Gulf Coast LNG projects, including some already under construction, are facing a rash of new regulatory challenges and political pressure as environmental groups double down on calls for more climate considerations in permitting.
In the latest victory for opponents to liquefied natural gas exports, the U.S. Court of Appeals for the Fifth Circuit vacated Tuesday a state air permit granted to Sempra Infrastructure’s Port Arthur LNG.
In the opinion written by Judge James Graves, the court agreed with the argument by environmental group Port Arthur Community Action Network (PACAN) that the Texas Commission on Environmental Quality (TCEQ) had given Port Arthur greater emission limits than other LNG facilities approved in Texas without proper explanation.
“It therefore acted arbitrarily and capriciously under Texas law,” Graves wrote of the commission.
Port Arthur And Rio Grande
Sempra reached a final investment decision on the $13 billion Port Arthur project southeast of Houston earlier this year. Construction on the first phase, a 13 million metric tons/year (mmty) facility, has been underway while Sempra hones in on marketing volumes from a potential expansion. A 13 mmty, two-train second phase received FERC approval in September.
In its argument to the Fifth Circuit, PACAN compared the Port Arthur project to the Rio Grande LNG facility underway in South Texas by NextDecade Corp. In its 2020 application for an air permit from TCEQ, NextDecade proposed using the same refrigeration technology as Sempra outlined for Port Arthur, but it was granted a lower emissions limit.
The permitting decision for Port Arthur has been remanded back to TCEQ.
Representatives with Sempra told NGI that the company is reviewing possible impacts from the Fifth Circuit’s decision, but construction is expected to continue under the project’s existing permits.
“The court’s decision directed the agency to clarify its decision for this permit, based on nonbinding guidance the TCEQ previously provided,” a Sempra spokesperson said. “The court did not mandate the adoption of any specific emission limit in its decision and also noted that the TCEQ is not obligated to abide by the nonbinding guidance when issuing or reviewing the permit.”
Rio Grande LNG, and a nearby export project proposed by Glenfarne Energy Transition LLC, also have been garnering more legal challenges despite having the matter of their FERC approvals clarified earlier in the year.
NextDecade reached a final investment decision on Rio Grande in July after securing $18.4 billion in financing, making it one of the most expensive U.S. greenfield energy projects to date. The Houston-based firm broke ground on the 17.6 mmty first phase last month, and expects to ship the first cargo in early 2027.
The 4 mmty Texas LNG project being developed by Glenfarne is unsanctioned. Glenfarne’s Adam Prestidge, head of legal and corporate affairs, told NGI last month that Texas LNG is nearing the end of the preliminary engineering process, and news about offtake contracts could be forthcoming.
In August 2021, a federal appeals court remanded Federal Energy Regulatory Commission approval decisions back to the Commission after finding it didn’t explain how it evaluated the projects’ potential impacts on climate change and environmental justice communities.
Earlier in the month, FERC denied a request from the Sierra Club and other groups for a rehearing on those approvals, but Sierra Club told NGI the groups plan to continue challenging those orders in a separate federal court case.
More Fights Ahead
Sierra Club also has petitioned FERC to deny a permitting extension for Tellurian Inc.’s proposed Driftwood LNG project in southwest Louisiana. In a letter to FERC sent last week, Sierra Club representatives wrote that Tellurian hadn’t demonstrated “good cause” for a delay in development, and its apparent financial issues represented “numerous red flags” for the project’s completion.
The company warned in a filing with the U.S. Securities and Exchange Commission (SEC) earlier in the month that it could soon be insolvent. The first phase of Driftwood is proposed to include two trains with 11 mmty of liquefaction capacity. A second phase could include three trains and 16 mmty of capacity. Tellurian already has spent more than $1 billion on the facility, and it started limited construction last year.
On the regulatory front, the Department of Energy is also facing pressure from lawmakers to revisit how it judges whether LNG exports are in the public interest.
On Tuesday, 60 Democratic Senators and Representatives cosigned a letter to DOE officials highlighting “concerns that DOE’s current approach to making these determinations does not fully or accurately consider how these exports impact the climate, environmental justice or domestic energy prices.”
The Energy Information Administration estimates U.S. export capacity could nearly double to 24.3 Bcf/d by 2027. However, during a third quarter call with analysts, Cheniere Energy Inc. COO Anatol Feygin said the firm estimates an additional 130 mmty “of additional supply is needed beyond what is under construction today” to meet growing global demand.
