacturing and Marine Export Facility 18
MERIT CRITERIA
MERIT CRITERIA
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
Kalama Manufacturing and Marine Export Facility 19
MERIT CRITERIA
MERIT CRITERIA
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.
Kalama Manufacturing and Marine Export Facility 20
MERIT CRITERIA
MERIT CRITERIA
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.
Kalama Manufacturing and Marine Export Facility 21
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.
Kalama Manufacturing and Marine Export Facility 22
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.
Kalama Manufacturing and Marine Export Facility 23
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
Kalama Manufacturing and Marine Export Facility 24
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
Kalama Manufacturing and Marine Export Facility 25
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.
Kalama Manufacturing and Marine Export Facility 26
BENEFIT-COST ANALYSIS
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
Kalama Manufacturing and Marine Export Facility 27
BENEFIT-COST ANALYSIS
BENEFIT-COST ANALYSIS
• 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.
Kalama Manufacturing and Marine Export Facility 28
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