FERC approves Jordan Cove LNG project, despite market, state obstacles

Washington — Acting amid significant market headwinds for new US LNG development, the Federal Energy Regulatory Commission voted 2-1 to conditionally approve the Jordan Cove LNG export project in Coos Bay, Oregon, and the related Pacific Connector Gas Pipeline, which would send gas to the export terminal.

The action marks the first major US LNG export project to be approved in the West Coast of the Lower 48, but does not necessarily mean the terminal and pipeline will be built, as numerous market challenges remain for developer Pembina. Moreover, the state of Oregon has declined to sign off on several key regulatory approvals, including a quality certification and coastal zone management determination.

In a teleconference with reporters, FERC Chairman Neil Chatterjee said although the current market for LNG is "obviously very difficult," he believes the long-term fundamentals for US LNG are still strong."

"I believe America will continue to be a net exporter and keep its place on the world energy stage," he said, despite the recent fall in LNG prices to record lows. "All the signals I see from domestic participants, as well as our international allies [are] that people continue to be bullish about the prospects for US LNG," he said.

In contrast to the record evidence in the FERC docket when the commission rejected Jordan Cove and Pacific Connector in 2016, Chatterjee said that the pipeline project now had executed precedent agreements for 95.8% of firm capacity, helping to justify approval and the use of eminent domain.

GLICK, McNAMEE VIEWS

Democratic Commissioner Richard Glick voted against approval, and, in a statement said FERC "cannot ignore changes in the global LNG landscape, including recent events." FERC should review whether projects are actually going to be built, he said.

"By issuing a certificate for the pipeline needed to serve the LNG facility, the commission is giving the developer the ability to immediately begin the process to take land via eminent domain when the future of the Jordan Cove LNG project — and perhaps other proposed LNG projects — remain very much in doubt," he said.

According to Pembina, the company has signed voluntary easement agreements that constitute 77% of the privately owned portion of the pipeline route.

Commissioner Bernie McNamee, who at the February open meeting said he needed more time to consider Oregon's objections, this time voted to advance the project. Issues raised by the state's Department of Land and Conservation Development were already considered in FERC's environmental impact statement or specifically addressed in the order, he said in a statement.

The action "in no way" negates Oregon's denial without prejudice of water quality certification or its objection to the coastal zone consistency determination, McNamee said. Construction is not allowed without evidence of those authorizations or relevant waivers, he noted.

While state interests may inform the commission's decisions, he said at times FERC may find the national interest outweighs the state interests.

PEMBINA PLANS

Amid the escalating crisis over the coronavirus outbreak, Pembina this week cut its 2020 capital spending plans by $900 million to $1.1 billion. It also deferred some projects. While it did not mention Jordan Cove, specifically, the operator has yet to announce any firm long-term offtake contracts tied to the proposed liquefaction terminal.

In a sign it could move in another direction, the company said February 28 that it was considering developing or taking a stake in one or more liquefaction projects in British Columbia. That was before the capital spending cut, so even those talks could now be on hold.

While the market for LNG has been beset in recent months by low international prices, weaker-than-expected demand in key end-user markets and trade flow restrictions from the outbreak, Pembina has said it still sees a path to capitalize on forecasts for tightening supplies around the middle of the decade. A foothold on the West Coast of North America would give it a much shorter shipping route to Asia than from US Gulf Coast export terminals.

Pembina, in a statement Thursday, said the "affirmative decision from the FERC represents the most significant step forward for Jordan Cove since Pembina acquired the project," and said FERC's signoff emphasizes that the project is "environmentally responsible and is a project that should be permitted given a prudent regulatory and legal process was undertaken." It highlighted other recent progress including 14 local jurisdiction and city applications and permits.

If built, the LNG terminal project would produce up to 7.8 million mt/year of LNG for export. The 229-mile, 1.2 million Dt/d Pacific Connector pipeline would run through Klamath, Jackson, Douglas, and Coos counties in Oregon.