LNG Exports

Dominion Receives DOE Authorization to Export LNG

Dominion Cove Point received authorization on October 7, 2011, from the Department of Energy to enter into contracts to export liquefied natural gas to countries that have free trade agreements with the United States. Dominion had filed for permission on Sept. 1.

Under the authorization, Dominion is permitted to enter into multi-year contracts up to 25 years long with companies wishing to export natural gas to countries with free trade agreements. The authorization is for up to 1 billion cubic feet per day. Dominion would have to add liquefaction equipment at its Cove Point facility to convert natural gas into liquefied natural gas.

On October 3, 2011, Dominion filed a second application with the Department of Energy. This application requests authorization to export to additional countries not included in the first application. In this application, Dominion said exports would be in the public's interest because studies show they could provide an enormous economic stimulus, provide energy price stability, promote the continued development of domestic natural gas and natural gas liquids, create thousands of new jobs in the oil and gas industry, increase tax revenues and improve the balance of trade.

Considerations

Filing Phases

The Oct. 3rd filing with the Department of Energy is the second phase of a two-phase export authorization request. This application requests authorization to export to any country with which the U.S. does not prohibit trade. The first phase, requesting authorization to export LNG to countries that have a Free Trade Agreement (FTA) with the U.S., was filed Sept. 1 and approved on Oct. 7.

The current list of FTA countries is very limited and none of the countries import significant volumes of LNG.

Economic Benefits

Economic studies filed with the application show benefits from exports and upstream gas production over the 25-year proposed term could include:

A reduction of the U.S. trade imbalance by at least $2.8 billion annually, and possibly as much as $7.1 billion;
A total of $22 billion in added government royalty and other revenues to federal, state, and local governments over the 23-year post-construction operating period (2018-2040), an average of $962 million annually. In addition, there would be $9.8 billion in landowner royalty income over the 25-year operating period;
Up to a $40 million annual increase in local property tax revenues in Calvert County Maryland; and
About 14,600 permanent jobs during the 23-year post-construction operating period (2018-2040), which are associated with facility operations and upstream natural gas production.

The studies filed with the application include an economic study of construction and operations completed by ICF International of Fairfax, Va., and market and supply studies completed by Navigant Consulting, Inc. of Rancho Cordova, Calif.

Connections and Positioning

Dominion Cove Point has connections to several interstate pipelines and is well-positioned to provide export customers access to abundant and diverse domestic gas supply. The facility is particularly well-situated to export gas production from the prolific Marcellus Shale and promising Utica Shale formations.

Pipeline Connections

Facility and Operational Changes

This application asked for permission to export up to 1 billion cubic feet per day, or 7.82 million metric tons per year, over a 25-year term to any country with which the U.S. does not prohibit trade. In order to export natural gas, Dominion would need to add liquefaction facilities to the existing Dominion Cove Point LNG import terminal. Construction of the new facilities could potentially begin in 2014 with an in-service date at the end of 2016.

Dominion is proposing to operate Dominion Cove Point as a bi-directional facility. It would continue to be able to import LNG and vaporize it as natural gas. In the future, it would be able to liquefy natural gas and export it as LNG. With both import and export capability, the terminal would be positioned to provide services to its customers in any market environment.

Services For Customers

Dominion plans to provide this new service to liquefy the natural gas for its customers. Dominion would not actually own or directly export the LNG. Customers would be responsible for supplying the natural gas to the terminal and then shipping and selling the LNG to foreign entities. Marketing-related information about this project is available from Bill Allen, (804) 771-4458, bill.allen@dom.com.

Environmental Considerations

Dominion will design and operate this proposed facility to minimize environmental impacts. In preparation for this filing, Dominion has discussed the benefits of this project with many federal, state and local officials. In addition to Department of Energy approval, Dominion would need environmental and regulatory approvals from the Federal Energy Regulatory Commission as well as other federal, state and local governmental authorities.

Project Status

While this project offers substantial potential benefits, Dominion has not made the final decision on pursuing the project and does not plan to do so until the necessary regulatory approvals, customer commitments and approval by Dominion's Board of Directors are received.

Print