Center for LNG's Cooper talks of FERC approvals, future of project financing

This week, the Federal Energy Regulatory Commission approved Dominion Resources Inc.'s liquefied natural gas export project at Cove Point, Md. What are the next steps for the facility and possible litigation? During today's OnPoint, Bill Cooper, president of the Center for Liquefied Natural Gas, discusses the state of play on LNG export facility approvals and talks about the geopolitics surrounding U.S. LNG exports.


Monica Trauzzi: Hello and welcome to OnPoint. I'm Monica Trauzzi. With me today is Bill Cooper, president of the Center for Liquefied Natural Gas. Bill, nice to have you back on the show.

Bill Cooper: Thank you for having me. I appreciate it.

Monica Trauzzi: Bill, the Federal Energy Regulatory Commission has approved Dominion's LNG export facility at Cove Point, Maryland. How does the Cove Point storyline shape the national dialogue on LNG exports, particularly on the environmental front? There were many environmental sticking points on this project.

Bill Cooper: Well, the Dominion Cove Point facility essentially became a poster child for the environmental movement trying to block LNG exports for a host of reasons. The fact of the matter is, though, I think the Federal Energy Regulatory Commission did an excellent job of staying within their mission, staying within their regulatory framework in their review of the environmental assessments for the Dominion project, and not going into jurisdictions of other agencies that regulate the things that were of concern to the environmental community.

Monica Trauzzi: Dominion says Cove Point will cost between $3.4 and $3.8 billion to build. How does Dominion ensure profitability, and how much of a financial risk is involved for the companies who are jumping into these export facilities early?

Bill Cooper: Well, of course you'd have to ask Dominion on the particulars of the commercial arrangements, but what has been announced is what we would refer to as tolling agreement facility in which Dominion leases out its liquefaction capacity to other companies who are willing to take that market risk. And those are GAIL and Sumitomo; thus they're willing to accept that and bring that capacity into their global portfolio and spread that risk around. So I don't see any downside really for Dominion.

Monica Trauzzi: How many facilities -- speaking about the U.S. more broadly right now, how many facilities do you think will ultimately secure financing and become operational in the United States?

Bill Cooper: Well, that's really hard to predict, and I think that's why it's so important for the regulators to not try to predict it either. And if the regulators will permit these facilities based upon their own rules and regulations, much as we've seen the Federal Energy Regulatory Commission just do with Dominion Cove Point, then we'll just have to let the individual projects sort that out. And I think that's probably the best approach.

Monica Trauzzi: So Cove Point would begin shipping in 2017. How does that impact what we're seeing happening geopolitically right now on natural gas?

Bill Cooper: I think it -- excuse me. I think it sends a very positive message to the rest of the world that the United States wants to be a player in the export of natural gas, and it provides optionality to countries around the globe to secure those supplies. Now it doesn't necessarily mean that those supplies have to land in that country to have a positive impact, because if U.S. LNG exports displaces exports from someplace else, then those exports will seek a home and ultimately get where they need to be.

Monica Trauzzi: So do you think the United States is appropriately positioning itself to be a long-term player in the natural gas marketplace on a global level?

Bill Cooper: Yes, I do. The mere fact that a facility get licensed and built, the contracts are of sufficient duration to make us a long-term player.

Monica Trauzzi: Cheniere, Sabine Pass -- they're expected to be operational as early as the end of next year, the end of 2015. What are you watching for most closely as that project works towards that operational capacity?

Bill Cooper: We eagerly anticipate the commissioning of that facility, and that would be the next phase. Once the construction is completed, then the Federal Energy Regulatory Commission will come in and make sure everything's done appropriately as they monitor it throughout the construction process. And if they approve the commissioning and ultimate operation of the facility, it'll be a huge milestone for the United States.

Monica Trauzzi: So all of this action comes on the heels of DOE moving to streamline its process for LNG export applications. Did the agency take adequate steps to streamline the process? Is there more that they could have done?

Bill Cooper: The Center for LNG's position on that would be we would like to see the Department of Energy issue those authorizations shortly after the close of the various comment periods for each application. That has not been done, as you know, with the old order of precedence and the 16-month moratorium. But certainly DOE's within its rules and regulations to only issue final authorizations and the Natural Gas Act doesn't provide a timeline, but we would like to see the process go a little faster.

Monica Trauzzi: But what about now, is it going fast -- it is going faster now.

Bill Cooper: We'd like to see it go a little bit faster to give the regulatory certainty to the applicants and allow those folks to seek the financing that they desire well before the FERC process is completed, because the FERC process can be rather lengthy.

Monica Trauzzi: When Congress returns to Washington after the midterms, do you expect any movement on LNG exports legislation, and more specifically if Republicans take over the House -- or the Senate, I'm sorry -- how might that change the dynamic of the discussion in Congress on LNG exports?

Bill Cooper: Well, when Congress comes back for the lame duck they'll have huge issues to discuss obviously, and we would like to see LNG exports legislation be part of that. But that remains to be seen. I think if the Republicans certainly take over the Senate, we may see more focus on energy issues generally and hopefully LNG exports would be part of that dialogue. But I would also say that even if the Republicans don't, we do see widespread bipartisan support for LNG exports legislation and hopefully we would be able to move that regardless.

Monica Trauzzi: All right, Bill, we'll end it there. Thank you for coming on the show.

Bill Cooper: Thank you very much.

Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.

[End of Audio]



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