NextDecade Corp. has dropped plans for a liquefied natural gas (LNG) export terminal on the Texas City Ship Channel, saying the site is partially under the control of the federal government and not suitable for the project. 

The U.S. Army Corps of Engineers advised the company that a portion of the proposed Galveston Bay LNG site is federally regulated under navigation servitude, which indirectly extends powers to the government to oversee commerce under the Constitution. Part of the site serves as an active dredged material placement area for the Texas City Ship Channel. 

“On account of the potential for prolonged uncertainty around the prospect of release of Federal Navigation Servitude” by the Army Corps, “NextDecade has elected to forfeit the Galveston Bay LNG site and will no longer make lease payments to the site’s landholders, the Texas General Land Office and the City of Texas City,” the company said. 

NextDecade said the project can’t be constructed without the Army Corps requesting that Congress authorize the release of its rights over the dredging area. 

NextDecade said it would also withdraw Galveston Bay LNG from the Federal Energy Regulatory Commission’s pre-filing process. The company has also requested that the U.S. Department of Energy terminate its June 2018 authorization to export LNG from the terminal. 

Galveston Bay would have consisted of three liquefaction trains with the capacity to produce 5.5 million metric tons/year (mmty) of the super-chilled fuel. NextDecade’s decision to abandon the project has no impact on its Rio Grande LNG export terminal, which is being developed on a 984-acre site in the Port of Brownsville in South Texas. 

Rio Grande would have the capacity to export 27 mmty of LNG and the company is currently working to secure enough deals to supply buyers so it can move ahead with the terminal. A final investment decision (FID) was pushed back amid Covid-19 outbreaks last year and is expected this year. 

“While it is unfortunate that the Galveston Bay LNG site is not viable for large-scale infrastructure development, this determination only further enhances the value of – and the need for – NextDecade’s world-class Rio Grande LNG project in the Port of Brownsville,” said CEO Matt Schatzman.

The company has already inked a 2 mmty sale and purchase agreement with Royal Dutch Shell plc. The company has said it could reach FID with another 9 mmty of capacity sold under long-term contracts, which have proved challenging to secure amid the pandemic and ample global LNG supplies. French company Engie SA ended negotiations to purchase LNG from Rio Grande over the French government’s concerns about emissions related to hydraulic fracturing. 

Rio Grande would pair robust natural gas supplies in the Eagle Ford Shale and Permian Basin with overseas markets.