FERC extends construction deadlines for two US LNG projects despite protests

Over objections from environmental groups, the Federal Energy Regulatory Commission agreed to extend construction deadlines for two US Gulf Coast LNG projects and signed off on more construction activites for a pipeline serving a third.

The actions could be a positive sign for US LNG export-related projects awaiting action from the regulator, amid uncertainties over how presures to strengthen environmental reviews might affect project timelines.

FERC May 5 gave Cheniere Energy's 10 million mt/year Corpus Christi Liquefaction Stage 3 project in Texas and related pipeline projects another 31 months, until June 30, 2027, to complete construction and enter service (CP18-512, CP18-513).

Notably, the commission rejected Sierra Club and Public Citizen arguments that the delay was driven by market prices rather than a response to unforseeable difficulties associated with the coronavirus pandemic.

FERC's determination

The commission reasoned that while it may deny an extension when a project is no longer commercially viable, the record did not back that conclusion in this case.

"The companies continue to pursue the project and remain optimistic that the COVID-19 pandemic's impact on LNG market conditions is waning," FERC said. It also cited evidence of rising demand, which it said was supported by the recent US-EU partnership to increase US LNG supplies to Europe by at least 15 Bcm in 2022, with expectations of increased demand going forward.

The companies have shown there is a continued interest in the project, the order said.

Market turnabout

A turnabout in LNG prices in Europe and Asia since record lows in 2020 has spurred renewed interest in US LNG supplies. Offering relatively low fixed fees and destination flexibility for cargoes, US LNG exporters and project developers including Cheniere, Venture Global LNG, NextDecade and Energy Transfer have announced new long-term deals in recent months. The swings in delivered prices also present opportunities in the prompt market for US FOB cargoes.

Platts DES NWE for June, the delivered price of LNG into Northwest Europe, was assessed May 9 at $18.710/MMBtu. While that was down sharply from a record high of $60.925/MMBtu March 8, the current price is still more than double what it was on the same day a year ago.

Across the Atlantic, the Platts Gulf Coast Marker for US FOB cargoes loading 30-60 days forward was assessed at $18.100/MMBtu May 9. The current GCM value also is more than double what it was a year ago.

Lake Charles LNG

Similarly, FERC gave the Lake Charles LNG project and Trunkline Gas' related pipeline modifications project another three years, until Dec. 16, 2028, complete construction and start service (CP14-119, CP14-120).

The applicants also cited pandemic-related disruptions to the global LNG market as a source of delay, and were countered by Sierra Club, Healthy Gulf and Louisiana Bucket Brigade. The environmentalists urged FERC to reexamine public benefits of the project in light of climate change and growth in renewable energy adoption. New information requires FERC to undertake an analyses to account for endangered species and environmental justice, the environmental groups argued.

The commission disagreed, saying the companies requested only to change the timing, not the nature of the projects. FERC again cited evidence of increased demand for LNG.

In addition, FERC determined the listing of additional species did not conflict with the extension decision. Should it become necessary based on consultation with the National Marine Fisheries Service or the US Fish and Wildlife Service, FERC will supplement its environmental review under the National Environmental Policy Act before allowing construction to start, the commission said. It described Sierra Club's argument that FERC did not adequately consider impacts on environmental justice communities as "an improper collateral attack" on the authorization order.

Charles Riedl, executive director at the Center for Liquefied Natural Gas, called the commission's actions in the recent cases "a positive sign" that FERC is looking to work with the Biden administration's goal of helping Europe import more US LNG. "Without federal approvals for the construction of more LNG export capacity, it will not be possible for the US to meet its stated goal of 50 bcm/year of LNG to Europe by 2030, and FERC plays an integral part in reaching that goal," he said in an email May 9.

Gator Express advance

Separately, FERC May 9 staff granted Gator Express Pipeline permission to start constructing platform piles (CP17-66, CP17-67). Gator Express May 3 told the regulator that to support Plaquemines LNG plans for a phased operational start-up with the first LNG exports targeted by the end of 2024, Gator Express needs to proceed expeditiously with construction of its pipeline system connecting to the export terminal.

Sierra Club and Healthy Gulf raised concerns about a variance request Gator Express filed March 29 that would allow 24-hour construction in locations where barge access channels and pipeline ditches would be constructed using dredge barges. The environmental groups sought public comment and more analysis of impacts to bottlenose dolphins.

The May 9 FERC staff order did not mention the Sierra Club filing, but said Gator Express had provided information needed to meet environmental conditions contained in FERC authorizing order. The nearly 4 Bcf/d project, to be built in two phases, entails two parallel, 42-inch-diameter pipelines in Plaquemines Parish, Louisiana, one 15.1-mile lateral and another 11.7 miles long.