NextDecade mulls Rio Grande LNG implications after court revokes FERC permit

• FID for Rio Grande LNG expected in the next 6 months
• Ruling is a blow for facility that NextDecade says offers 90% emissions reductions
• The Rio Bravo Pipeline project was also part of the case

NextDecade is considering its Rio Grande LNG financing prospects and next options after a D.C. Circuit Court struck down a permit issued by the US Federal Energy Regulatory Commission (FERC) for its export terminal in Texas.

In a 6 August decision, the US Court of Appeals for the District of Columbia issued an order revoking authorisation granted to NextDecade’s Rio Grand LNG facility on the grounds that the regulator failed to take into account greenhouse gas emissions and environmental impacts of the project.

The court decision is a blow to the LNG facility, which NextDecade earlier said is the first US LNG project offering “expected emissions reductions of more than 90% through its proposed carbon capture and storage project”.

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The Rio Bravo Pipeline project was also part of the case, triggered by environmental groups led by the Sierra Club, and including the City of Port Isabel, the Carrizo/Comecrudo Tribe of Texas, and Vecinos para el Bienestar de la Comunidad Costera. The pipeline project aims to construct and operate a new interstate pipeline system to deliver gas from the existing Nueces County grid in Texas grid to the Rio Grande terminal.

In a 6 August statement, NextDecade said it is disappointed with the decision and disagrees with the ruling. It is now reviewing the decision and assessing all its options.

“The Company is evaluating the impact of the Court’s decision on the timing of a positive final investment decision (FID) on Train 4,” NextDecade said.

In June, NextDecade’s agreed with Saudi Aramco to supply 1.2 mtpa LNG over 20 years.

READ Aramco signs 20-year deal for LNG from NextDecade’s Rio Grande project

NextDecade is aiming to reach FID on Train 4 during the next six months, according to the company's 13 June joint statement with Saudi Aramco. NextDecade earlier this week said Rio Grande LNG Train 4 had signed a USD 4.3 billion engineering, procurement and construction (EPC) contract with Bechtel Energy. The contract's price and validity stands until 31 December.

Currently, construction continues on the first three liquefaction trains and related infrastructure (Phase 1) at the Rio Grande LNG Facility.

Challenging environment for LNG?

The decision comes out of the blue for the LNG and gas industry in the US, industry experts say, noting the sector seems to be increasingly challenged.

Even as the US vies to defend its position as the world’s leading LNG exporter, the US Department of Energy is now challenging a federal court’s ruling to lift its January LNG pause, rolled out on the basis of fresh Washington requirements to review the criteria for LNG export approvals to non-Free Trade Agreement countries.

Meanwhile, the latest Circuit Court ruling is the third since July to signal a judicial pushback on FERC decisions relating to consideration of GHG emissions: on 31 July, the court invalidated a FERC decision to allow construction of the Transco pipeline to transport fracked gas to New Jersey and Maryland from Pennsylvania; on 16 July to reconsider the emissions impact of Commonwealth’s Louisiana LNG project on Tuesday, following a lawsuit from environmental groups.

In the NextDecade matter, the court pulled FERC up over failing to issue a supplemental environmental impact statement (EIS) during its remand process for both projects.

READ Biden’s DOE appeals federal court’s decision to lift LNG pause

“For both projects, the Commission failed to issue a supplemental EIS to account for its updated environmental justice analysis. And for the Rio Grande terminal, the Commission further failed to consider the company’s CCS proposal as part of its environmental review as either a connected action or a project alternative,” the court said in its ruling.

It added that while it does not take the step of revoking the permit lightly, “the circumstances here require it”.

NextDecade impacts

The extent to which the matter will be a setback for NextDecade is still not clear, an industry expert said.

“It reads as though FERC have not followed due process,” the industry expert noted on first reading of the ruling.

He added: “I would guess the biggest concern for ND would be Train 4 FID. They are so close and this could impact any sales agreements that are provisional on FID.”

Another commentator was surprised entirely that the court took the step to pull back the permit – it is not yet clear whether this is the first time an LNG plant’s approval has been pulled after the crucial final investment decision stage, the commentator told Gas Matters Today.

They added: “Of course, it will be challenged, and it is difficult to see how eventually it wouldn’t be allowed to proceed (maybe with some further conditions). If not, is anyone ever going to take FID on another US LNG project with that level of risk?”

 The US elections ahead will mean change for the sector too, depending on whether Donald Trump makes it back into government, or whether a Kamala Harris administration begins.

“If you overlay the politics and implications of the US election it really is quite a mess,” the commentator said. -PS

Photo: Shutterstock

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