trending Market Intelligence /marketintelligence/en/news-insights/trending/8fIPh6XNVRzXtzZOKjgR1Q2 content esgSubNav
In This List

Court 'more likely than not' to uphold FERC's Cove Point LNG review


Insight Weekly: Loan-to-deposit ratio rises; inventory turnovers ebb; miners add female leaders


Insight Weekly: Sustainable bonds face hurdles; bad loans among landlords; AI investments up


Insight Weekly: Bank oversight steps up; auto insurers’ dismal year; VC investment slumps


Insight Weekly: Renewables lead capacity additions; bank mergers of equals up; nickel IPOs surge

Court 'more likely than not' to uphold FERC's Cove Point LNG review

The U.S. Court of Appeals forthe District of Columbia Circuit is scheduled to hear oral arguments April 19 ina case brought by an environmental coalition alleging that FERC's environmentalreview of Dominion Resources Inc.'sCove Point LNG LP liquefactionand export project did not comply with the National Environmental Policy Act.

FERC has denied that its September 2014 approval order failed to adequatelyconsider the indirect and cumulative effects of the liquefaction and export projectunder the act, including what the EarthReports Inc.-led coalition petitioning thecourt expects to be more drilling and hydraulic fracturing in the Marcellus andUtica shales. Natural gas trade associations also defended FERC's review, but the environmental groups, whichalso include the Sierra Club and Chesapeake Climate Action Network, to call on the agency to "facethe twenty-first century." (D.C. Circuit 15-1127, FERC CP13-113)

S&P Global Market Intelligencerecently spoke with Joseph Fagan, a Day Pitney LLP partner with experience representingindustry clients in federal regulatory matters, about the Cove Point case and itsimplications for other U.S. LNG export projects. The following is an edited transcriptof the conversation.

SNL Image

Joseph Fagan, Day Pitney LLP partner

Source: Day Pitney LLP

S&P Global Market Intelligence:Does this have the potential to be a landmark case? Could the court rule againstFERC?

Joseph Fagan: I think it would be more likelythan not that the court will uphold the FERC decisions. One, this is not the firsttime the courts have been presented with these environmental arguments, and I thinkyou'd be hard-pressed to say that FERC hasn't at least given a hard look at allthe environmental issues and they've complied with their obligations. Another factorI think, frankly, that plays in favor of upholding FERC's decision is that CovePoint is not a brand-new greenfield plant.

And thenthe arguments about the impacts of the gas production … I think it's pretty clearthe court will find that's speculative.

It wouldprobably cause havoc not only in the LNG space but also probably in the state pipelinespace if the court were to turn over the certificate orders.

The groups appealing FERC's decisioncite upstream impacts as a primary reason for their action. From your perspective,what was the petitioners' thought process in appealing the Cove Point decision?

I thinkwhat Sierra Club and others are trying to do, and I understand why they're doingit, is all these huge projects are being proposed and they're opposed to them, sothey're trying to come up with whatever arguments they can make, hoping that perhapsthey'll find something that sticks if they throw enough stuff against the wall.That being said, the cynical part of me also says even if they know, for example,that fracking is not something that falls within FERC's jurisdictional bailiwick,they know they can tie the projects up in some litigation which may delay ultimateapprovals. They know full well that for a lot of these big export projects, theeconomics are very tight and they can delay these projects a year or more … andmaybe they can essentially get a win that way.

The Sierra Club, which is partof the coalition appealing the Cove Point decisions, has also appealedFERC's decision to allow CheniereEnergy Inc.'s Sabine Pass LNG liquefaction and export facility to expandits capacity at existing facilities. Since those oral arguments happened in November2015, could the court's decision on that matter indicate what might happen withCove Point?

What'sinteresting about Sabine Pass is they've already started exporting cargoes, so we'rewaiting on the court's order, but yet that project is already . In terms of how that would playout in practice if the court were to rule in Sierra Club's favor would be interesting,but I wouldn't be holding my breath.

Do you think the LNG industryis seriously worried about the Cove Point case, or do they see it more as anotherprocedural hurdle?

I thinkthey're watching it, but … you see folks saying until there's a change in law, there'sprobably not going to be any difference in how the Court treats these things. Itend to agree with that because if a Court were to rule in favor of EarthReportsin the Cove Point case, I think the reason why it would be very shocking to manyis because it would be a break from precedent. So long as FERC considers argumentsand explains why it is not accepting those arguments, typically the courts willbe very deferential.

I don'tthink at this point the case rises to the level of the industry worrying it'll havea huge impact. Where you might see some interest outside the oral arguments is ifFERC issues its own rulemaking or a new pronouncement saying they're going to lookat these issues a lot more closely when permitting LNG facilities and natural gaspipelines.

Could that feasibly happen?

Sure,but … I think it really depends on how flexibly FERC — whether it's current or futurecommissioners — would view the standards set forth in the statute. It would be atough stretch. This Congress certainly isn't going to change the law to explicitlyallow for the issues the environmental groups are pushing for to be considered.I don't see that happening for quite a while. FERC is very pro-infrastructure. Ican't imagine they would make it more difficult for infrastructure to be built,though it doesn't mean you get a free pass. That's what we saw with Jordan Cove.You have to explain what you're doing and why you're doing it.