On March 11, 2016, FERC denied the application for Jordan Cove’s proposed LNG export terminal and associated facilities on Coos Bay, Oregon, as well as the related Pacific Connector Gas Pipeline, a proposed 232-mile long, a 36-inch diameter interstate pipeline with capacity of approximately 1.02 Bcf per day to connect the Terminal to a liquid point. This decision is the first time that the FERC has rejected an application for an LNG export project, and the reasoning for its decision could have important implications for other LNG and pipeline projects.
- The decision focuses significantly on the proposed pipeline. FERC’s Certificate Policy Statement for pipelines weighs the benefits of a proposal against the adverse effects, with the amount of evidence required to show need depending on the extent of the adverse effects, particularly the degree to which eminent domain would be required to acquire the necessary right-of-way. The need for the project may be shown by precedent agreements with customers or other evidence like demand projections or market studies.
- The proposed Pacific Connector would impact 157.3 miles of privately-owned land held by approximately 630 landowners, 54 of whom intervened in the case. Pacific Connector had obtained only 4.7% of permanent right-of-way easement acreage and 2.8% of the construction easement acreage for the pipeline route. Thus, the Applicants likely would have required eminent domain authority to acquire almost all of the pipeline easements.
- Pacific Connector “presented little or no evidence of need” for the Pipeline. The pipeline did not hold an open season to solicit interest that could have indicated need, and it did not enter into any precedent agreements for transportation on the pipeline. FERC Staff sent data requests four times over 2014-2015 asking about customers for the LNG project and the pipeline, but no contracts were executed. The Applicants relied largely on DOE’s export authorization to show need for the pipeline – but DOE’s order did not consider any issues associated with the pipeline.
- FERC concluded that the generalized allegations of need for the pipeline did not outweigh the potential for adverse impacts on landowners and communities. Therefore, FERC denied the requested certificate to construct the pipeline. FERC rejected the idea of imposing a condition requiring executed contracts for pipeline transportation prior to construction because eminent domain authority applies upon issuance of the order.
- FERC’s rejection of the proposed authorization for the LNG export project followed directly from its rejection of the pipeline. FERC held that, without a pipeline connecting the Terminal to a supply source, the proposed LNG Terminal could provide no benefits to counterbalance any impacts of construction.
- In our view, the Jordan Cove decision was a result of the absence of customers for the LNG Project, and a new FERC emphasis on customer support. If Jordan Cove had customers, they presumably would have contracted for pipeline capacity as well, and the result would have changed. An essential aspect of the decision, however, hinges on the large proposed pipeline with significant landowner effect and opposition, without an offsetting showing of market need. This ruling comes at a time when FERC faces increasing public opposition to numerous large pipeline proposals.
- FERC’s order was “without prejudice” to the applicants submitting a new application if the companies showed a “market need” in the future.