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Dominion Resources gets court's OK to export liquefied natural gas from Maryland facility

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Saturday, Jan. 5, 2013, 12:01 a.m.

Dominion Resources Inc. can export liquefied natural gas from its Cove Point, Md., facility, a state court ruled on Friday, rejecting arguments by the Sierra Club that such exports violate a 2005 agreement.

Calvert County Circuit Judge James Salmon said in a ruling that under the company's 2005 agreement with the environmental group, Richmond, Va.-based Dominion retains the right to pipe liquefied natural gas, or LNG, from Cove Point, taking advantage of natural gas production in bountiful shale formations in Pennsylvania and other states.

“The agreement specifically allows for ‘delivery by pipeline of LNG from the LNG terminal site,'” Salmon stated in his 10-page opinion. “This plainly allows the tankers at the pier to receive LNG from the terminal site.”

The environmental organization said Dominion's gas plan would encourage hydraulic fracturing, or fracking, a process the group said harms natural resources and people.

It would also raise gas and electricity prices and damage ecologically sensitive lands, the group wrote in an emailed statement a month before Dominion asked the court in May to declare the LNG exports permissible.

Sierra Club sued to block construction of the terminal to import natural gas in the 1970s, and settled the case in return for gaining the right to approve plans for expansion. The group said it won't grant such permission, according to the court ruling.

Dominion still needs approval for the project from the Federal Energy Regulatory Commission and permission from the Energy Department to export liquefied natural gas to countries such as Japan, which are not covered by a free-trade agreement.

Dominion's proposed Cove Point exporting terminal is one of 21 proposed projects that — if approved — could export a total of nearly 30 billion cubic feet per day of American natural gas overseas.

Cove Point filed its application in September 2011 with the Department of Energy, seeking permission to export 1 billion cubic feet per day from the Maryland facility. Only one application has been approved thus far by the DOE: Chenere's plan to export 2.2 billion cubic feet per day from Sabine Pass, La. The Energy Department has not stated when it will act on the others.

Dominion and other energy companies favor export of gas from the Marcellus shale and other vast American reserves, claiming there is a glut here that has slowed drilling when prices overseas on the international market could provide higher returns.

Some American manufacturers oppose exports, fearing they will increase domestic natural gas prices and hurt growth in new businesses and jobs.

Dominion sued Sierra seeking a declaratory judgment because of the 2005 agreement.

“Sierra Club takes the position that under the 2005 agreement, Dominion does not have the right to use the Cove Point facility to export LNG,” according to the ruling.

“The Sierra Club is disappointed by this ruling, and we are reviewing the decision,” Craig Segall, a lawyer for the environmental group, wrote in an emailed statement. “We will continue to work to protect the Chesapeake Bay and the surrounding region from the dangerous pollution that would result from Dominion's unwise plans to frack and export natural gas.”

“We're moving forward with the project,” said Dan Donovan, a spokesman for Dominion, which owns Virginia's largest utility. “Efforts are going on in engineering, marketing and regulatory review.”

Dominion is negotiating terminal services agreements for potential customers of its Cove Point project, including Japan's Sumitomo Corp., Donovan said.

Converting Dominion's Chesapeake Bay terminal into an export facility for liquefied natural gas would cost $2.5 billion to $3.5 billion. The plant, which Dominion said it hopes to bring online by 2017, would have a capacity of about 750 million cubic feet a day.

Bloomberg News and Trib Total Media staff writer Lou Kilzer contributed to this report.

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