Shareholder and advocates file SEC complaint outlining inadequate disclosure of financial and environmental risks on the eve of Dominion’s annual shareholder meeting
Washington – In an effort to shed light on possible investment risks associated with a proposed liquefied natural gas (LNG) export terminal on the Chesapeake Bay, a shareholder and environmental advocates submitted an official complaint to the U.S. Securities and Exchange Commission (SEC) this morning. The filing details how Dominion Midstream, a new gas export subsidiary of the larger Dominion Resources, has potentially omitted or inadequately disclosed significant financial and environmental risks of its proposed liquefied natural gas export terminal. These advocates argue that potential investors and the greater public have a right to know about any risks as the company seeks permission to raise project funds through stock sales.
“As the proposed Cove Point liquefied natural gas export terminal on the Chesapeake Bay continues to face intensifying community backlash and regulatory delays, Dominion is failing to disclose the full risks to potential investors,” said Diana Dascalu-Joffe, Senior General Counsel at the Chesapeake Climate Action Network (CCAN), who filed the complaint on behalf of the organization and an existing shareholder of Dominion. “To sound the alarm, a current Dominion shareholder and advocacy groups are alerting SEC officials with this complaint.”
In late March, Dominion filed an application with the SEC to raise approximately $400 million for the export facility through an initial offering of public stock. The complaint accuses Dominion Midstream of failing to disclose various risks within its application.
These include: 1) The potential for project delays due to additional permitting hurdles or litigation (especially given Dominion omitted mention of a six month delay already triggered); 2) risks to the facility’s physical structure and operation due to environmental and climate change impacts, including sea level rise, land subsidence and severe weather; and 3) financial risks due to potential cost overruns and construction delays related to the project’s unique and significant safety and environmental hazards. The complaint notes that delays and cost overruns could impact Dominion’s end-user contracts with Japan and India for the exported gas.
According to the complaint, Dominion Midstream’s financial statements, including all registration statements, should include “a discussion of the most significant factors that make the offering speculative or risky” and “how the risk affects the issuer or the securities being offered.”
“The fact is, Dominion still has significant regulatory hurdles it needs to clear before it can even start construction,” said Deborah Goldberg, Managing Attorney at the environmental law firm Earthjustice. “Dominion may hope it can rush the regulatory process. But rushing the process and overlooking important unanswered environmental and safety questions could create significant risk for the nearby community – and even for investors. An incomplete review of impacts could also invite successful legal challenges – challenges that Earthjustice is fully prepared to bring.”
Over the past year, Dominion’s $3.8 billion plan to pipe fracked gas from the Marcellus shale to the Cove Point facility, liquefy it, and export it to be burned in Japan and India has ballooned into a regional controversy. On February 20, more than 700 people joined a rally outside the Maryland Public Service Commission (PSC) headquarters in Baltimore, urging the agency to reject controversial air and water pollution permits for the Cove Point project. In April, a coalition of national, regional and community-based groups opposed to the project delivered over 40,000 public comments to the PSC. As the Federal Energy Regulatory Commission prepares to weigh in this summer, anti-fracking and climate activists are planning to rally by the thousands outside the agency’s headquarters in Washington, DC on July 13.
“As the impacts of climate change accelerate, CEO Tom Farrell is exposing Dominion to significant long-term risks by investing in massive new fossil fuel projects instead of the clean energy technologies that will drive a stable economy well into the future,” said Matt Patsky, CEO and Managing Partner at Trillium Asset Management. “If the Cove Point export terminal goes forward, investors will be latching themselves to a socially and morally controversial project, with the fallout potentially tarnishing their own reputation.”
The SEC complaint comes just one day before Dominion’s executives, board and CEO Thomas Farrell convene in Cleveland for the company’s annual shareholder meeting. In Cleveland, Dominion will consider four shareholder resolutions challenging the company to address its vulnerability and contribution to climate change. Cleveland-area activists plan to protest outside, highlighting further concerns about the role Cove Point’s development would play in incentivizing expanded fracking for gas across the region.
The complaint filed with the SEC today is available at: http://chesapeakeclimate.org/assets/uploads/2014/05/Dominion-Midstream-SEC-Registration-Statement-Complaint.pdf
Kate Ray, Rabinowitz Communications, 202-265-3000, firstname.lastname@example.org
Kelly Trout, Chesapeake Climate Action Network, 240-396-2022, email@example.com