Federal Energy Regulatory Commission Approves Controversial Maryland Export Terminal

liquefied natural gas facility

UPDATE (Oct. 3, 2014): On Sept. 29, the Federal Energy Regulatory Commission (FERC) approved Dominion Resources $3.8 billion expansion of its Cove Point facility in Lusby, MD to allow for liquefied natural gas (LNG) exports from the site. FERC’s decision also authorizes Dominion to install new compressor units and perform upgrades to facilities at multiple sites in Virginia. Dominion plans to have the project completed and begin exporting LNG by June 2017.

Despite overwhelming pushback from the public about the substantial health, safety, and environmental risks associated with the project, FERC chose not to prepare a comprehensive environmental impact statement before approving the project. Instead, FERC relied on a less detailed environmental assessment and concluded that the project is “in the public interest” due to the potential economic benefits of exporting LNG.

However, groups opposed to the Cove Point expansion project argue that FERC ignored “the project’s lifecycle global warming pollution, potentially catastrophic threat to hundreds of nearby residents, pollution of the Chesapeake Bay and risk to the critically endangered right whale, along with all the pollution associated with driving demand for upstream fracking and fracked gas infrastructure.”

Chesapeake Climate Action Network and environmental groups represented by Earthjustice plan to petition FERC to review the decision, and assert that they will challenge FERC’s inadequate environmental review in court if necessary.


UPDATE (Aug. 13, 2014): On Aug. 6, the Calvert County (Maryland) Circuit Court issued a decision invalidating a November 2013 county ordinance passed by the Calvert County Board of County Commissioners that exempted the expansion of the Cove Point facility from the local zoning process. The lawsuit was filed by the AMP Creeks Council, a local citizens' group focusing on land-use planning and zoning. The court decision may delay final approval for construction of the export terminal project by the Federal Energy Regulatory Commission (FERC), since FERC normally doesn't make a final decision until all necessary permits are obtained. FERC commissioners are expected to vote soon on whether to accept a favorable environmental assessment issued by commission staff on May 15.


Editor's note: This article was originally published on Sept. 24, 2013.

On Sept. 11, 2013, the U.S. Department of Energy (DOE) announced that it has conditionally approved a Dominion Resources Inc. permit application to convert its existing liquefied natural gas (LNG) import facility, located on the Chesapeake Bay, to an export terminal. The project must still receive final approval from several agencies, but if approved, the permit would allow the company to export up to 0.77 billion cubic feet of liquefied natural gas per day for 20 years to non-free trade countries like India and Japan. It could also increase the risk of catastrophic tanker accidents, air pollution, and water contamination.

Environmental groups are appalled by the initial approval. They have warned that exporting LNG will lead to more hydraulic fracturing (or fracking) operations in the United States to satisfy increased demand overseas.

What's at Stake

Dominion Resources Inc. purchased the Cove Point import facility in 2002 for $217 million. After Dominion purchased the site, it received federal approval to expand its storage capacity from 7.8 billion cubic feet (Bcf) to 14.6 Bcf and the plant’s daily send-out capacity from 1.0 Bcf to 1.8 Bcf. One Bcf is enough natural gas to provide energy for approximately 3.4 million homes per day.

In 2011, Dominion applied for and received approval to export liquefied natural gas to countries that operate under free trade agreements with the United States. The permit authorizes Dominion to export up to 1 Bcf of liquefied natural gas per day for up to 25 years. On Sept. 11, the Energy Department approved a second permit filed by Dominion seeking to export 0.77 Bcf per day for up to 20 years to non-free trade countries, which is conditional upon the Federal Energy Regulatory Commission's (FERC) completion of an environmental review and approval of the project.

If Dominion receives all the necessary approvals for its project to convert the existing facility into an export terminal, the company plans to begin construction of the $3.8 billion project in 2014. Once completed, the terminal would be bi-directional, meaning that Dominion could import and export liquefied natural gas from the facility. Operations are projected to begin by 2017.

According to Maryland’s State Data Center, almost 20,500 people live in the same zip code as the Cove Point facility. The facility is located on the Chesapeake Bay in Lusby, MD. Risks to the area include increased traffic on the bay from massive LNG tankers that would carry the liquefied gas from the facility to importing nations. In addition to the risk of tanker accidents, “[t]he facility would also dump billions of gallons of dirty ballast water into the Bay, threatening marine life,” according to a letter from environmental advocates and area businesses. The construction would require clearing hundreds of acres of forest along the Patuxent River, threatening habitats, damaging the tourism industry, and disrupting the state’s “water enthusiasts and fishing industries.” The Patuxent is a major wildlife and recreation resource in Maryland.

These threats exist because, in addition to converting its Cove Point facility to export LNG, Ecowatch reported that Dominion would need to construct a compressor station in the Elklick Diabase Flatwoods Conservation site and set up a huge construction site on the Patuxent River waterfront. According to Sierra Club, "the facility would become the state's biggest trigger of heat-trapping pollution, exceeding the combined emissions of the state's entire fleet of seven coal-fired power plants."

Approved Without Assessing the Environmental Impacts

Before Dominion can export liquefied natural gas, it must get a permit to export the fuel and construct an export terminal from the Energy Department, FERC, and state and local permitting agencies. FERC is responsible for ensuring that an environmental impact statement is completed in accordance with the National Environmental Policy Act. The DOE is the lead federal agency for deciding whether an LNG project will move forward since it has the authority to approve or deny the import and/or export permit.

Although FERC is responsible for preparing an environmental impact statement for the project, the agency said it would only prepare an environmental assessment (a less detailed review of environmental impacts). The Energy Department issued the conditional approval on Sept. 11 without waiting for FERC to complete its environmental assessment and approve the project to build new facilities at the site.

Shortly after the Energy Department announced the conditional approval, the Sierra Club released a statement opposing the decision. In the statement, the group promised to "hold DOE to its commitment to fully review environmental issues before deciding whether to issue final authorization."

Public interest and environmental groups have warned that expanding LNG exports will threaten public health and safety because it will lead to an increase in fracking operations in the United States. Moreover, exporting natural gas is not expected to reduce greenhouse gas emissions domestically or abroad. To prepare liquefied natural gas for export, it must first be sent to a liquefaction facility where it is cooled and converted into a liquid. It is then sent through a pipeline into huge tankers that transport the liquefied gas overseas where it is sent through another pipeline into a facility that converts it back into gas. These many steps take a considerable amount of energy to conduct and pose a potential risk of leakage at every stage.

According to Chesapeake Climate, "If Dominion redirected the money it's investing in Cove Point toward wind power, it could increase the East Coast's installed wind capacity by 50 percent and create more than 7,500 jobs."

In addition to these issues, previous major accidents involving liquefied natural gas show why concerns about the safety of LNG operations are justified. One example happened right in Cove Point in October 1979, when a leak led to an explosion in an electrical substation at a receiving terminal, killing one operator and injuring another. Another incident occurred in Cleveland, OH, in 1944, when a gas leak and explosion from liquefied natural gas-related activities killed 128 people. And in 2004, an accident at a steam boiler used in the liquefaction process caused a huge explosion at the Algerian port of Skikda, killing approximately 30 people and injuring 70 more.

Before the DOE and FERC approve export permits, they should stringently review and assess the risks to public health and safety so that these concerns – not corporate profits – remain the top priority.

State and Local Concerns Should Be Addressed

In addition to gaining final approval from the DOE and FERC, Maryland's Public Service Commission will need to decide whether to allow Dominion to build the infrastructure it needs to convert the Cove Point import facility to an export facility. The Center for Effective Government has joined with several environmental groups and businesses opposed to the project on a recent letter sent to Maryland Governor Martin O'Malley (D) urging him to "declare your public opposition to the project and do everything in your power as Governor to stop it." The letter also warned that the project would lead to higher energy prices, set back the state's greenhouse gas reduction efforts, strain the state's transportation infrastructure, and pollute the Chesapeake Bay.

According to the letter, construction at the facility would require “support from a massive infrastructure system of compressor stations and hundreds, if not thousands, of miles of intrusive pipelines spread all across Maryland and the surrounding region.” Residents in Myersville, MD, for instance, are already fighting a compressor station that would be built one mile from the town’s elementary school. Meanwhile, residents of Baltimore County are fighting a pipeline project that would threaten 70 streams and 24 watersheds.

Some environmental groups may have a say in the construction permitting decision under an early 1970s agreement between the groups and the facility's original owner. The agreement gave environmental groups opposed to the construction of the import facility power to approve or deny any major changes to the terminal or adjacent areas. Dominion acquired the facility in 2002, and in 2005 renewed the agreement. The 2005 agreement said that the Sierra Club and the Maryland Conservation Council would not oppose the expansion of import operations if Dominion would protect the areas surrounding the facility.

When Dominion proposed the project to export liquefied natural gas, Sierra Club sent a letter to the company rejecting the proposal. Dominion challenged the agreement in court, and in January received a decision in its favor. The court found that converting the facility to an export terminal and adding the liquefaction plant does not constitute a "major change" under the agreement. Sierra Club plans to appeal the court decision, and if successful, may be able to block the project. Meanwhile, the controversy has already spurred substantial public opposition.

International Considerations: Fast-Track Authority for TPP Agreement

Dominion's permit, if approved, would allow it to import from and export LNG to nations with free-trade agreements with the U.S., as well as nations that do not currently have such agreements with the United States, such as Japan. Japan is the largest importer of LNG in the world, and after a tsunami destroyed the Fukushima nuclear facility in March 2011, Japan's reliance on LNG imports has increased. Exporting LNG to Japan could be quite profitable for a U.S. company because the price of natural gas in overseas markets is much higher than in the U.S., where the shale gas boom has led to record low prices.

This past July, Japan entered the Trans-Pacific Partnership (TPP) negotiations and will become a favored trading partner with the U.S. if the agreement is finalized.

If Maryland approves the Cove Point project, it could not impose any new standards on liquefied natural gas without exposing the state to potential litigation under the investor-state dispute resolution provisions in existing free trade agreements, as well as those expected to be in the TPP agreement. Under these provisions, a private importer in a country with favored nation status could sue the state of Maryland and the U.S. government for imposing any environmental law or regulation that hurts the overseas company's bottom line. The fact that the Cove Point facility has been conditionally approved for exports and would be the only export terminal on the East Coast could subject state and local authorities to enormous pressure.


Exporting large quantities of liquid natural gas carries significant health and safety risks to the public and to the environment, such as air and water contamination and catastrophic accidents.

States and local communities near the export facilities must deal with the outcomes, should these risks be realized. The residents of these communities should be able to determine if the risks are worth the rewards to them. This is why local permitting authority exists, and it is the way democracy is supposed to work.

Elected officials at all levels of government need to review the evidence, assess threats, and listen to their constituents. Congressional fast-track authority for trade agreements – particularly agreements that give deep-pocketed corporations new legal rights – should be rejected as fundamentally anti-democratic.

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