When asked about the anti-Jordan Cove initiative that we will vote on next May, a Portland lawyer who worked for the failed Astoria LNG terminal pointed out the value of delay: “. . . if there’s enough local opposition and they tie it up in court long enough these pipelines will go away.” (The World, December 6).

Actually, he was wrong; it takes more than delays to make pipelines and LNG terminals go away, but the vanishing prospect of big profits will finish the job quite nicely. Corporate promoters like Jordan Cove don’t mind throwing their shareholders’ money at whatever legal hurdles pop up – but only while they see a future payoff. If changes in the marketplace make their plans unprofitable, then – poof! Bye-bye to attorneys and consultants and briefs and studies and permit applications: no more good money after bad. And it’s not out of a deeply felt responsibility towards their shareholders, either. Even though the Jordan Cove promoters have successfully sold stock so they can live well while spinning their paper web for FERC, they will realize soon that recent gas market developments will make it impossible to raise the billions that will be required to build their terminal and their pipeline. And then, things will start to unravel.

In fact, the company ought to appreciate whatever delays the “anti-development quarter”, as a former World editor used to call them, has caused. When all’s said and done, the anti-Jordan Cove crowd may have prevented an investment that would have broken Jordan Cove and its parent company Veresen. Don’t look for any awards for Citizen Of The Year, though.

We’ve seen market-driven industrial failures before. The 1979 coal export mania was done in, not by anti-coal activists but by a steep drop in oil prices. Same goes for the 1989/80 Daishowa pulp mill; it imploded because the pulp market was crashing. And the 2007 Maersk container terminal was made unviable by the sharp recession that cut into container shipping.

But citing those cases carries a risk of oversimplifying. My book “The JOB Messiahs” shows that all were unserious proposals that carried the seeds of their own destruction. Jordan Cove, it must be admitted, was different. The company came here because nobody else wanted them, so unlike Daishowa and Maersk and Nucor, they did not court Coos Bay merely to get better terms (i.e. more lavish corporate welfare) in some other town. There were no other towns. But Jordan Cove’s plans were based strictly on that ancient rule of business: buy low and sell high. This was already obvious in 2005, when they proposed building an LNG import terminal. Back then an expected shortage of natural gas had caused domestic gas prices to rise from $2 to $13 per million British thermal units (MMBtu), which made importing LNG look like a profitable venture. But within a few years fast-growing supplies of American fracked gas caused prices to crash, and ever since they have fluctuated between $2 and $6 per MMBtu. Jordan Cove’s response was to turn its original plan on its head and build a plant to export now-cheap American gas as LNG, to places where the going price was $12 or more. And for some time that looked very promising, especially after the 2011 earthquake and tsunami in Japan, which caused the idling of all the Japanese nuclear power plants. The resulting demand for LNG by Japanese power companies caused LNG prices in Asia to go as high as $19 per MMBtu. This explains why Jordan Cove did not give up on its plan, and why7 all kinds of local officials who sucked up to Jordan Cove were confidently assuring everybody that the terminal was in the bag.

But let’s look at a few recent numbers. This year domestic gas prices have averaged a little over $4. According to industry experts, transporting, liquefying, shipping and re-gasifying this gas overseas as LNG costs about $6 per MMBtu. (It may be more since recent LNG export projects in places like Australia and Indonesia have far exceeded original construction cost estimates.) Anyway, $6 on top of $4 produces gas costing ten dollars per MMBtu. If you can sell that for $19 on long-term contracts to Japan, or even for $12 to China, the biggest Asian market, you’re guaranteed to make money.

But several dark clouds have risen. One is the growing awareness that the potential of American fracking may have been overstated since many of the fracked wells peter out much sooner than conventionally drilled ones. Another is that fracking is more costly than regular drilling, and many frackers will need to sell their gas at much higher prices to stay in business. Such factors (among others) suggest higher domestic prices.

There are also hints that the Japanese nuclear plants may be restarted, which would be another dark cloud against the blue sky of LNG. But the biggest, darkest cloud is the deal Russia made last month to sell huge volumes of Russian gas to China. From Siberia this gas will enter China’s northwestern territories by pipeline; the communiqués about the deal mentioned no prices, but gas experts expect that the Chinese will pay about $8 per MMBtu. For now, this will not keep coastal parts of China from importing gas as LNG, but the Chinese have always been cagey traders, and the Siberian gas deal has greatly reduced their willingness to pay $12 or more for LNG. Between $10 and $11 looks like the upper limit, and the Chinese will be also much less eager to sign long-term contracts. That’s because lately, spot prices (short-term, non-contractual prices) of LNG overseas have been lower than contract prices, when previously they were higher. But with the prospect of excess capacity in the market, not just because of the Russian plan but due to new LNG supplies coming on stream from Australia and Indonesia, Asian buyers have increasingly favored buying short-term. Moreover, long-term contract prices have long been tied to oil prices, which are still declining.

All has combined into a perfect storm that’s ruining the prospect of profitable long-term LNG contracts, and making exporting LNG from North America a losing proposition. Remember, by the time American LNG gets to the Chinese market, it will have cost the seller $10 – or more. No investor in his right mind will bet his money on a venture that has no sure, contractual prospect of making big money. This what a savvy investment expert wrote only yesterday:

“Here we take a look at the LNG sector and why we believe investors should steer clear . . . for the foreseeable future. LNG prices have collapsed, falling by about 50% so far in 2014. Prices are now below $10 per million Btu (MMBtu) in Asia, down from peaks of around $19/MMBtu in the aftermath of the Fukushima crisis.”