Veresen ‘back to square one’ on LNG

U.S. REJECTION

CALGARY • Veresen Inc. may wait until presidentelect Donald Trump is sworn into office to reapply for U.S. permits to build a liquefied natural gas project on the Oregon coastline, according to analysts.

The U.S. Federal Energy Regulatory Commission dealt Calgary-based pipeline and midstream company Veresen a setback on Friday, when it declined the company’s application for a rehearing on its $5.3-billion Jordan Cove LNG project.

Raymond James analyst Chris Cox said in a research note that FERC’s decision was “without prejudice,” meaning the company “may look to reapply with the FERC following the new presidential administration taking office in the new year.”

Veresen had requested a re-hearing after FERC denied its application for a permit in March, when the regulator said Veresen hadn’t demonstrated there was a commercial need for the project because it had yet to officially sign customers in Asia to buy the gas from Canada and the U.S.

Following that denial, Veresen announced it had signed two major Japanese customers, JERA Co. Inc. and ITOCHU Corp., to offtake agreements by the middle of April, reapplied for FERC permits and asked for a re-hearing for the facility and attached Pacific Connector pipeline.

On Friday, FERC released its decision not to re-hear Veresen’s application and said the company has not demonstrated there were “extraordinary circumstances” proving the need for a re-hearing.

“We afforded Pacific Connector ample time — over 3.5 years — to demonstrate evidence of market demand,” FERC officials wrote in their decision, which criticized Veresen for not providing proof of customers earlier in the process.

“We are very disappointed by FERC’s decision, especially in light of the significant progress that has been made in demonstrating market support for the project and the strong showing of public support for the project,” Veresen CEO Don Althoff said in a release. The company declined a request for additional comment.

The release stated Veresen would “review all of its options in light of the FERC denial, including appeal or the submission of a new application with FERC.”

AltaCorp Capital analyst Dirk Lever said in a research note the most recent FERC denial puts Veresen “back to square one,” and noted that a timeline for a sanctioning decision for the project is now “indeterminable.”

Veresen spent US$100 million to advance the project over the course of 2016, but will scale back spending to US$30 million over the course of 2017. The company said it remains committed to the project.