Week Ending September 7, 2018

LNG Project Reviews at FERC Show Progress, MOU Signed with PHMSA

This Article Appears as Published in Foster Report No 3214
LNG Project Reviews at FERC Show Progress, MOU Signed with PHMSA

FERC made progress on its review of LNG export project applications, issuing scheduling orders for the environmental reviews on 12 LNG projects that provide developers with dates for the review process into 2019 and 2020.

The notices provide estimates for FERC staff’s planned completion of the environmental reviews. They include three projects that received schedules in accordance with the Fixing America’s Surface Transportation (FAST) Act, including the massive Alaska Gasline Development Corp. (CP17-178), which has a planned final environmental impact statement (EIS) of 11/8/19 and 90-day federal authorization deadline of 2/6/20. The other two projects under the FAST Act are the Jordan Cove Energy Project and Pacific Connector Gas Pipeline (CP17-494; CP17-495) planned for the West Coast, with a federal authorization deadline by 11/29/19 and Gulf LNG Liquefaction Co. (CP15-521), with a final order from FERC planned by 7/16/19.

The Commission also completed a memorandum of understanding (MOU) with the Pipeline and Hazardous Materials Safety Administration (PHMSA) of the U.S. Department of Transportation, a step that was announced in July but not finished until August 31. The MOU provides that PHMSA will review LNG project applications to determine whether a proposed facility complies with PHMSA safety standards, then send a letter to FERC stating its findings. FERC will then consider PHMSA’s compliance findings in its decision on whether a project is in the public interest, the agencies announced.

The LNG sector and lawmakers on Capitol Hill have been antsy amid the pile-up of applications being reviewed by FERC that had not received scheduling orders. In a recent letter to FERC Chairman Kevin McIntyre, a group of eight Republican senators asked McIntyre to provide information on the Commission’s efforts to improve the review process for LNG export project applications. In different venues over the past few months, McIntyre noted that FERC has been using third-party contractors for monitoring of LNG projects under construction, trying to hire additional engineering staff to help FERC’s Office of Energy Projects review applications, and completing the MOU with PHMSA.[1]

Those efforts helped the Commission reach the point of providing scheduling orders for the 12 project developers, McIntyre said in an August 31 statement. “Our recent streamlining efforts will provide all LNG stakeholders additional regulatory certainty and help minimize undue administrative burdens,” he said.

Two LNG export projects are operating, with several others under construction, and the so-called second wave of project developers seeking contracts with global purchasers to reach final investment decisions. With LNG exports from the U.S. forecasted to increase in the global gas market, “FERC’s efficient processing of LNG facility applications will put the U.S. in a more competitive position,” McIntyre said.

LNG safety experts at PHMSA “are fully prepared to analyze current and future project proposals, evaluate their potential impact on public safety, and reduce barriers to moving these projects forward,” said PHMSA Administrator Skip Elliott.

McIntyre praised officials at FERC, DOT, and PHMSA as aiding the review of LNG project applications that are more complex than previous applications. The process improvements undertaken “have shortened projected environmental schedules in some cases by nine to 12 months,” McIntyre said.

A few of the LNG project applications have been pending at FERC without a scheduling order for more than two years. Gulf LNG’s application for an export terminal in Mississippi and related pipeline was filed 6/19/15.

The Center for LNG welcomed the developments, with Executive Director Charlie Riedl expressing hope that they will provide greater certainty for the market and alleviate delays in the application review process.

“FERC’s issuance of schedules for the 12 projects is commendable, just as is their interest in future cooperation with PHMSA to keep these projects moving in a timely manner,” Riedl said September 4. “We look forward to working with stakeholders to ensure that the LNG review process remains safety-focused and unencumbered by burdensome delays,” he said.

LNG Allies, which had asked FERC to expedite reviews under the National Environmental Policy Act, also praised the Commission’s efforts. U.S. LNG project developers are facing stiff competition from facilities planned in Australia, Canada, Qatar and Russia, noted Fred Hutchison, president and CEO of LNG Allies.

FERC commissioners “understand the reality of the global natural gas marketplace and are doing all they can to make sure that proposed U.S. projects receive their federal permits in a timely manner,” Hutchison said September 4.

He said the next step to aid the process would be for President Donald Trump to nominate and have the Senate confirm a replacement for former FERC Commissioner Robert Powelson, who left the agency on August 10. Quickly filling that spot, “will ensure that FERC can meet the relatively short LNG timelines that were just announced,” Hutchison said.

Among the other scheduling notices issued by FERC August 31, the earliest estimate for an environmental assessment is for Freeport LNG Development LP, Freeport Train 4 (CP17-470), planned for 11/2/18. Other projects receiving notices are: Port Arthur LNG, LLC, PALNG Common Facilities Co., LLC, Port Arthur Pipeline, LLC (CP17-20; CP17-21; CP18-7); Driftwood LNG, LLC, Driftwood Pipeline, LLC (CP17-117; CP17-118); Corpus Christi Liquefaction Stage III, LLC, Corpus Christi Liquefaction, LLC, Cheniere Corpus Christi Pipeline, LP (CP18-512; CP18-513); Texas LNG Brownsville, LLC (CP16-116); Rio Grande LNG, LLC, Rio Bravo Pipeline Co. (CP16-454; CP16-455); Eagle LNG Partners Jacksonville, LLC (CP17-41); Annova LNG Common Infrastructure, LLC, Annova LNG Brownsville A, LLC, Annova LNG Brownsville B, LLC, Annova LNG Brownsville C, LLC (CP16-480) and Venture Global Plaquemines, LNG, LLC, Venture Global Gator Express, LLC (CP17-66; CP17-67).

All of the notices indicate that if a schedule change becomes necessary, additional notice will be provided so that relevant agencies are kept informed of a project’s progress.

Freeport LNG Development on September 5 said it reached an agreement with Sumitomo Corp. of Americas on a 20-year liquefaction tolling agreement for 2.2 million tons per annum (mtpa) of LNG for the Train 4 project. The companies entered into a binding “Heads of Agreement” arrangement that will enable the Sumitomo Corp. subsidiary to expand its LNG supply and trading operations, they said in a joint announcement.

“We are pleased to announce the start of a long-term relationship with Sumitomo as our first Train 4 foundation customer,” said Michael Smith, chairman and CEO of Freeport LNG. Sumitomo’s gas trading and LNG operations make it a great addition to Freeport LNG customers, and the 2.2 million mtpa of capacity under the agreement “is a major step toward Freeport LNG contracting the approximately 3.5 mtpa needed for financing and commencing construction of Train 4,” Smith said.

Freeport was given a schedule with an EA issuance planned for November 2, with a 90-day federal authorization deadline of 1/31/19. The Train 4 project at the Freeport LNG site replicates the design of the first three trains, the company noted in a recent letter to FERC about the use of third-party contractors to assist FERC staff with fire protection reviews on the project.

Freeport declined FERC’s request to provide use of a third-party contractor “because Freeport does not believe that doing so will result in any efficiencies in the engineering review process,” it said in the September 5 letter.

Companies that use third-party contractors as part of the FERC review process pay for those contractors out of their own pocket, which can be expensive following their own engineering analysis and environmental reviews that were conducted as part of the application, industry sources have noted.

Because the Train 4 project is essentially identical to the design and approved Trains 1-3 at the Freeport site that are under construction, “there would appear to be no benefit in bringing a third-party contractor up to speed on Freeport’s design when the Commission staff is already well-versed in the nuances of the Liquefaction Project and has already conducted a thorough, detailed design review for Trains 1-3,” the company said. Hiring a third-party contractor would create redundancies and delays in the review process, Freeport told FERC.

The first three trains at the LNG export facility near Freeport, Texas, which began as an LNG import facility, are expected to produce about 15 mtpa and begin export operations in 2019. Nearly 14 mtpa has been contracted to Osaka Gas Trading & Export, LLC, JERA Energy America, LLC, BP Energy Company, Toshiba America LNG Corp., SK E&S LNG, LLC, and Freeport LNG Marketing, LLC.

By Tom Tiernan TTiernan@fosterreport.com


[1] For past stories, see, Senators Press McIntyre on Efforts to Improve LNG Project Reviews, FR No. 3213, pp. 8-10 and LNG Sector Reacting to FERC Project Review Efforts, Plan for Streamlining, FR No. 3208, pp. 6-8.

Want to try it out? Sign up for a free trial!
Subscribe Here