Wrangle over Oregon LNG project

Calgary-based Veresen, developer of the proposed Jordan Cove LNG project in Oregon, has been drawn into a legal spat with a tentative partner.

Michigan-based Energy Fundamentals Group, EFG, is seeking a declaration from the Ontario Superior Court that it still holds an option on a 20 percent equity stake, even though the project has been switched from an “import” to an “export” venture.

Veresen has countered that the option is no longer valid under a 2005 agreement between EFG and Fort Chicago Energy Partners, Veresen’s predecessor.

“Veresen believes that the option held by EFG applied only to the prior proposal to build an LNG import terminal and is not valid with respect to the current proposed liquefaction and LNG export terminal,” it said in a news release.

Veresen argued EFG was granted an option to invest in return for financial advisor services.

“Given the considerable development costs incurred by Veresen since 2005 and the premium return to be paid on such amounts, if valid, the exercise of the option by EFG would require a substantial payment to Veresen,” it said.

Although Veresen did not estimate what it might be owed, Robert Kwan, an analyst with RBC Dominion Securities, said the amount would likely be about C$100 million.

EFG could not be reached to comment on Veresen’s claims.

Veresen said it made the switch to an export venture as a result of the “dramatic and long-term change in North American supply of gas,” which undermined the commercial viability of importing LNG.

Jordan Cove LNG received a permit earlier this year from Canada’s National Energy Board to export up to 1.5 billion cubic feet per day of gas from Western Canada to serve as feedstock for the LNG project. That represents about 100 million metric tons a year of LNG export capacity from Oregon.

- Gary Park