Sierra Club Challenges Dominion Over Natural Gas Export Project

An undated aerial photo of the Dominion Liquified Natural Gas facility in Cove Point, Md. (National Journal)

The Sierra Club announced on Thursday that it plans to use a 40-year-old conservation settlement agreement to fight an effort by Dominion Resources to expand its liquefied natural gas terminal in Maryland and convert it into a major export facility.

The agreement — signed in 1972 as part of a court settlement between the Sierra Club, the Maryland Conservation Council, and Columbia Gas System (later acquired by Dominion) and updated most recently in 2005 — specifies that Sierra Club and MCC should have a say in any changes planned for the facility. This includes any plans for expansion or turning the import terminal into an export hub, according to Michael Brune, the Sierra Club's executive director .

"They will need our approval to move forward," Brune said in telephone briefing with reporters on Thursday. "The Sierra Club cannot and will not support LNG [liquified natural gas] exports from Cove Point, and we will deny Dominion Energy's proposal."

The group has been fighting LNG exports from Cove Point, located on the western shore of the Chesapeake Bay about 50 miles south of Baltimore, as well as from other facilities and companies for some time now, but Brune noted that this particular legal challenge signifies a "major breakthrough" for the environmental group.

A growing glut of natural gas, due to recent discoveries of vast shale deposits around the country, has energy companies scrambling to build export terminals for the first time in the United States. Nearly a dozen applications for permits to build export facilities are pending before the Federal Energy Regulatory Commission and the Energy Department, though the department says most are on hold while a study is done on the economic impact of increased gas imports. The Sierra Club is challenging export facilities in Louisiana, Oregon, and Texas, among other locations.

As hydraulic fracturing, or fracking, the process used to drill shale gas in the United States, has transformed the industry, liquefied natural gas importers have been looking to convert their facilities for exports and seeking federal approval to do so. Despite the Sierra Club's opposition, Cheniere Energy won federal approval earlier this month to build an LNG export terminal next to its import facility in Sabine Pass, La.

In spite of the challenge from environmentalists, Dominion seems confident that it can move forward with the expansion and conversion of its Cove Point facility.

"We have reviewed the various regulations, agreements, and rulings from various regulatory bodies governing the site and are confident we will be able to locate, construct, and operate a liquefaction facility at Cove Point," Thomas Farrell II, Dominion's chairman, president, and CEO, said in a conference call on its quarterly earnings on Thursday.

Speaking specifically to the Sierra Club's objections, Farrell said "the agreement allows us to use the existing footprint and where we are carrying on LNG operations to perform liquefaction exercises and to deliver liquefied natural gas to the terminal. So I don't think there's really a lot of confusion about it. It's pretty clear, in black and white."

The settlement agreement was originally signed after Sierra Club and MCC challenged the initial construction of the Cove Point LNG import terminal in 1972, but the Sierra Club says that future owners of the facility, such as Dominion, are still bound to comply.

"The agreement helped us to protect the state for years, and now it's paying off again," said David O'Leary, chairman of the Sierra Club's Maryland chapter.

The Sierra Club has already sent a formal letter to Dominion, addressed to Paul Ruppert, its senior vice president of transmission, detailing these concerns.

"Although we have sometimes authorized facility expansions in exchange for enhanced landscape protection elsewhere in the area, we agreed in 2005 that the facility would be used only for imports and would not be expanded again," the group writes, noting the updated agreement.

"We are therefore writing to inform you that we will not grant Dominion's request again to expand the facility in order to export LNG," the group wrote, citing concerns about the dangers of fracking as well as the carbon emissions associated with the production of natural gas.

Sierra Club lawyer Craig Segal said that the group has "the right to enforce the agreement" if Dominion does not comply.

"A deal's a deal," he said.