Dominion Resources’ Cove Point LNG Terminal Wins Federal Approval

From an Article by Jim Polson & Mark Chediak, Bloomberg News, September 30, 2014

The U.S. Federal Energy Regulatory Commission has issued the permit for the Cove Point liquified natural gas (LNG) terminal in Maryland. Dominion Resources has proposed a tax-advantaged master limited partnership, or MLP, to own the terminal and use proceeds from a planned initial public offering to help fund construction estimated to cost as much as $3.8 billion.

Dominion, of Richmond, Virginia, is seeking to take advantage of a boom in U.S. natural gas production, driven by advances in drilling techniques including hydraulic fracturing, or fracking. Cove Point is scheduled to begin shipments from the 5.25 million tons a year capacity plant in 2017. The U.S. Energy Department has approved Cove Point’s exports to both free-trade and non-free trade agreement countries, according to FERC’s statement.

Cove Point would be the nearest export terminal to the Marcellus Shale, the most productive U.S. natural gas deposit. Cheniere Energy’s Sabine Pass and Sempra Energy’s Cameron terminal in Louisiana are the only U.S. export projects so far to win approval from the FERC and US Energy Department.

Dominion’s waterfront site, about 60 miles southeast of Washington, D.C., has already imported liquefied natural gas and requires minimal construction that would damage the environment, Dominion said in a statement yesterday following the approval.

Opponents including the Chesapeake Climate Action Network, an environmental group, have vowed to contest FERC approval in the courts. FERC failed to consider total impacts from increased natural gas production, including greenhouse-gases associated with fracking, they said in filings. FERC said the proposal, if mitigated with certain conditions, is “in the public interest.”

Advocates of natural-gas exports in Congress and the industry in recent months have seized on the potential for U.S. supplies of the fuel to cut Europe’s reliance on Russia. Europe gets about 30 percent of its natural gas from Russia, which annexed Ukraine’s Crimea region in March.

The company has in place 20-year contracts with affiliates of Japan’s Sumitomo Corp. (8053) and Gail India Ltd. of New Delhi. Neither Japan nor India have free-trade deals with the U.S.

NOTE: Dominion operates the Blue Racer Natrium complex in Marshall County, as well as other natural gas processing infrastructure in both Ohio and West Virginia, which would send material to Cove Point for export so the gas could be used in cities such as Tokyo and New Delhi. The Cove Point project is separate from Dominion’s planned $5 billion Atlantic Coast Pipeline that would ship natural gas from West Virginia for use in North Carolina via a 42-inch diameter line running 550 miles.