Seeing No Demand, Agency Denies LNG Terminal Permit

File image courtesy Veresen

By MarEx 2016-03-22 18:50:46

On Friday, the Federal Energy Regulatory Commission (FERC) denied two firms associated with natural gas companies Williams and Veresen the permission to use eminent domain for constructing a pipeline and an LNG export terminal at Coos Bay, Oregon.

FERC emphasized that the pipeline's proposed operator, Pacific Connector, had not shown a market for its service, and in an “absence of a demonstrated need for the pipeline,” the commission denied the firm’s request.

The Commission's guidelines require applicants to provide evidence of demand for their product, including, among other possible forms, the existence of long-term service agreements or precedent agreements with clients. It said that it had repeatedly asked for evidence in this format and had not received it.

“We find the generalized allegations of need proffered by Pacific Connector do not outweigh the potential for adverse impact on landowners and communities,” the agency concluded.

Further, since partner firm Jordan Cove’s proposed LNG terminal couldn't operate without the pipeline's gas, the commission determined that “authorizing its construction would be inconsistent with the public interest.”

FERC dismissed environmental groups' requests for hearings on the project as moot, given that it had already denied permission to build on other grounds.

It left the door open to a reconsideration of the pipeline if Jordan Cove and Pacific Connector could show a market for their product.

If FERC's permission had been granted, Pacific Connector would have had the ability to start eminent domain proceedings to acquire right-of-way to build the line over private land.

"Clearly, we are extremely surprised and disappointed by the FERC decision," said Don Althoff, President and CEO of Veresen, Jordan Cove's owner. "The FERC appears to be concerned that we have not yet demonstrated sufficient commercial support for the projects. We will continue to advance negotiations with customers to address this concern."

Jordan Cove LNG and Pacific Connector will file a request for a rehearing, a spokeswoman for Veresen said. 

Regarding the potential for commercial support, she said that while global LNG markets are challenging, the firm believes its proposal would be cost-competitive with Gulf Coast export facilities. “We are not able to comment on the identity of our potential customers as they are confidential at this time. Broadly speaking, we are in negotiations with Asian customers,” she said.

The Pacific Northwest’s “thin green line” of opposition to fossil fuel exports, including Columbia Riverkeeper, Cascadia Wildlands and the local affiliate of climate action network claimed victory in the decision.