Most of the Pacific Northwest’s port and port related activity is located in the Puget Sound area and along the Columbia River, mostly within Washington State. On November 7th of this year, Steve Lerch of the state Economic and Revenue Forecast Council presented a review of the Washington States’ economic outlook to members of the Senate and the House of Representatives and said there are several issues going into 2014 that could negatively affect the economy.  “As in September, factors outside the state account for the high downside risk to the forecast. A slowing Chinese economy, the uncertainty surrounding U.S. tax and budget policy, the potential for a slowdown in the U.S. housing recovery, and European economic and debt problems all remain major threats to the U.S. and Washington economies,” Lerch said.  “In the two months since the September forecast was adopted, the Washington economy posted 4,400 net new jobs, 5,200 fewer than the 9,600 expected in the forecast.   “As in September, our final November forecast assumes a gradual decline in aerospace employment. Washington aerospace employment is down a total of 2,300 jobs since the peak in November 2012.” While Lerch, believes the decline is mild there are some dark clouds on the horizon. Back in November machinists at Boeing’s Washington State facilities (International Association of Machinists) rejected an eight-year labor extension deal that would have secured an estimated 20-year’s worth of work building the next generation 777x jet airliner. The deal would have terminated the union’s pensions and raised healthcare costs, issues that resulted in an overwhelming rejection (67%) of the Boeing proposal.  Already other States are lining up to build the 777x with Missouri, Alabama, California, South Carolina (which already has a Boeing presence) and Georgia in the mix. There is also the possibility that some parts and pieces will be imported from abroad, none of which is good news for Washington State and the PNW.  “The Institute of Supply Management - Western Washington Index (ISM-WW) continues to indicate positive but slowing growth in the broader manufacturing sector. The index declined from 61.0 in June to 52.7 in September before edging up to 54.2 in October. (Index values above 50 indicate positive growth while values below 50 indicate contractions.) The last time the Western Washington index was below 50 was in July 2009. “Washington exports grew 5.1% from the third quarter of 2012 to the third quarter of 2013. Exports of transportation equipment (mostly Boeing planes) increased 17.1% over the year but exports of agricultural products fell 43.2%. Exports from all other Washington industries rose 4.4% over the year.” Energy Exports There are potential exports that could improve the Western Washington Index, one of these being coal exports.  The Washington-based Institute from Energy Research said September 30, 2013: “U.S. coal companies turned to coal exports to keep mines open and workers employed, but a slump in that market largely due to an oversupply and slower than expected growth in China has resulted in lower projected exports for this year compared to last year’s record.” The new leadership in Beijing has moved away from the historical policy of stockpiling strategic mineral and energy commodities, dampening demand for coal and other commodities. How long the market will remain in the doldrums is hard to predict. But without double digit GDP growth in China, demand has to come from traditional industrialized markets, newly industrialized economies like India and rapidly developing states like Vietnam, Malaysia and Thailand.  Regardless, coal companies expect the global demand for coal to increase. In anticipation of a rebound, especially in Asia, coal companies are trying to develop three export terminals on the West Coast where no terminals currently exist. However, opposition both to increased rail traffic and environmentalists opposed to coal exports in general are at loggerheads with the coal companies trying to develop port sites. Another potential export that would bolster the Pacific Northwest economy and revenues at select ports could be oil, delivered either by pipe or rail, to refineries or transfer facilities on the West Coast. The U.S. Energy Information Administration (EIA) has said America’s crude oil production increased by 790,000-barrels per day between 2011 and 2012.  The IEA expects U.S. crude oil production to continue rising over the next two years by 815,000 bbl./d this year to 7.25 million barrels per day and another 570,000 bbl./d in 2014 to 7.82 million barrels per day. “Most of the U.S. production growth over the next two years will come from drilling in tight rock formations located in North Dakota and Texas,” the IEA reported.  But getting the crude from oilfield to the refineries will be a challenge as opposition groups are now targeting rail and pipeline transport as well as the construction of port facilities on the West Coast.  The Port of Vancouver USA has recently leased property to Tesoro-Savage for a crude oil handling facility with the Board of Commissioners approving a 10-year lease on October 22, 2013. However, a Washington state regulatory board withdrew its approval for two crude oil shipping terminals in Grays Harbor in response to resistance from the Quinault Indian Nation and several conservation groups, who argued the impact of the vessel and rail transits hadn’t been adequately studied. The proposed two terminals would add an estimated 520 additional vessel calls and 973-unit trains annually. At this writing, Imperium Renewables said it would move ahead with the expansion despite the Shorelines Hearing Board’s decision to require additional permitting. Overall, there are five facilities either operating looking for expansion or being planned in the Northwest: • Ferndale (BP, Phillips 66) • Anacortes (Shell, Tesoro) • Port of Grays Harbor (US Development, Westway, Imperium) • Clatskanie, Oregon (Global Partners)  • Port of Vancouver (Tesoro-Savage) Liquefied Natural Gas (LNG) also represents an opportunity for PNW ports. At present The Energy Department has approved four applications for terminals to export gas to countries that don’t have a free-trade agreement with the U.S, with another 20-applications under consideration. In the PNW several ports are hoping to have an LNG terminal approved and Oregon LNG has proposed to build a liquefied natural gas (LNG) terminal near Warrenton, Oregon, where natural gas would be liquefied and transported by ships to Pacific Rim markets. An 86-mile pipeline, named the “Oregon Pipeline,” is being proposed by the company to connect the LNG terminal to the Northwest Pipeline system at the Woodland, Washington interconnect site. Four LNG terminals have been proposed for the mouth of the Columbia River and, for the first time in years, test wells are being drilled in Eastern Washington with Canadian-owned Encana being the most active. As well, Puget Sound Energy is expanding its gas storage property near Chehalis and Energy Northwest has plans to build a $1 billion plant and the Port of Kalama that would take gas from coal, synthesize it and use it to generate electricity. In recent years there has been a significant shift in US oil imports away from OPEC to NAFTA partners and outside producing nations. In 2012, the top five suppliers were Canada, Saudi Arabia, Mexico, Venezuela and Russia. Of that group, Saudi Arabia and Venezuela are OPEC members while Canada (oil & gas – around 2.9 million bbl/day - are Canada’s largest export to US) and Mexico are members of NAFTA. Russia is an independent producer. Estimates suggest that within five-years the US may not need to import oil from any source but Canada.  The real question is with a surplus in hydrocarbon energy, how is North America going to develop transport and port facilities, particularly in the PNW, the closest exit point to markets?