- FERC Approves Major LNG Export Project for Sabine Pass
- April 25, 2012
- Law Firm: Troutman Sanders LLP - Atlanta Office
On April 16, 2012, FERC approved an application filed by Cheniere Energy Inc.’s subsidiaries Sabine Pass Liquefaction, LLC and Sabine Pass LNG, L.P. (collectively “Sabine Pass”) to site, construct, and operate a liquefied natural gas (“LNG”) export facility in Cameron Parish, Louisiana. Separately, the Commission released an order vacating Jordan Cove Energy Project, L.P.’s (“Jordan Cove”) December 17, 2009 authorization to build an LNG import terminal in Coos County, Oregon. With the current trend of decreasing American natural gas prices, there has been an increased demand for exporting natural gas. Thus, several companies have submitted applications with FERC to construct export facilities. The Sabine Pass facility will be the first LNG export facility in the lower 48 states.
In order for Sabine Pass to export LNG, it had to receive permits from both the Department of Energy (“DOE”) and FERC. Specifically, while Sabine Pass had to apply to DOE for authorization to import or export LNG, authority for construction and siting of import or export LNG facilities is assigned to FERC. Sabine Pass received DOE approval to export LNG to all Free Trade Agreement and non-Free Trade Agreement nations on September 7, 2010 and May 20, 2011, respectively. On January 31, 2011, Sabine Pass applied to FERC for authority to construct the export facility in two phases in order to allow Sabine Pass to liquefy and export up to 16 million tons per annum or 2.2 Bcf per day of domestically produced natural gas. Notably, the new export facilities would utilize Sabine Pass’s five, already-existing LNG storage tanks that were authorized in previous Commission orders.
FERC determined Sabine Pass’s LNG export facility is not inconsistent with the public interest, and Sabine Pass now has five years to complete construction and begin operating the export facilities. In determining that Sabine Pass’s application is not inconsistent with the public interest, FERC gave deference to DOE’s authorization to export natural gas. FERC specifically cited to DOE’s finding that the natural gas production associated with the Sabine Pass export facility will have the positive effects of: 1) increasing production that would enhance domestic energy security, 2) improving economic activity and job creation, 3) continuing natural gas exploration, and 4) increasing tax revenues. The Commission also stated that since the export facilities will be built within the footprint of the existing import facilities, the environmental impact of the facility will be “small in number and well-defined.”
In vacating the Jordan Cove December 17, 2009 authorization, FERC relied on a February 29, 2012 Jordan Cove submittal that requested pre-filing status to explore using its proposed import facility as an export facility. FERC determined that based on Jordan Cove’s February filing, it no longer intends to import LNG. Jordan Cove stated it could add importing equipment to the facilities at a later time, but that did not deter FERC from vacating Jordan Cove’s prior authorization to import LNG without prejudice. Thus, Jordan Cove may re-submit another import application if market conditions change. Meanwhile, Jordan Cove’s request to use the pre-filing process for export operations was granted by FERC, and that proceeding is still on-going in a separate docket. Finally, FERC also vacated the authorization to build the 234-mile pipeline connector that would have transported LNG from Jordan Cove’s terminal to existing pipelines.
Commissioner Moeller dissented in the Jordan Cove order, stating that investors need certainty when relying on a Commission authorization to build, and FERC’s revocation of an authorization to construct three years into a five-year authorization process could change the public’s perception of the stability of FERC decisions. Commissioner Moeller added that natural gas commodity prices have a long history of volatility, and Jordan Cove has acknowledged that it would add import equipment if the market conditions were to change. As such, Commissioner Moeller did not see this as evidence that Jordan Cove had no intention of implementing the December 17th authorization to import LNG.
FERC’s approval of the LNG exporting facilities has been the subject of controversy from some lawmakers who oppose exporting LNG generally. Representative Ed Markey (D-Mass), the ranking Democrat on the House Natural Resources Committee, has adamantly opposed exporting LNG because he claims it would drive up the domestic price of natural gas and send more U.S. jobs overseas. Representative Markey has already introduced two bills that would block FERC from approving any more LNG export facilities.