In a win for the natural gas industry, the U.S. Court of Appeals for the District of Columbia Circuit denied a Sierra Club appeal challenging the Department of Energy's (DOE) authorization of the Freeport liquefied natural gas (LNG) terminal on Quintana Island, TX, to export to non-free trade agreement (FTA) countries.
The Sierra Club argued that DOE failed to meet its obligations under the Natural Gas Act (NGA) and the National Environmental Policy Act (NEPA) by not sufficiently examining the indirect effects of approving LNG exports from the Freeport terminal. DOE did not properly weigh the impacts of increased domestic natural gas production and the cumulative environmental effects of other export projects, the environmental group contended.
An opinion accompanying Tuesday's decision noted that DOE under the Obama administration -- in response to a number of non-FTA LNG export applications -- commissioned two studies to examine the impacts of increased natural gas exports. The judges concluded that the types of indirect effects Sierra Club wanted DOE to analyze went beyond the "reasonably foreseeable" standard required under NEPA.
Citing past case law, the court found that DOE "was not required to 'foresee the unforeseeable.' Its determination that an economic model estimating localized impacts" of increased domestic production induced by increased LNG exports "would be far too speculative to be useful is a product of its expertise in energy markets and is entitled to deference.
"...We cannot say that the Department failed to fulfill its obligations under NEPA by declining to make specific projections about environmental impacts stemming from specific levels of export-induced gas production."
As for Sierra Club's challenge of DOE's public interest evaluation under the NGA, the court found that the group's list of environmental concerns "fails to overcome the presumption in favor of exports.
"Notably, even if the department determined the impacts were significant, it could still find that the public interest weighs in favor of allowing exports," the opinion read. "...Sierra Club has given us no reason to question the Department's judgment" that Freeport's application for LNG exports is consistent with the public interest.
"We are disappointed with the court's refusal to require DOE to use available tools to inform communities of the impact of this additional fracking prior to approving exports," said Nathan Matthews, a Sierra Club staff attorney. "This LNG export approval creates unnecessary risks for the people of Freeport, Texas, and for every community that is saddled with fracking rigs next to their homes, schools, and public spaces."
The American Petroleum Institute (API) praised the court's decision.
"Increased natural gas exports will create jobs and increase the energy security for our nation and our allies throughout the world," API Vice President Marty Durbin said. "The court's action today to deny the petition for review of Freeport LNG's export authorization is great news for other planned LNG export projects around the country. Moving forward, we must put in place smart, common-sense regulations that will continue to drive innovations in technology that will increase opportunities for American LNG throughout the world."
According to the Energy Information Administration (EIA), 2017 is poised to mark a turning point in United States' transition from a net natural gas importer to a net exporter, driven in large part by LNG exports out of Cheniere Energy Inc.'s Sabine Pass LNG terminal. Cheniere said last week that Train 4 at Sabine would soon produce its first commissioning cargoes.
In related news on Wednesday, Houston-based Commonwealth LNG said FERC has accepted its application to initiate the pre-filing process for an export facility near Cameron, LA. The project is to have capacity to liquefy and ship 9 million metric tons/year of LNG.
“This is the culmination of over two-and-a-half years of work by the Commonwealth management team and our LNG consultants, advisers and vendors,” said COO Scott Johnson.
Pending a successful environmental review and receipt of a FERC order, Commonwealth expects to begin construction in 2019, with commercial operation in 2022.
Meanwhile, Veresen Inc. management said the company intends to re-file for approval of its Jordan Cove LNG project in Oregon.
Legislation to streamline federal approval of LNG exports was recently introduced in the Senate, with the Industrial Energy Consumers of America (IECA) coming out against the legislation.
"The Obama administration's 'public interest' LNG export studies, which are still being used to justify LNG export approvals to non-FTA countries, did not consider 'cumulative' export volume to FTA and non-FTA countries and how it could contribute to consumption of vast amounts of U.S. natural resources nor its economic impact," IECA wrote.
Using data from EIA's 2017 Annual Energy Outlook on exports via LNG and to Mexico and comparing that to EIA's data on technically recoverable domestic natural gas resources, IECA concluded that in a scenario where LNG exports rise to 12.1 Bcf/d by 2035 "58% of all U.S. technically recoverable natural gas resources are consumed by 2050, only 33 years."
Meanwhile, President Trump on Tuesday signed an executive order calling for expedited federal approval of infrastructure projects.
In light of Trump’s executive order, “we would reiterate a theme we raised in the wake of the election,” analysts with ClearView Energy Partners wrote in a Tuesday note to clients examining the Freeport LNG appeals court ruling. “Under the Obama administration, agencies expanded the scope of their environmental reviews, much to the frustration of project applicants frustrated with delays.
“However, many of those reviews have withstood judicial scrutiny -- indeed, the D.C. Circuit rejected all four challenges to FERC’s NEPA review of LNG export facilities to date before upholding DOE today. In that context, a significant reversal of course on permit reviews by the Trump administration -- if quicker-paced reviews turn out to be materially less robust -- could create incremental judicial review risk for future projects.”