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Jordan Cove announces second long-term LNG deal after FERC denial

said it has signed apreliminary agreement to provide long-term natural gas liquefaction capacity toITOCHU Corp. at the JordanCove LNG facility, just days before the project's deadline to appeal FERC's certificateauthorization denial.

The dealcovers ITOCHU's purchase of 1.5 million tonnes per annum of liquefaction capacityfor an initial term of 20 years, according to a Veresen news release. The agreementis subject to the negotiation of a mutually acceptable, definitive liquefactiontolling agreement, which the two are working to conclude.

"Thisis the second major customer agreement for the Jordan Cove LNG project and it representsfurther proof of the market support for this project," Veresen President andCEO Don Althoff said in a statement.

On March22, Veresen nailed down a similar off-take agreement with JERA Co. Inc. for at least1.5 mtpa for 20 years. The agreement with Japan's ITOCHU brings Jordan Cove's potentiallycontracted capacity to 3 mtpa — or roughly 0.4 Bcf/d — of the terminal's proposed0.9-Bcf/d capacity.

FERC'sMarch 11 denial of certificate authority for Jordan Cove LNG and the thatwould serve it found that the "generalized allegations of need proffered byPacific Connector do not outweigh the potential for adverse impact on landownersand communities." The commission then concluded that authorization for JordanCove LNG would be inconsistent with the public interest because "without asource of natural gas … it will be impossible for Jordan Cove's liquefaction facilityto function."

WhileVeresen's achievements ahead of the April 11 deadline for request for rehearingdemonstrate customer demand, they may not be enough to appease FERC. Raymond James& Associates Senior Vice President Pavel Molchanov told S&P Global Market Intelligence in March that thedeal with JERA would "not likely" change FERC's mind, particularly becauseit is only a preliminary deal and is subject to the execution of a detailed liquefactiontolling agreement. S&P Capital IQ industry analyst Stewart Glickman added thatif Jordan Cove could sign agreements for "closer to 70% or 75%" of itscapacity, then it might be able to sway the commission.

If FERCdenies Jordan Cove's request for rehearing, the project can appeal that decisionin the U.S. Court of Appeals within 60 days of the commission's order. Veresen hadplanned to reach a final investment decision in 2016 after receiving notice to proceedwith construction from FERC.