By Ayesha Rascoe
WASHINGTON, April 26 The Sierra Club will try to
use a 40-year-old legal settlement to scuttle plans by Dominion
Resources Inc to convert a liquefied natural gas terminal
in Maryland into a major export hub.
The environmental group, which opposes the export terminal
as part of its wider fight against natural gas drilling from
shale deposits, can weigh in on certain changes at the site of
the proposed terminal under a 1972 legal agreement.
The Sierra Club says that under that settlement, it has a
say over whether Dominion can convert an import terminal at Cove
Point, near a state park, into an export plant. Dominion's CEO
disagreed with that view during a conference call with analysts
on Thu rsday.
The Sierra Club and the Maryland Conservation Council made
the deal with the then owner of the planned Cove Point terminal,
just south of Calvert Cliffs State Park. Dominion, the current
owner, wants to convert the facility from an import terminal to
an export plant that would ship up to 1 billion cubic feet of
cheap U.S. natural gas a day to foreign markets where it would
fetch a higher price.
Dominion is one of nearly a dozen companies seeking
government approval to export some of America's abundant shale
gas resources. Natural gas is trading at $2 per million British
thermal units in the United States, much lower than its level in
Europe of $6-$8 and around $13 in Asia.
The Sierra Club and Maryland Conservation Council challenged
construction of the Cove Point LNG import terminal more than
four decades ago. Their 1972 settlement with Columbia Gas System
Inc. bound Columbia and any future owners of the terminal to
certain conditions for use of the land. It also required
approval of the environmental groups for expansions.
"The deal says what it says, and that's the end of the
story," Sierra Club lawyer Craig Segall said. "If they want to
try to persuade someone to let them out of it, that's their
prerogative, but I don't think they will be successful."
On a conference call to discuss quarterly earnings,
Dominion's CEO said the company did not agree that the
settlement bars it from exporting gas..
"As we do with all stakeholders on which we are going to
have an impact, we like to work out cooperative arrangements,"
Tom Farrell, chief executive of Dominion, said on the call.
"We always have with the Sierra Club. We hope that we can,
as we go along here. But we have the right to build it, and we
are going to proceed accordingly," Farrell said.
Dominion's share price was up 39 cents on Thursday, after
the company announced first quarter net profit rose to $494
million, or 86 cents a share, from $479 million, or 82 cents a
share, a year ago.
The push to export natural gas has sparked debate over how
the United States should handle its newfound gas bounty.
Critics say allowing exports could raise prices for U.S.
consumers. Some producers say exports are necessary to allow
shale production to keep flourishing since the current glut of
U.S. natural gas has sent domestic prices to 10-year lows and
forced some companies to cut back on output.
Environmentalists oppose expanding the use of fossil fuels
and hydraulic fracturing, or fracking, the drilling technique
that spurred the shale gas revolution and that they claim has
potential to foul water supplies.
"Every billion dollars that we're throwing into an LNG
terminal is a billion dollars that's better invested in solar
and wind," Sierra Club Executive Director Michael Brune told
Bill Cooper, president of the Center for Liquefied Natural
Gas, disputed the notion that exports would greatly expand shale
gas drilling and said exports would help create jobs and boost
the U.S. economy.
"The industry is drilling wells every day and we don't have
an export market," Cooper said. "What we're talking about is
creating another demand market to take care of the excess supply
that we've already found."
The agreement on the Cove Point terminal has been updated
several times since 1972, most recently in 2005 to allow
Dominion to add new storage tanks to the site. The 2005 deal
restricts the use of Cove Point to LNG imports and bars major
new construction on the site without consent of the two
environmental groups, the Sierra Club said.
The Sierra Club said it remained confident that its
interpretation of the agreement will stand, allowing the group
to block Dominion's export plans.
While the land deal is unique to the Maryland terminal, the
challenge to Cove Point is a part of group's larger effort to
oppose LNG exports. The group has already begun challenging
export terminals on the federal level, calling for further
studies on the environmental impact of fracking and LNG, an
energy-intensive process that cools natural gas to levels where
it becomes a liquid.