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MD Judge: Dominion can export LNG from Cove Point

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Dominion will move forward with its project to export liquefied natural gas from its Cove Point, Md. facility, the company announced following a Jan. 4 Maryland court decision.

It's a project that will bring jobs and revenues to the national and local economies, and on which substantial progress already has been made, said Dominion President, CEO and Chairman Thomas F. Farrell II in a media release following the ruling.

The Sierra Club asserted in April 2012 that a 2005 agreement gives it the right to reject Dominion's proposal to export liquefied natural gas, or LNG, at Cove Point. The agreement protects the sensitive environment surrounding Cove Point on the western shore of the Chesapeake Bay.

"We appreciate Dominion's past efforts to manage the Cove Point site sustainably," the Sierra Club wrote in a "cease and desist" letter to the company. "The LNG export proposal, however, would further industrialize the ecologically sensitive lands at the plant site. … We are therefore writing to inform you that we will not modify our agreement to allow the export proposal …"

But Circuit Court Judge James P. Salmon of Maryland ruled on Jan. 4 that the agreement unambiguously gives Dominion the right to build liquefaction facilities inside the plant's fenced area and to export liquefied natural gas.

With U.S. natural gas production decreasing and imports rising in the last decade, the old LNG import and storage facility at Cove Point on the western shore of the Chesapeake Bay was revived for imports in the early 2000s. Dominion expanded the facility's import capacity in 2008 but, already in 2009, found that the new boom in shale gas was making that capacity obsolete. The company proposed to reconfigure the facility for liquefaction and exports.

Following the Jan. 4 ruling, the company immediately signaled its intention to move forward.

"We have received support from business, labor, government, community and environmental groups for a major construction project that would bring great benefits to many people," Farrell said. "We look forward to working with the Sierra Club and other involved environmental groups to continue the outstanding record of environmental cooperation at Dominion Cove Point."

The liquefaction project is expected to cost between $2.5 billion and $3.5 billion.

Dominion said it has received permission from the U.S. Department of Energy to act as an agent for liquefied natural gas exports to countries with free trade agreements, and that it is waiting for DOE action on its application for countries without free trade agreements.

The company has entered the Federal Energy Regulatory Commission's pre-filing process in anticipation of filing an application in 2013.

Engineering studies are continuing and are expected to be completed soon. Terminal services agreements are under negotiation with potential customers, including Sumitomo Corporation, a major Japanese trading company.