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FERC Repeats Endorsement of Cove Point LNG, Denies Anti-Shale Protests

FERC has denied a request for rehearing filed by two opponents of the Dominion Cove Point LNG LP export project, opening the door for the Department of Energy (DOE) to put its final stamp of approval on the project.

The Allegheny Defense Project and Wild Virginia petitioned the Federal Energy Regulatory Commission in December to issue a stay to stop the ongoing construction work on the plant in Calvert County, MD, and supporting compressor station work in Virginia until it issued a final order on rehearing (see Shale DailyDec. 30, 2014). Similar to many of the opposition measures aimed at the liquefied natural gas (LNG) export terminal, the rehearing request centered on the Commission's refusal to consider whether, where and how the terminal might increase drilling for natural gas and/or hydraulic fracturing.

FERC once again disagreed with the groups, saying they had "misapplied the causation element for assessing indirect impacts," and denying their contention that Marcellus and Utica shale region natural gas extraction activities and Cove Point are "two links of a single chain."

According to the order and FERC's Sept. 29, 2014 order authorizing the project, "Marcellus Shale production is not required for the Cove Point Liquefaction Project, and production is likely to increase in the area regardless of whether the Cove Point Liquefaction Project is approved. Production activities in the Marcellus Shale region and the associated impacts are thus not sufficiently causally related for the Commission to consider them as indirect effects of the Cove Point Liquefaction Project" [CP13-113] (see Daily GPISept. 30, 2014).

DOE approved Dominion's application to export LNG to free-trade and non-free trade agreement countries, subject to environmental review and final regulatory approval, in 2013 (see Daily GPISept. 12, 2013).

ClearView Energy Partners LLC analysts in a note Tuesday said FERC's decision clears the way for DOE "to finalize the project's conditional authorization to export natural gas to countries with which the U.S. does not have free trade agreements ('non-FTA' destinations). We anticipate another rapid turnaround from the DOE."

Construction of the Cove Point LNG facility is on schedule and on budget, Dominion Resources Inc. CEO Tom Farrell said Monday. Operations at the $3.4 billion - $3.8 billion facility are expected to begin in late 2017.

"The first foundations have been poured and the first structural steel has been erected," Farrell said during a conference call with analysts. "Engineering is nearly 80% complete and approximately 85% of the engineered equipment had been procured as of the end of the first quarter."

The project would enable Dominion to transport up to 860,000 Dth/d from existing pipeline interconnects near the west end of the Cove Point pipeline to its terminal to export up to 5.75 million tons/year (0.8 Bcf/d) of LNG.

The project has been the repeated target of protests, both in its docket at FERC and during the Commission's monthly open meetings (see Daily GPIApril 16March 19).

Dominion Midstream Partners reported 1Q2015 adjusted earnings before interest, income taxes, depreciation and amortization of $11.8 million and distributable cash flow was $11.9 million for the quarter.

Dominion reported operating earnings for 1Q2015 of $584 million (99 cents/share), compared with $607 million ($1.04/share) for the same period in 2014. Operating earnings are defined as reported earnings, determined in accordance with Generally Accepted Accounting Principles (GAAP), adjusted for certain items. Unaudited reported (GAAP) earnings for the quarter were $536 million ($91 cents/share), compared with $379 million (65 cents/share) for the same period in 2014.

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