Dominion Can Export LNG From Cove Point, Court Says

Dominion Resources Inc. (D) can export liquefied natural gas from its Cove Point, Maryland, facility, a state court ruled, rejecting arguments by the Sierra Club that such exports violated a 2005 agreement.

Calvert County Circuit Judge James Salmon in a ruling made public today said that under the company’s 2005 agreement with the environmental group, Richmond, Virginia-based Dominion retains the right to pipe LNG from the Cove Point facility.

“The agreement specifically allows for ‘delivery by pipeline of LNG from the LNG terminal site,’” Salmon said in his 10-page opinion. “This plainly allows the tankers at the pier to receive LNG from the terminal site.”

The environmental organization said Dominion’s gas plan would encourage hydraulic fracturing, or fracking, a process the group said harms natural resources and people. It would also raise gas and electricity prices, and damage ecologically sensitive lands, the group said in an e-mailed statement a month before Dominion asked the court in May to declare the LNG exports permissible.

Sierra Club sued to block construction of the terminal to import natural gas in the 1970s, and settled the case in return for gaining the right to approve plans for expansion. The group said that it won’t grant such permission, according to the court ruling.

No Rights

Dominion sued Sierra seeking a declaratory judgment because of the 2005 agreement. “Sierra Club takes the position that under the 2005 agreement, Dominion does not have the right to use the Cove Point facility to export LNG,” according to the ruling.

“The Sierra Club is disappointed by this ruling, and we are reviewing the decision,” Craig Segall, a lawyer for the environmental group, said today in an e-mailed statement. “We will continue to work to protect the Chesapeake Bay and the surrounding region from the dangerous pollution that would result from Dominion’s unwise plans to frack and export natural gas.”

Dominion rose 1.1 percent to $53.54 today in New York, the highest closing price since Oct. 18, according to data compiled by Bloomberg.

“We’re moving forward with the project,” Dan Donovan, a spokesman for Dominion, which owns Virginia’s largest utility, said in a phone interview. “Efforts are going on in engineering, marketing and regulatory review.”

Dominion is negotiating terminal services agreements for potential customers of its Cove Point project in Maryland, including Japan’s Sumitomo Corp., Donovan said.

Needs Approval

Converting Dominion’s Chesapeake Bay terminal into an export facility for liquefied natural gas would cost $2.5 billion to $3.5 billion. The plant, which Dominion said it hopes to bring online by 2017, would have a capacity of about 750 million cubic feet a day.

Dominion still needs approval for the project from the Federal Energy Regulatory Commission and permission from the Energy Department to export liquefied natural gas to countries such as Japan, which aren’t covered by a free-trade agreement.

The case is Dominion Cove Point LNG LP v. Sierra Club, 04- C-12-000598, Circuit Court for Calvert County, Maryland.

To contact the reporters on this story: Tom Schoenberg in Washington at tschoenberg@bloomberg.net; Julie Johnsson in Chicago at jjohnsson@bloomberg.net.

To contact the editors responsible for this story: Michael Hytha at mhytha@bloomberg.net; Susan Warren at susanwarren@bloomberg.net.

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