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EPA Presses FERC to Expand Cove Point Analysis

November 26, 2012
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The Environmental Protection Agency (EPA) has called on FERC to expand the scope of its environmental analysis of Dominion Cove Point's liquefaction facilities, asking it to look into the "foreseeable future" and to exceed its jurisdiction by reviewing the "indirect effects" related to natural gas drilling and combustion.

EPA's request is not the first on the subject. The Federal Energy Regulatory Commission (FERC) earlier this year rejected a similar request to consider the "indirect effects" involving Sabine Pass Liquefaction LLC and Sabine Pass LNG, shooting down the Sierra Club's arguments that FERC's approval of the export project was "arbitrary and capricious" because it failed to consider the project's "reasonable foreseeable" indirect effects of increasing the development of shale gas and its associated environmental impacts (see NGI, July 30).

In the rehearing order, the Commission told the environmental group that it was virtually impossible to estimate how much, if any, of the export volumes associated with the Sabine Pass liquefaction project will come from existing or new shale production. Moreover, FERC said that "while it may be the case that additional shale gas development will result from the liquefaction project, the amount, timing and location of such development activity is simply unknowable at this time."

The Sierra Club is at the forefront of the drive to block LNG liquefaction facilities, including the Dominion export project (see NGI, May 21). It also has been battling shale oil and gas development in various states and courts. Dominion said it plans to spend more than $2 billion on the liquefaction facility, which would convert gas from the booming Marcellus and Utica shales into LNG for export.

The EPA apparently was aware of FERC's Sabine Pass decision, because its letter rebutted the Commission's earlier conclusions, telling FERC to look into the "foreseeable future" and ignore the boundaries of its jurisdiction in coming up with an assessment.

In its letter to the Commission, the EPA recommended that FERC assess "the cumulative environmental effects resulting from implementation of the proposed [Cove Point] project, when combined with other past, present and reasonably foreseeable future actions, regardless of whether these actions are energy-related or not, or whether or not FERC has jurisdiction over them," such as the extraction of gas from the Marcellus and Utica basins. The company had "no comment" on the EPA's letter.

As part of the assessment of the environmental effects of the project, "we believe it is appropriate to consider the extent to which implementation of the proposed project, combined with implementation of other similar facilities nationally, could increase the demand for domestic natural gas extraction and increase domestic natural gas prices," the EPA said.

The agency asked the Commission to "calculate how many production wells, on average, would need to be drilled" to meet the export capacity of the proposed facility.

The EPA also proposed that FERC "discuss the extent to which implementation of the proposed project would create demand for construction of new gas pipelines or expansion of existing pipelines, in order to accommodate the increased volumes of gas supplied to the Cove Point and other facilities." In addition, it proposed that the Commission evaluate the Cove Point liquefaction project's direct and indirect impacts on the nearby Chesapeake Bay fisheries and fishermen.

The proposed Dominion Cove Point export facilities, which would be sited at its existing import terminal in Lusby, MD, is one of 16 applications pending before the Department of Energy seeking authorization to export LNG to countries with which the United States does not have free trade agreements (see related story).

While FERC has authority over siting of export facilities, DOE authorizes exports and imports. The department currently is conducting an investigation into the supply/demand and benefits aspects of the various export proposals.

EPA suggested that the National Environmental Policy Act review of the Cove Point liquefaction facility "represents an opportunity for FERC and the DOE to jointly and thoroughly consider the indirect and cumulative environmental impacts of exporting LNG from Cove Point," while the department awaits the results of a final report on the cumulative economic impacts of exporting LNG.

In early October, Calvert County, MD, Circuit Court Judge James Salmon heard cross motions for summary judgment from attorneys representing Dominion, the Maryland chapter of the Sierra Club and the Maryland Conservation Council. Dominion filed a lawsuit against the two groups in May after the Sierra Club claimed that it had the authority to block the liquefaction plant.

The company has stated that a 2005 agreement between Dominion and the Sierra Club specifically permits all the activities related to the project to proceed (see NGI, April 30). But the Sierra Club disagrees, insisting that an agreement dating back to the 1970s with the previous owner of the Cove Point LNG terminal -- Columbia LNG Corp. -- trumps Dominion's claims. Sierra Club also opposes the project because it indirectly supports hydraulic fracturing, which is used to stimulate production from unconventional wells.

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