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More developments broke late last week over the embattled $6 billion Jordan Cove LNG Project slated to be built in Coos County on the southern Oregon coast by Veresen Inc., a Calgary-based energy infrastructure company that focuses on pipelines, midstream and power.
Local media reported that Veresen reached an agreement with its first customer for its proposed LNG terminal , while Veresen said in a news release that the deal was a preliminary agreement with a consortium of Japanese utilities that would cover a quarter of the terminal's capacity. Veresen said talks with other potential customers are ongoing. The project will have storage capacity of 320,000 cubic meters, and liquefaction capacity of 6 million metric tons per year, expandable to 9 million metric tons per year.
Veresen added that the agreement "signals strong market support for the Jordan Cove LNG project from the world's largest LNG buyer and represents a significant step forward in the project's development." Japan is currently the world’s largest importer of LNG, importing 85 million metric tons of the super-cooled fuel in 2015.
This development is significant for several reasons. First, it comes just one and a half weeks after the Federal Energy Regulatory Commission (FERC) denied a license for the Jordan Cove Project, stating that its developers hadn’t demonstrated sufficient demand for the project and its feeder pipeline. The FERC added that there wasn't sufficient public need for the project to overcome negative impacts on landowners. After the FERC’s denial, Veresen vowed to fight on, stating that it would appeal the decision. The company has 30 days to file an appeal from March 11.
However, the FERC’s decision can hardly be called surprising as many media outlets in Oregon claimed. Environmental groups and others have fought the project tooth and nail ever since its inception, particularly property owners concerned over imminent domain issues. In addition, Veresen has been involved in a court battle in Ontario over ownership of the project from a company that claims it reached an agreement with Chicago Energy partners L.P., Veresen’s predecessor.
Not surprisingly, local opponents said that Veresen’s recent announcement was a desperate play to resuscitate the project in the face of an international glut of LNG. "The ink is barely dry on FERC's denial and all of a sudden they have a buyer?" Douglas County landowner Stacey McLaughlin asked. "This deal reeks of desperation and is certainly suspect after threatening landowners with imminent domain for more than a decade. Given this timeline of events I can say we are even more determined now to do whatever it takes to protect our homes and this assault on our lives."
Adding weight to its FERC appeal
If Veresen does indeed show demand interest from a Japanese consortium for a quarter of the project’s production, this should add considerable weight to its FERC appeal. It also raises the question of whether or not the FERC used the project’s then lack of demand to satisfy environmental naysayers.
Moreover, the argument that the project is not needed in face of the ongoing LNG supply glut is short-sighted. While LNG markets are indeed awash in supply and will be until at least 2020, it’s this very supply glut that is causing numerous LNG project proposals in the U.S. and globally to be sidelined, likely indefinitely, which in time will shift markets from a supply glut to one where demand will catch up with supply and restore market equilibrium. Veresen now has its arsenal loaded and ready to challenge the federal denial of its project, time will tell if the Feds agree if its enough.
