Jordan Cove signs new deals; asks FERC to re-look at project rejection

Jordan Cove Energy Project LP (JCEP) and Pacific Connector Gas Pipeline LP (PCGP) on April 8 requested rehearing of a March 11 Federal Energy Regulatory Commission order rejecting JCEP’s application to construct and operate a liquefied natural gas (LNG) production and export facility and PCGP’s application to construct and operate a natural gas pipeline.

The Jordan Cove LNG facility is to be located in the International Port of Coos Bay in Oregon.

The companies said: “The Commission should reverse its decision in the March 11 Order and issue the requested authorizations because recently executed agreements demonstrate need for the Project. These agreements evidence a change in the facts that served as the Commission’s sole basis for rejecting JCEP’s and PCGP’s applications, which warrants the Commission accepting such agreements into the record and revising its analysis accordingly.

“The Commission should either issue the requested authorizations, subject to conditions, or keep the record open to receive further evidence, rather than rejecting the applications simply because conditions in the industry, of which the Commission as an expert agency can take notice, have caused the execution of pipeline precedent agreements to be delayed.

“The Commission should issue the requested authorizations because the Final Environmental Impact Statement (“FEIS”) found the Project to have no significant adverse environmental impacts and identified significant positive economic and fiscal effects of the Project, and the Department of Energy (“DOE”) found the Project to have regional and national economic benefits, which together outweigh the unquantified risk that the power of eminent domain might be needed to obtain some portion of the required right of way.

“The Commission should utilize methods available to it of ensuring that the Project will not go forward without sufficient customer agreements in place, such as by conditioning the exercise of the power of eminent domain on the execution of precedent agreements, rather than rejecting the applications. The Commission has previously conditioned the exercise of the power of eminent domain in orders granting certificates of public convenience and necessity and should do so here.

“The Commission should not have directed the Applicants to file new applications, which would likely take years to process, in order to submit evidence regarding customers’ contractual commitments, rather than keeping the record open in this proceeding in order to receive such evidence.”

Since the March 11 order, five agreements have been reached which demonstrate the need for the project, the companies added.

  • On March 22, JCEP finalized the key commercial terms with JERA Co. Inc. for the sale of at least 1.5 million tons per annum of natural gas liquefaction capacity for an initial term of 20 years, subject to customary conditions including the execution of a detailed liquefaction tolling agreement. JERA is a joint venture of Tokyo Electric Power Co. (TEPCO) and Chubu Electric Power. The purpose of JERA is to ensure “the stable supply of energy on an internationally competitive basis.” This mission includes the joint procurement of LNG. Once TEPCO’s and Chubu’s fuel procurement is consolidated into JERA in July 2016, it will become the world’s largest purchaser of LNG. This deal was getting close to final form when FERC rejected the application.
  • On April 8, JCEP reached preliminary agreement with ITOCHU Corp. on certain key commercial terms for the purchase by ITOCHU of an additional 1.5 million tons per annum of natural gas liquefaction capacity for an initial term of 20 years. The agreement subject to the negotiation of a mutually acceptable, definitive liquefaction tolling agreement, which JCEP and ITOCHU will continue to work together to conclude. With approximately 130 bases in 65 countries, ITOCHU engages in domestic trading, import/export, and overseas trading of various products such as textiles, machinery, metals, minerals, energy, chemicals, food, information and communications technology, realty, general products, insurance, logistics services, construction, and finance, as well as business investments in Japan and overseas.
  • On April 8, PCGP and Macquarie Energy LLC executed a precedent agreement for 215,000 dekatherms per day (Dth/d) of firm transportation service. Macquarie is a global marketer and trader of energy products, including natural gas. Macquarie does not intend to subscribe for liquefaction services from JCEP but is instead taking capacity on PCGP in order to serve as an aggregator of natural gas supplies for JCEP liquefaction service customers.
  • On April 4, PCGP and Avista Corp. executed a precedent agreement for 10,000 Dth/d of firm transportation service. Avista is a combined electric-gas utility that serves over 600,000 customers in Oregon, Washington and Idaho The proposed route of PCGP lies in the heart of Avista’s southern Oregon service territory. PCGP will have 40,000 Dth/d of capacity to deliver gas into the Grants Pass Lateral near Roseburg which can flow south into Grants Pass on the currently fully-contracted pipeline. This substantial new quantity of capacity will enable significant economic development in the region by attracting new industries and providing additional natural gas to existing industrial, commercial and residential users throughout southern Oregon. PCGP is committed to serving local communities located along the pipeline and has agreed to install taps for natural gas deliveries to these smaller communities.
  • On April 8, PCGP and JCEP executed a precedent agreement for 592,354 Dth/d of firm transportation service. The timing of the execution of the JCEP PA was driven by the March 11 FERC order. It has been the expectation of JCEP that it would be a shipper on PCGP. JCEP has intended to utilize a portion of the terminal’s LNG production capacity in order to produce LNG for sale by JCEP, either at the outlet of the terminal or delivered to a foreign import terminal.
About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.