Dominion waits for FERC order on Cove Point

During an earnings call back in January 2011, Dominion Resources president and CEO Tom Farrell announced the company’s plans to explore a liquefaction and export facility at a former natural gas import terminal in Calvert County, Maryland.

Now, three years later, a Federal Energy Regulatory Commission is expected soon to issue an order that will move the project a step closer to actual construction.  

Officials with Dominion Cove Point LNG, a subsidiary of Richmond, Va.-based Dominion Resources, expect FERC to issue an order — a response to public comments that followed an environmental assessment of the project — as soon as the end of this month, said Mike Frederick, vice president of Dominion Resources Inc.’s LNG Operations.

“We’re very close to wrapping up the regulatory process and starting construction,” Mr. Frederick said.

If approved, Cove Point would become the closest LNG export terminal to the Marcellus Shale that covers much of Pennsylvania. The $3.8 billion project will convert an existing natural gas import site — largely unused because of domestic production — into an export facility where locally produced natural gas can be shipped overseas.

The terminal will have the ability to export 0.7 billion cubic feet of gas per day, and most of that likely will come from the Marcellus Shale play. Dominion has two 20-year contracts — one with an Indian company and another with a Japanese company that would evenly split the company’s exports.

Exports are a priority at the moment for an industry dealing with sluggish prices. Natural gas prices are about half of what they were in 2008, and they dropped again last week as growth in supply continues to outpace growth in demand. That‘‍s good news for consumers but bad news for developers who have spent billions of dollars drilling in southwestern Pennsylvania and elsewhere.

FERC’‍s order on the Dominion project will address issues raised in the public comment period following the environmental assessment release in May. The order could require the company to take more measures to mitigate environmental impacts. 

Dominion will review the order, craft an implementation plan to address any issues raised and wait for the project’‍s approval or denial, the final step before construction. While there is no timetable for that process, Mr. Frederick said Dominion anticipates FERC will approve the project and that Dominion will start construction before the end of the summer.

The state of Maryland also needs to issue a wetlands license for the facility, which will operate along the Chesapeake Bay. Mr. Frederick expects to receive that by the end of the month.

FERC‘‍s environmental assessment released in May was favorable for Dominion’s export plans. “The FERC staff concludes that approval of the proposed project, with appropriate mitigating measures, would not constitute a major federal action significantly affecting the quality of the human environment,” the commission said.

Since then, Dominion has won a series of decisions that each push the project along.

In early June, FERC denied requests from U.S. senators and representatives, the U.S. Environmental Protection Agency and several environmental groups to extend the 30-day public comment period that typically follows the release of an environmental assessment.

Later that month, the Maryland Court of Appeals, the state’s highest judicial body, rejected a request from the Sierra Club to stop the project altogether. “Our understanding is, with the court denying hearing it, that’s the end,” Mr. Frederick said.

The export terminal would bring to port 85 ships annually, adding 75 jobs and generating $60 million in annual tax revenue — $20 million in income tax and $40 million in additional property tax, according to Dominion.

Mr. Frederick said he expects the terminal to be in operation by late 2017.

Michael Sanserino:, 412-263-1969 and Twitter @msanserino.

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