LNG

The US Supreme Court ruling just before the July 4 holiday weekend to limit the regulatory powers of the Environmental Protection Agency (EPA) over emissions from power plants is seen reducing legal challenges on the US hydrocarbon industry, including against LNG export developments and natural gas pipeline infrastructure.

In a 6-3 opinion the Supreme Court in Washington DC ruled in the case of West Virginia versus the EPA that the federal agency did not have the authority to regulate industry greenhouse-gas emissions that would affect individual power plants.

The case stems from former President Barrack Obama's Clean Power Plan (CPP), which would have enforced mandates for how much GHG emissions from power plants were allowed.

The policy was never officially implemented as it faced legal challenges and was side-lined under the Administration of President Donald Trump.

Analysts said the Court ruling leaves the Administration of President Joe Biden dependent on passing legislation if it wants to introduce regulations to reduce GHG emissions at plants and facilities.

“A decision of such magnitude and consequence rests with Congress itself,” the Court ruled,

The justices stated that they doubted Congress intended to delegate the question of “how much coal-based generation there should be to any administrative agency” of the federal government.

Biden setback

Analysts added that the Court ruling marked a setback for Biden, who was elected President on an anti-hydrocarbon platform and several of his first moves included blocking oil and gas projects.

The most high-profile Biden cancellation was of the Keystone XL pipeline extension to deliver more cheap Canadian oil for refining in the US into petroleum products such as gasoline.

Biden and his Democratic Party also opposed LNG, a policy they have now rowed back on, and blocked the Jordon Cove LNG export project proposed for the northwest state of Oregon as an outlet to Asia for abundant US natural gas.

Biden has also pledged to remove carbon from the US power grid by the middle of the next decade, setting the country on a path to net-zero emissions.

However, his efforts to implement more extreme climate-mitigation legislation in Congress have stalled and could disappear after the mid-term elections in November 2022.

US lawyers were quick to comment and asserted that the Supreme Court ruling in the case for West Virginia, the US coal state, should be interpreted as a warning to federal agencies not to overstep their explicit statutory authority in crafting new regulations.

Though the Obama CPP never took effect, its opponents were concerned that a similar policy against coal, oil and gas could be enacted unless the courts intervened and this led to the West Virginia case.

The petitioners in the case were West Virginia, supported by the state of North Dakota, along with two coal companies and they asked the Court to decide whether the EPA had blanket authority to force changes in the power generation mix in the name of GHG reductions and the answer was no.

Pembina Pipeline Corp., the Canadian company whose liquefied natural gas export project in Oregon was cancelled by US regulators, said it was continuing with an alternative venture, the Cedar LNG project in British Columbia, in a strategic partnership agreement signed with the Haisla First Nation of native North Americans.

Pembina Pipeline Corp., the Canadian energy transportation and midstream firm with liquefied natural gas project ambitions, has terminated its acquisition agreement with Inter Pipeline Ltd, the owner of oil and gas pipeline assets in Western Canada as well as storage facilities and processing plants.

Pembina Pipeline Corp., joint developer of the Cedar LNG project in British Columbia and the rejected Jordan Cove in the northwest US state of Oregon, has contacted shareholders for a special virtual-only meeting to be held on July 29 on the proposed strategic combination with smaller peer Inter Pipeline Ltd.

Tourmaline Oil Corp., the Canadian oil and gas company, has agreed a C$1.1 billion (US$904.4 million) deal to purchase Black Swan Energy and boost its assets in the Montney Shale basin, where producers in northeast British Columbia have been heartened by two LNG export projects advancing to ship cargoes to Asia from the Kitimat area.

Pembina Pipeline Corp., developer of the now blocked Jordan Cove LNG export plant in the US northwest state of Oregon, took a hit in its fourth-quarter earnings after the project was the first hydrocarbon venture stopped by the Biden Administration, though Pembina said Jordan Cove and two other ventures remained in its strategy.

TC Energy Corp., one of North America’s leading pipeline companies involved in multiple projects such as bringing feed-gas to the LNG Canada project and US gas supplies to Mexico, said it was disappointed with the expected action to revoke the existing Presidential permit for its Keystone XL pipeline.

TC Energy, based in Calgary in the Canadian province of Alberta, said the decision by the new US Administration would impact thousands of union jobs, new renewable energy investments and opportunities for Indigenous communities.

“The decision would overturn an unprecedented, comprehensive regulatory process that lasted more than a decade and repeatedly concluded the pipeline would transport much needed energy in an environmentally responsible way while enhancing North American energy security,” said TC Energy.

The initial permit award by the previous Administration to construct the Keystone oil pipeline resulted in an additional investment of around US$8Bln.

This 1,947km (1,210-mile) pipeline was designed to deliver 830,000 barrels per day of crude oil from Hardisty in the Canadian province of Alberta to the US state of Nebraska.

It would then have connected with existing facilities to reach US Gulf Coast refiners to meet critical needs for transportation fuel and manufactured products. Keystone XL had been expected to be placed into service in 2023.

As part of the funding plan, the provincial Canadian government of Alberta had agreed to invest around US$1.1Bln as equity in Keystone XL which substantially covered some construction costs.

TC Energy said the action by the Biden Administration on the Keystone XL would directly lead to the lay-off of thousands of workers and negatively impact ground-breaking industry commitments as well as “historic” equity partnerships with native North Americans.

It is the second Canadian-led multi-billion dollar project to be cancelled by the new US Administration following the reversal of a construction permit for the Jordan Cove LNG project in the northwest US state of Oregon being developed by Calgary-based Pembina Pipeline Corp.

TC Energy said it would review the US decision, assess its implications, and consider its options.

At the same time, TC Energy declared that the news from Washington DC was very disappointing and extended its regrets to the many, many thousands of people affected.

“TC Energy is thankful to its customers, American and Canadian workers, our partners the Government of Alberta and Natural Law Energy, labor organizations, industry, the Government of Canada and the countless supporters of this important energy infrastructure project,” the company declared.

TC Energy added that the revocation of the permit means that the advancement of the project is now officially suspended.

“The company will cease capitalizing costs, including interest during construction, effective January 20, 2021, being the date of the decision, and will evaluate the carrying value of its investment in the pipeline, net of project recoveries,” explained TC Energy.

Among its other projects, TC Energy is also building the Coastal GasLink Pipeline from Dawson Creek to the Royal Dutch Shell-led LNG Canada project at Kitimat in British Columbia.

That pipeline will be 670 kilometres (416 miles) in length and provide feed-gas for the liquefaction plant currently under constructed.

Once completed, the pipeline will connect abundant Western Canadian Sedimentary Basin natural gas supply to the Shell-operated liquefaction plant.

TC Energy informed investors that if there were no intervening actions on Keystone, this US action would result in a potentially large non-cash after-tax charge to earnings in the first quarter of 2021.

“Our base business continues to perform very well and, aside from Keystone XL, we are advancing $25 billion of secured capital projects along with a robust portfolio of other similarly high quality opportunities under development,” said François Poirier, TC Energy’s President and Chief Executive.

“These initiatives are expected to generate growth in earnings and cash flow per share and support annual dividend increases of 8 percent to 10 percent in 2021 and 5 percent to 7 percent thereafter,” added the CEO. 

The Jordan Cove LNG export project in the northwest US state of Oregon and its Pacific Connector Gas Pipeline have filed a petition finding that the Oregon Department of Environmental Quality had waived its authority to issue certification for the project and they can now move forward.

Pembina Pipeline Corp. of Canada, the owner of the only approved LNG export project on the West Coast of the United States at Coos Bay in Oregon, has boosted its finances with an $800 million unsecured revolving credit facility.

With the addition of the credit note, Pembina now has $3.3 billion in revolving credit capacity and around $2.3Bln in available cash and unutilized debt facilities.

Pembina said the new credit line would be available for general corporate purposes, thereby providing additional liquidity and flexibility for its activities.

Pembina’s Jordan Cove LNG liquefaction and export plant in Oregon and its Pacific Connector Gas Pipeline project were approved in March 2020 by the US Federal Energy Regulatory Commission.

Pembina noted in its financial update that over the next two years, the company’s debt maturities are modest and include $73M in 2020 and $800M distributed across three instruments throughout 2021.

Calgary, Alberta-based Pembina acquired the Jordan Cove LNG project in late 2017 in its takeover of another Canadian company, Veresen Inc.

The project includes a 230-mile pipeline which would traverse four counties in Southern Oregon on the route to the liquefaction plant.

The liquefaction plant and other facilities are planned for a 200-acre site and comprise five small-scale Trains each with 1.5 million tonnes per annum of output for a total of 7.8 MTPA.

“In today's challenging and uncertain environment, ensuring ample liquidity is of utmost importance and I would like to acknowledge and thank our key lender group for their swift response,” said Scott Burrows, Pembina's Senior Vice President and Chief Financial Officer.

“We enjoy productive, long-term relationships with our lenders and value their deep understanding of our business,” added Burrows.

“Over the past two weeks we have taken decisive and unprecedented action to preserve our strong balance sheet, protect our ‘BBB’ credit rating and ensure we have the liquidity to fund our business until market conditions stabilize,” stated the CFO.

The LNG venture is only one of several North American projects Pembina is developing and they include the Prince Rupert liquefied petroleum gas export terminal on Watson Island in the Canadian Pacific Coast province of British Columbia.

That project is a rail terminal to move LPG from rail cars to ships destined for international markets.

There is no on-site processing or refrigeration, and smaller volumes for storage and movement require a smaller footprint relative to other energy facilities proposed on the West Coast.

However, Jordan Cove LNG has multiple facilities, including two full-containment storage tanks with total capacity of 320,000 cubic metres, gas treating infrastructure, an export jetty and access to more than 25 billion cubic feet per day of gas supply from Western Canada and the US Rockies.

The project’s affiliated Pacific Connector pipeline will have a 36-inch diameter with capacity to transport up to 1.2 billion cubic feet of natural gas per day.

Feed-gas for Jordan Cove would be sourced at the Malin Hub, creating a new outlet for natural gas from areas such as the Rockies Basin.

The export plant is expected to be visited by about 120 LNG carriers per year and Pembina has signed preliminary accords with Jera Co. Inc. and Itochu Corp. of Japan for the supply of cargoes. 

Pembina Pipeline Corp. of Canada said US regulators had approved its Jordan Cove LNG liquefaction and export plant at Coos Bay in the northwest state of Oregon as well its Pacific Connector Gas Pipeline project.