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FERC Denies Sabine Pass Liquefaction Rehearing

FERC on Thursday rejected Sierra Club's request for rehearing of orders approving a proposal by Sabine Pass Liquefaction LLC and Sabine Pass LNG LP to liquefy and export natural gas, as well as the environmental group's plea to stay the orders. The action makes the case ripe for court review.

Close observers of the Federal Energy Regulatory Commission (FERC) expected the agency to reaffirm its April 16 and May 10 orders authorizing the first U.S. project to export as liquefied natural gas (LNG) home-grown gas to foreign countries, and approving the project's initial site preparation, respectively (see NGI, April 23).

In seeking rehearing, Sierra Club argued that the Commission was "arbitrary and capricious" in authorizing the liquefaction project because it failed to consider the project's "reasonably foreseeable" indirect effect of increasing the development of shale gas and its associated environmental impacts; failed to prepare an environmental impact statement (EIS) that comprehensively considers project impacts to air quality, land and water resources, and greenhouse gas (GHG) emissions; and wrongly concluded that the liquefaction project was not inconsistent with the public interest.

According to Sierra Club, FERC also erred in concluding that it was not "reasonably foreseeable" that exporting 2.2 Bcf/d of LNG from the liquefaction facility would induce additional shale production and create associated environmental impacts. The environmental group particularly hit on hydraulic fracturing of shale and the liquefaction process as resulting in increased air emissions.

"This issue was fully addressed in the April 16 order, and we find no cause to revisit the matter in great detail. We note that in its rehearing request, Sierra Club misstates the findings set forth in the April 16 order. The Commission did not conclude that it was not 'reasonably foreseeable' that the liquefaction project would induce increased natural gas production; rather, the order states that it is virtually impossible to estimate how much, if any, of the export volumes associated with the liquefaction project will come from existing or new shale production.

"Moreover, while it may be the case that additional shale gas development will result from the liquefaction project, the amount, timing and location of such development activity is simply unknowable at this time," the FERC order said [CP11-72]. "We also reject Sierra Club's assertion that the liquefaction project itself will have 'significant' GHG emissions impacts, thus necessitating preparation of an EIS."

The Commission further dismissed the argument that the Sabine Pass Liquefaction project qualifies as "highly controversial" under the National Environmental Policy Act (NEPA) and, therefore, requires an EIS. "For an action to qualify as 'highly controversial' for NEPA purposes, there must be a 'dispute over the size, nature or effect of the action, rather than the existence of opposition to it.' Accordingly, a controversy does not exist merely because individuals or groups vigorously oppose, or have raised questions about, an action," the order said.

And "we reaffirm our finding that the liquefaction project is not inconsistent with the public interest."

FERC approved the liquefaction project after the Department of Energy authorized the companies' plans to export natural gas for a 20-year period to all free trade agreement (FTA) and non-FTA nations (see NGI, April 23). Other projects seeking authorization to export to non-FTA countries are having to wait until DOE further evaluates the market impact of exports.

The liquefaction facility would permit Sabine Pass LNG and Sabine Pass Liquefaction, both units of Houston-based Cheniere Energy, to liquefy and export up to 2.2 Bcf, or 16 million metric tons per year, of domestically produced gas. The project would be sited at Sabine Pass' existing LNG import terminal in Cameron Parish, LA. In May FERC gave the company the go-ahead to start initial site preparation. The Commission ordered the companies to complete construction and have the proposed facilities available for service within five years.

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