FERC Gas LNG Pipelines West

Three Strikes, You’re Out: The Unneeded Jordan Cove Project

July 11, 2019

Developers who wish to build new interstate gas pipelines or liquefied natural gas (LNG) export or import terminals must get approval from the Federal Energy Regulatory Commission (FERC). While the standards of review are different (see here for more), in both cases, FERC looks at the public interest, which includes a review of whether the project is “needed.” FERC finds need in almost all cases. In fact, over the last 20 years, FERC has only rejected two gas infrastructure projects due to a lack of need, while approving over 450.

One of those two projects, the Jordan Cove Energy Project in Oregon, is now back at FERC—for the third time—seeking the green light to build a massive pipeline and LNG export terminal. NRDC, in partnership with the law firm Eubanks & Associates, recently filed comments with FERC regarding the environmental and climatic consequences of the project. In addition to these significant environmental issues, the Jordan Cove Energy Project is a textbook case of one that fails the need test and thus must be rejected.

That strange feeling of déjà vu

The Jordan Cove Energy Project’s developers propose to build Jordan Cove LNG, a 200-acre LNG export terminal on the Oregon Pacific coast in Coos Bay, capable of exporting over a billion cubic feet of gas per day, and Pacific Connector pipeline, a 229-mile gas pipeline stretching from Malin, Oregon to Jordan Cove LNG.

If this project sounds familiar to you, it should. Project developers have been trying to create an LNG project on the Oregon coast for over a decade.

First, in 2007, the developers sought approval to build an LNG import terminal in Coos Bay, with a pipeline to transport the imported gas to domestic gas markets. While FERC Commissioners, in a split-decision, approved this version of the project in 2009, it was never built because of the U.S. fracking boom.

Second, in 2013, the developers reapplied with a revised mission to export domestic LNG to international markets. Aside from the change in direction, the project largely matched the 2007 proposal.

To gauge market interest and show need, pipeline developers typically hold an “open season” where prospective shippers can bid on the proposed capacity. They also typically enter into “precedent agreements,” which are contracts between the pipeline developer and gas “shippers,” or the entities that wish to purchase capacity on the pipeline. FERC used to require pipeline developers to offer at least one precedent agreement to demonstrate need. While no longer required, FERC still considers precedent agreements to be highly relevant in determining need (NRDC has called on FERC to reform its need analysis).

When the Jordan Cove Energy Project’s developers reapplied to FERC in 2013, they never held an open season for Pacific Connector and never submitted any precedent agreements. FERC sent the developers numerous requests asking for evidence of pipeline need. In response, the developers insisted that they “remain[ed] confident that … customers will enter into binding long-term [agreements]” with Pacific Connector, but those contracts never materialized. Instead, the developers relied on general statements that Pacific Connector would benefit the public by delivering Rocky Mountain and Canadian gas to Oregon, adding jobs, and serving the proposed Jordan Cove LNG terminal.

A stunning defeat

In 2016, in a unanimous decision, FERC Commissioners rejected the Jordan Cove Energy Project. FERC held that the developers had “presented little or no evidence of need” for Pacific Connector and that their “generalized allegations of need” did not demonstrate that the project was required to serve the public convenience and necessity—a requirement for a FERC-approved gas pipeline. Because FERC could not approve Pacific Connector, it also rejected Jordan Cove LNG because an LNG terminal without a gas connection is inherently inconsistent with the public interest.

This remains only the second time that FERC has rejected a gas project in the last 20 years.

It’s “new” and “improved!”

In 2017, project developers again reapplied and again sought approval to build Pacific Connector and Jordan Cove LNG to export LNG. Now, one would think that after having received one of only two rejections over the last 20 years, due to a lack of need, the project’s developers would have every incentive to offer as robust a demonstration of pipeline need as possible. So what have they offered?

Pacific Connector held an open season in summer 2017 to gauge shipper interest. It received bids from two entities. One company’s bid failed because it wasn’t creditworthy. The second was … Jordan Cove LNG. Pacific Connector and Jordan Cove LNG are owned by the same company. In other words, the corporate developer contracted with itself to show pipeline need. This arrangement represents almost 96 percent of Pacific Connector’s capacity. Thus, the Jordan Cove Energy Project is an extreme example of a pipeline developer’s attempt to show need without actually demonstrating it. For this reason alone, FERC should reject the project.

But wait, there’s more!

Beyond the lack of need, FERC has a duty under the National Environmental Policy Act to disclose and consider all direct, indirect, and cumulative impacts of the Jordan Cove Energy Project. FERC’s environmental review falls short in several key areas including: purpose and need; environmental justice; climate; and wildlife impacts. NRDC’s comments call on FERC to revisit all of these flawed issues as it considers the Jordan Cove Energy Project

First, FERC is required to specify the underlying purpose and need of the project and consider reasonable alternatives that may lead to better outcomes. FERC’s current environmental review of the Jordan Cove Energy Project, however, adopts the project developers’ claim that the contract between Pacific Connector and Jordan Cove LNG demonstrates need without further scrutiny.

In addition, FERC “never attempts to quantify—or even list—the potential impacts” of the Jordan Cove Energy Project on environmental justice communities. It also leaves out critical information about Native American communities affected by the project.

Moreover, FERC continues to shirk its responsibilities to adequately consider climate change in its environmental reviews. At a minimum, FERC must consider the direct and cumulative greenhouse gas impacts of Jordan Cove LNG, and the direct, indirect, and cumulative greenhouse gas impacts of Pacific Connector. Yet FERC artificially restricts its review to only direct impacts. As FERC Commissioner Glick has noted, FERC’s refusal to take climate change impacts seriously benefits no one and is contrary to the law. It also impedes FERC’s ability to conduct its public interest review under the Natural Gas Act.

FERC’s environmental review also fails to include critical information on wildlife impacts, including endangered species. For example, the project likely will wound, kill, or disturb bald or golden eagles, yet FERC’s environmental analysis fails to rigorously consider the likelihood of such an event. Similarly, FERC fails to thoroughly consider risks to migratory birds and marine mammals, particularly the Southern Resident orca and the California gray whale—two of the most iconic wildlife species on the planet.

The bottom line

The bottom line is that the Jordan Cove Energy Project isn’t needed and presents significant threats to the environment, wildlife, environmental justice communities, and climate.

Rather than third time’s the charm, it’s time for FERC to call the project out on strikes.