Despite arguments to the contrary by an El Paso Corp. affiliate, the Environmental Protection Agency (EPA) last week ruled that liquefied natural gas (LNG) regasification performed on floating vessels in the Gulf of Mexico will be held to the same clean air and clean water regulations as fixed-structure LNG facilities.

The Dallas-based EPA office issued the ruling as part of El Paso Energy Bridge Gulf of Mexico LLC’s permit application process for a proposed natural gas deepwater port to be built about 120 miles offshore Louisiana. The proposal is “somewhat different” than other LNG projects in that it would allow for specially designed tankers to regasify LNG onboard with warm water from the Gulf and discharge the water back into the sea, and then offload the gas to existing pipelines that would deliver it onshore.

The EPA ruling does not constitute “final agency action” on El Paso permits for the project. The opinion still is subject to administrative review by the agency’s Environmental Appeals Board.

This marks the first case that has come before the EPA in which LNG regasification would occur onboard vessels, said Patrick Rankin, EPA’s assistant regional counsel in Dallas. The “twist” to this case is El Paso has taken the industrial process (regasification) that is routinely regulated under the Clean Air Act (CAA) and Clean Water Act (CWA) and put it on a ship, sparking the controversy over the extent of EPA’s regulatory authority. The EPA is asserting it has statutory authority over regasification on vessels, he noted.

But El Paso claims that the EPA is overstepping its bounds. It contends the regasification process that would be performed aboard the so-called El Paso Energy Bridge Vessels (EPEBV) would be part of the vessels’ “transportation function.”

In its Oct. 28 letter to the company, the agency countered that the warming water discharges that would occur during the LNG regasification process were not “incidental to the normal operation of a vessel.” Regasification “is instead an industrial process normally performed at fixed facilities, [such as] onshore terminals, not on vessels delivering the LNG,” it wrote.

Therefore, “the warming water discharges from [El Paso’s] port process should…be regulated under an NPDES [National Pollutant Discharge Elimination System] in the same fashion as warming water discharges from the same process at competing [fixed-structure] LNG terminals,” the EPA said. El Paso would be “sucking a whole lot of water out of the Gulf” to regasify the LNG, and then discharging it back, said Rankin.

Nor, the agency noted, would its regulation of emissions from the LNG vessel flout international law, which El Paso argued “generally prohibits nations from exercising sovereignty over vessels on the high seas.” The EPA’s statutory authority “in no way interferes with the freedom of navigation,” the agency said.

The EPA further discounted El Paso’s argument that the agency’s clean air authority extended only to stationary sources, not to mobile emissions sources. It noted that the CAA’s definition of “stationary sources” gives the agency the authority to consider emissions from external combustion engine vessels when deciding whether to issue pre-construction and operating permits.

El Paso noted that the EPA in 1982 excluded the consideration of vessel emissions when deciding whether to award CAA permits. But the EPA pointed out that the 1982 rulemaking was “unambiguously vacated” by the U.S. Court of Appeals for the District of Columbia Circuit that very year.

El Paso said this summer that it revised its LNG strategy to include the ship-based LNG regasification system because it would be “less capital-intensive than traditional terminal investment,” and signaled this was the company’s “preferred solution.”

Rankin believes the cost of a ship-based LNG system, rather than a desire to circumvent federal air and water regulations, is what motivated El Paso to challenge the EPA’s authority. He estimated the cost of a land-based facility to regasify gas was $1 billion-plus, while a vessel constructed in Korea was approximately $165 million.

He noted that the El Paso LNG project was the second one submitted for the Gulf region under the amended Deepwater Port Act. “We’re expecting a lot of these in the region. It’s a pretty desirable place to locate these [facilities].”

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