US energy group Hess ‘evaluates’ €1bn Kerry project after court loss

Business Affairs Correspondent and
Hess, the US energy giant, says it is "evaluating its options" over the future of a proposed €1 billion investment on the Shannon estuary, after its Irish subsidiary yesterday lost a court case against the energy regulator.

Shannon LNG had asked the High Court for a judicial review of a June 2012 decision by the Commission for Energy Regulation (CER) to impose network charges on all gas suppliers to pay for pipelines between Ireland and Britain.

The court upheld the CER decision yesterday.

The company, which wants to ship cheap liquefied gas from the US to a proposed refinery in Kerry, had argued it should not have to pay the charges because it won’t be using the pipelines, also known as interconnectors. It has previously argued that the CER decision means it could be hit with annual fees of €75 million.

CER said the charges should apply to all suppliers because they use the same overall piece of infrastructure – the gas transmission network owned by Bord Gáis – and that the interconnectors are an integral part of this.

Bord Gáis, which was a notice party for the court case, yesterday said it welcomed the court's decision. "We will now review the judgement in detail and we look forward to working with the Commission for Energy Regulation, Shannon LNG and the natural gas industry to implement the decision on gas network charges," it said.

Pleased
The CER said it was "pleased" to win the case: "It is in the interests of gas customers. We look forward to working with the industry, including Shannon LNG, to implement the [decision]."

Jon Pepper, the head of corporate communications for Hess, which has a market capitalisation of $27 billion, declined to comment further.

The proposed investment would see Hess build a €600 million plant to refine the gas shipped from the US, alongside a €400 million power plant.

It has been dogged by delays in the decade since it was first mooted, and local politicians have claimed red tape surrounding the scheme was putting up to 600 construction jobs at risk.

Kerry-based Fine Gael MEP Seán Kelly, who has campaigned in Brussels for backing for the project, told the Kerryman newspaper: "We're not going to be codded anymore. This plan is vital for our future in Kerry."

In a 73-page judgment delivered yesterday, Mr Justice Cooke rejected Shannon LNG's claims that the CER decision breached national or EU law, that the regulator had effectively granted an unnotified state aid to Bord Gáis, or that it was being required to cross-subsidise BGE's operating costs.

Discrimination
Shannon LNG had claimed the CER decision meant it and Shell, the producers on the Corrib gas pipeline, would be discriminated against in favour of shippers importing from the UK via the interconnector piepline.

The judge noted all natural gas currently distributed within the State for supply originates off-shore and the supplies are distributed over an on-shore transmission system or pipeline network belonging to and operated by Bord Gáis.

Some 99 per cent of the total supply is imported from the UK through the two undersea interconnectors. The regulator was entitled to regard the interconnectors as an integral part of this transmission infrastructure and to charge a two-part tariff for access based on a Long Run Marginal Cost (LMRC) element and a “revenue shortfall” element, and not upon actual costs incurred by BGE, he ruled.