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Dominion moving forward with LNG export facility

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Dominion has announced it is making significant strides toward opening a liquefied natural gas liquefaction projection with the Dominion Cove Point project.

The gas liquefied at the Cove Point facility will primarily benefit gas drillers in the Marcellus and Utica shale gas plays. It is located in the Chesapeake Bay in Lusby, Md.

"Japan and India are important allies and trading partners of the United States that are in need of secure sources of natural gas, and Sumitomo and GAIL are high-quality companies working to meet those needs," said Thomas F. Farrell II, Dominion chairman, president and CEO. "We believe the agreements we have signed serve very important economic goals for all three nations."

The project is expected to cost between $3.4 and $3.8 billion.

So far the company has already subscribed marketed capacity of the project with 20-year terminal service agreements. More than half of the marketed capacity was contracted by two companies, Sumitomo Corporation in Japan and GAIL Global, a U.S. affiliate of GAIL Ltd., and Indian company.

The company has also already awarded its engineering, procurement and construction contract for the liquefaction facilities and will submit an application to the Federal Energy Regulatory Commission today detailing safety, environmental, security, cost community effects and benefits of the project.

"No other proposed liquefaction facility can provide the strategic value in terms of supply and location," Farrell said. "We believe that having achieved these milestones of signed terminal service agreements, an EPC contract and our FERC filing, we are well positioned to obtain permission from the U.S. Department of Energy to move forward with this vital infrastructure project."  

The export of liquefied natural gas is one of a number of ways shale gas producers are expected to be able to overcome record low natural gas prices. The glut of gas produced by unlocking new shale gas plays has suppressed prices to points some companies have found difficult to operate in economically.

According to the company, the benefits of the project are expected to include 4,000 Maryland jobs during the construction phase and support more than 14,600 jobs in the wider natural gas industry. The company also estimates nearly $10 billion in royalty payments to mineral owners over 25 years as a result of the project.

The project has generated local support, including the support of U.S. House of Representatives Democratic Whip Steny Hoyer, Md.

"I am pleased Dominion has moved forward to secure terminal agreements with two important trading partners," Hoyer said. "The proposed Cove Point LNG liquefaction project has the potential to make a significant contribution to Southern Maryland's economy. Today's announcement helps to ensure the project's viability and moves us closer to the job creation that its development is expected to bring to Calvert County and to Maryland."

Construction of the facility is expected to begin in 2014, putting the liquefaction facilities in service in 2017.

The project has also faced opposition from environmental groups such as the Sierra Club, which says the direct and indirect impact of the project could be disastrous to Maryland and areas where natural gas is extracted for the plant.