Approval of Two LNG Projects Prompts Praise, a Concurrence and Dissent

This article appears as published in Foster Report No. 3245.

FERC’s approval of two LNG export projects at the April 18 meeting was praised by the companies involved and others, with Chairman Neil Chatterjee commenting that the orders indicate how the Commission is making headway on processing LNG project applications in a more efficient manner.

The orders were approved on 3-1 votes, with Commissioner Cheryl LaFleur concurring and Commissioner Richard Glick dissenting.

They approve the Driftwood LNG project and related pipeline to send about 4 Bcf/d of natural gas to the liquefaction and export facility in Calcasieu Parish, Louisiana, and the Port Arthur LNG project and two related pipelines, each with a capacity of 2 Bcf/d, to feed the export facility near Port Arthur, Texas. The Driftwood project is being developed by Tellurian Inc. at a cost of $15.2 billion, while the Port Arthur facility is being developed by Sempra LNG at an estimated cost between $8 billion and $10 billion.

Neither project has reached a final investment decision, though both companies have said they expect to make that decision soon. Tellurian intends to do so and begin construction in 2019, with the Driftwood project beginning operations in 2023. Sempra also expects to begin construction this year for the Port Arthur project (CP17-20), which is one of five LNG export projects the company is developing in North America. The others are the Cameron LNG project in Louisiana that began commissioning recently on phase one, the second phase of the Cameron LNG project, and two phases of the Energia Costa Azul LNG project in Mexico.

The Driftwood LNG project (CP17-117, CP17-118) is designed to be able to export 27.6 million tons per annum (mtpa) once the 96-mile Driftwood Pipeline is built to connect with the export facility. Tellurian President and CEO Meg Gentle thanked FERC and other federal and state agencies that have reviewed the project over the past three years.

“We appreciate Chairman Neil Chatterjee’s leadership and indeed the work of all the FERC commissioners and staff to reach agreement regarding Driftwood LNG. Our investment in critical new U.S. infrastructure will create approximately 6,400 construction jobs and nearly 400 new permanent jobs when fully operational,” Gentle said in a statement.

“I’m proud of what we’re able to achieve today” in a bipartisan fashion, with the two project approvals that will benefit the Gulf Coast region, the U.S. as a whole and foreign trading partners that will use the natural gas to displace other energy resources with a higher emission profile, Chatterjee said during a media briefing after the open meeting.

It was a lack of thorough analysis on greenhouse gas (GHG) emissions that again led LaFleur to concur with the two orders and Glick to dissent. They expressed views during the meeting similar to those from February, when the Commission approved Venture Global’s Calcasieu Pass LNG project and related TransCameron Pipeline.

As she has in natural gas pipeline project reviews and the Calcasieu Pass LNG project, LaFleur conducted her own analysis of the GHG emission impacts and found them consistent with the public interest, putting her in the majority with Chatterjee and Commissioner Bernard McNamee. Glick insisted that by ignoring the emission consequences of the facilities, the majority is assuming that climate change plays no meaningful role in FERC’s public interest determination, counter to its obligations under the Natural Gas Act and National Environmental Policy Act.

LaFleur expressed her displeasure with the lack of a full assessment of the GHG emissions associated with the LNG and pipeline projects, even though the emissions are listed in the orders. She appreciates the emission disclosure, but said FERC would be better off to consider their impact. LaFleur believes the majority is waiting to see if a court directs the Commission to do a more thorough analysis on emission impacts.

“It is not lost on me that people consider me the swing vote” on such infrastructure reviews at FERC, said LaFleur, whose term is up in June and is not seeking another nomination from the White House. It is getting harder to find such facilities consistent with the public interest without a full analysis, she said.

LaFleur pointed out that her son and husband were in the audience at the meeting, but that did not mean it would be her last meeting as a commissioner. She said she would notify the media and others when she intends to step down.

Glick commented that even though the GHG emissions are disclosed, there is no analysis putting them in context or an examination of their impact. He views the majority’s position as the equivalent of “sticking our head in the sand,” and there was a brief smattering of applause among the audience, which included a few people who protested FERC’s approval of pipeline and LNG facilities.

If an analysis of GHG emissions finds a significant impact, project developers can address that through mitigation measures, Glick continued. There are wetland mitigation measures contained within the orders for the projects, he said, asking why the Commission cannot call for similar treatment of GHG emission impacts.

“I think everyone knows what’s going on here,” Glick said, referring to an unwillingness to tackle an assessment related to climate change, which is causing people to lose faith in the federal government.

McNamee sees the FERC orders as positive developments for job growth and the U.S. economy. He thanked his fellow commissioners for expressing their views, but disagreed that FERC did not take a hard look at the environmental impact of the facilities involved. Disagreeing about how best to consider the impacts does not mean FERC is not giving them thought, McNamee said.

Within the order and the final environmental impact statement (EIS) for Tellurian’s Driftwood project, the GHG emissions are tallied to be roughly 10.6 million tons of carbon dioxide equivalent (CO2e) annually. Providing context, the order notes that the Environmental Protection Agency’s national CO2e emissions estimate is about 5.8 billion metric tons of CO2e as of 2016.

The final EIS acknowledges that the quantified GHG emissions from the construction and operation of the LNG and pipeline facilities will contribute incrementally to climate change. “Further, the Commission has previously concluded it could not determine a project’s incremental physical impacts on the environment caused by GHG emissions. The Commission has also previously concluded it could not determine whether a project’s contribution to climate change would be significant,” FERC said in the order.

Neither the NGA nor the NEPA allow FERC “to assume away the climate change implications of constructing and operating” the LNG projects, “yet that is precisely what the Commission is doing today,” Glick said in his dissenting statement that is identical for both projects.

The 10.6 million tons of GHG emissions for the Driftwood project is equivalent to annual emissions from 2.3 million automobiles, which is more than all the cars in Chatterjee’s home state of Kentucky, Glick wrote. “Especially given the Commission’s acknowledgment that GHG emissions contribute to climate change, the decision to exclude emissions from playing any role in the Commission’s public interest analysis is indefensible,” he said. Approving a project that may contribute to the harms of climate change without meaningfully evaluating the impact or considering it part of the public interest determination “is contrary to law, arbitrary and capricious, and not the product of reasoned decisionmaking,” Glick said.

In her concurrence, LaFleur said “for reasons that I do not find persuasive, the Commission treats climate impacts differently than all other environmental impacts in our environmental review,” and refuses to make impact determinations for GHG emissions. The decision to exclude GHG emissions from a cumulative impact analysis “creates added legal risk,” she said, referring to a U.S. District Court ruling that required the Bureau of Land Management to disclose the cumulative impacts of GHG emissions for leasing of lands tied to energy production or mining activities.

During the media briefing, Chatterjee said the support of LaFleur, a Democrat, will give the orders “strong legal durability.” He praised the legal minds of LaFleur, McNamee, and the experts within the Commission who advised the majority that the orders will withstand legal scrutiny.

Both projects have authority from the Department of Energy to export gas to countries with which the U.S. has a free trade agreement. The project sponsors have applications pending at DOE seeking authorization to export to countries without a free trade agreement with the U.S., FERC noted.

The approvals mark the second and third orders approving LNG export projects, following the Calcasieu Pass project, which was the first such approval in quite some time. There are 10 other export projects pending at the Commission.

The Driftwood LNG project is to be sited near Lake Charles, Louisiana, with 20 modular liquefaction units, three LNG storage tanks and a marine loading facility with three berths for LNG vessels along the Calcasieu River.

The Port Arthur project includes the 131-mile Louisiana Connector Pipeline and the 34-mile Texas Connector Pipeline, each of which includes compressors stations and other related facilities to send the gas to the two liquefaction trains and export terminal. The liquefaction trains are designed to produce 13.5 mtpa of LNG. The project includes three LNG storage tanks, a marine facility consisting of two berths for LNG vessels, natural gas-fired turbine generators with a capacity of 240 MW and appurtenant facilities.

Sempra noted that it has a 20-year purchase agreement with Polish Oil and Gas Co. to buy 2 mtpa from the Port Arthur project and it has chosen Bechtel as the engineering, procurement and construction firm to build the facilities, subject to a final agreement.

“With today’s FERC order and the commercial momentum of the Port Arthur LNG project, we are one step closer to reaching a final investment decision and delivering low-cost, reliable and clean U.S. natural gas to world markets,” said Carlos Ruiz Sacristan, chairman and CEO of Sempra North American Infrastructure.

Development of the project is contingent upon obtaining additional customer commitments, completing commercial agreements, securing all needed permits, obtaining financing and reaching FID, Sempra said.

The Center for LNG praised FERC for the collaboration that led to the approval of the orders for the Driftwood and Port Arthur projects. “As the United States races to bring more supply to the global market, these decisions help ensure that U.S. LNG projects are not unnecessarily delayed and can compete,” said Charlie Riedl, executive director of the Center for LNG.

Similar comments came from Fred Hutchison, president and CEO of LNG Allies, and Todd Snitchler, vice president of market development at the American Petroleum Institute.

“Although the Commissioners still have divergent opinions about how FERC should handle the greenhouse gas implications of its decisions, once again a collegial, bipartisan atmosphere has prevailed and two more important U.S. LNG projects have obtained their FERC certificates,” Hutchison said. The global LNG market is competitive and timely actions by FERC and DOE “are critical to ensure that U.S. LNG projects keep pace with facilities proposed in other nations, such as Russia, Qatar, and Mozambique,” he said.

The Driftwood and Port Arthur projects “are emblematic of the opportunity that American energy producers have to bring clean, affordable and reliable natural gas to the rest of the world, while also providing jobs and economic benefits in the U.S. We’re excited that both of these projects will be moving forward with bipartisan consensus,” Snitchler said in a statement.

By Tom Tiernan ttiernan@fosterreport.com

Newsletter Sign Up
 
Search
 
Follow