By continuing to use this site, you agree to our use of cookies.


In Japan? You can go to Argus Japan


FERC affirms prior ruling on Cove Point LNG

29 Sep 2017, 8.18 pm GMT

FERC affirms prior ruling on Cove Point LNG

Houston, 29 September (Argus) — The US Federal Energy Regulatory Commission (FERC) has affirmed its previous conclusion that BP was not discriminated against during development of the Cove Point LNG export project in Maryland.

FERC issued the order yesterday in response to a federal court directive to more fully explain its position.

But FERC rebuffed the court's suggestion that the agency compare contract terms among BP, Statoil and Dominion to help determine if BP was discriminated against.

"We do not believe that a review of Dominion's proprietary agreement with Statoil is warranted," FERC said.

BP told Argus today that it is reviewing the FERC's new order to determine its next steps.

Dominion owns the Cove Point terminal and in 2013 allowed Statoil to turn back all the capacity the Norwegian company had acquired in 2004 to fund a major expansion of Cove Point LNG import capacity. Dominion did not allow BP, Shell and Statoil to turn back under similar terms LNG import capacity they had previously acquired.

Interstate commerce laws prohibit discrimination among similarly situated customers of FERC-regulated facilities. Dominion has said it could treat Statoil's expansion contract differently because it was under a different regulatory scheme than the other contracts.

BP in 2015 sued FERC in the US Court of Appeals for the District of Columbia Circuit after the agency refused to order Dominion to allow BP to turn back its capacity. BP has said it pays Dominion about $25mn/yr for LNG import capacity that has been rendered virtually worthless by the US shale gas boom.

The court in July 2016 ordered FERC to provide a more detailed rationale for its decision. It did not specifically order FERC to compare Statoil's expansion contract with the other contracts, but it disagreed with FERC's contention that such a comparison would be "irrelevant."

The court said even though the various contracts are under different regulatory regimes, they could have similar terms that would make customers similarly situated.

The Energy Policy Act of 2005 allowed LNG developers for the first time to sign non-open access contracts. The act was passed to spur development of new LNG import capacity at a time when the US was widely expected to become a major LNG importer. It allowed customers to have exclusive rights to new LNG import and send-out capacity at non-regulated rates, but provided such customers less protection from overpayment and other practices.

BP, Shell and Statoil each have 20-year contracts that expire in 2023 for 242mn cf/d (6.8mn m³/d) of import and send-out capacity at Cove Point. Those deals were signed under open-access rules that provide specified regulatory protections.

Statoil later agreed to be the sole customer for 773mn cf/d of new send-out capacity and a gas equivalent of 6.8 Bcf of storage. That 20-year contract started in 2009, but in 2013 Dominion allowed Statoil to cancel the deal in May 2017 because it is under the non-open access regulatory scheme.

Dominion likely saved hundreds of millions of dollars in building its $3.8bn Cove Point LNG export facility by repurposing Statoil's infrastructure, and Statoil likely saved hundreds of millions of dollars by not paying virtually worthless import capacity fees until 2029.

Cove Point is on track to start exporting LNG late this year, which would make it the second major operating LNG export terminal in the contiguous US. Louisiana's Sabine Pass LNG terminal started exporting in early 2016.


View more news articles

Share this page

Contact Us

Request a callback

I agree to the Argus privacy policy