FERC has rejected plans for a pipeline that would supply Jordan Cove LNG
The Federal Energy Regulatory Commission released its decision on the Pacific Connector Pipeline project March 11, saying that it will not approve the pipeline. The $1.74 billion pipeline was planned to carry gas from Rockies 232 miles west to Veresen Inc.’s (ticker: VSN, VeresenInc.com) Jordan Cove LNG project in Oregon.
The FERC wrote in its report that the pipeline, which would be built in partnership with Williams Partners LP (ticker: WPZ, Williams.com), did not display enough benefits to outweigh the “adverse effects on landowners.” Without a pipeline to feed the first LNG export terminal on the West Coast, the future of Jordan Cove is now uncertain as well. Now that the construction of the pipeline has been denied, Jordan Cove “can provide no benefit to the public to counterbalance” the impacts associated with its construction, according to the FERC.
Calgary-based Veresen said it was “extremely surprised and disappointed” by the decision and plans to request a rehearing.
“The FERC appears to be concerned that we have not yet demonstrated sufficient commercial support for the projects,” said Veresen President and CEO Don Althoff. “We will continue to advance negotiations with customers to address this concern,” he said.
While Veresen has estimated in previous presentations that the Jordan Cove terminal would cost $5.3 billion, a report issued by the federal energy commission’s staff last year estimated construction would total about $3 billion.
Global natural gas supply glut making economics uncertain
Jordan Cove is the first LNG project to be denied since the massive increase in natural gas production from the shale boom. The FERC has approved at least seven export plans as of January 6, 2016, and was weighing applications for nine more, including Jordan Cove, reports Bloomberg.
With natural gas prices at historic lows, companies are having a harder time making their case to the FERC about the need of more LNG export projects.
“The more adverse impact a project would have on a particular interest, the greater the showing of need and public benefits required to balance the adverse impact,” the federal energy commission said in its order.
The company showed “little or no evidence of the need” for the Pacific Connector pipeline considering the companies had not conducted an open season for capacity on the system and did not have contracts for it, the FERC said.
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