The Sierra Club said it has a right to reject the project, citing a legal settlement that the environmental group said prevents Dominion from exporting the fuel to other countries, instead of just importing it.
But Dominion disagreed with the group's assertion.
"We have reviewed the regulations and agreements governing the site and are confident that we can locate, construct and operate a liquefaction plant at Cove Point," said Thomas F. Farrell II, Dominion's chairman and CEO, in a statement.
The booming production of natural gas from shale deposits in neighboring states has prompted companies to export it to customers abroad.
Dominion won approval from the U.S. Department of Energy to use Cove Point for exporting up to 1 billion cubic feet of liquefied natural gas to about 20 nations with which the United States has free-trade agreements. The company is seeking federal permission to allow shipments to any foreign country, except those barred because of embargoes.
Other federal, state and local approvals also are required before Dominion can build a gas liquefaction plant at the 1,100-acre site three miles south of the Calvert Cliffs nuclear plant.
Environmentalists, however, say the expansion at the Cove Point terminal would damage the Chesapeake Bay. They also object to "fracking," the hydraulic fracturing technique used to extract shale gas.
The Sierra Club said it can weigh in on expansion plans at the terminal near Lusby under a settlement the group and the Maryland Conservation Council reached with the facility's then owner. The 1972 settlement was revised several times, most recently in 2005, and barred new construction on the site and limited the terminal's operations to importing liquefied natural gas without the permission of the two groups, according to the Sierra Club.
"We have the right to go to court if we can't persuade them of their errors," said Craig Segall, an associate attorney with the Sierra Club. "We think the language is clear."
Dominion said it's "confident" that the settlement allows the company to build a plant at the terminal.
Farrell said the facility can be built within the "footprint of the existing facility" without having to amend the agreement with the Sierra Club and the Maryland Conservation Council. Doing so would reduce the environmental impact compared to other similar projects, the company said.
Segall, however, was skeptical that the proposed plant could be built within the existing terminal, which is enclosed by a fence. He also noted that environmental and economic impacts of exporting gas have not been fully explored.
Construction is expected to begin in 2014 with plant operations beginning in 2017, pending regulatory approvals.