Stop the Clock – New Fortress Energy’s Louisiana FLNG Stuck in Limbo

Originally published for customers April 12, 2023

Just over a year ago, New Fortress Energy (NFE) announced that it had filed an application to construct and operate an offshore LNG facility. NFE’s announcement anticipated that the project would be approved within one year and be in operation by the end of this year. As we noted at the time the announcement was made, the need for additional LNG was critical following Russia’s invasion of Ukraine, and land-based projects take much longer to permit and construct than New Fortress Energy was expecting for its project.

The permitting timeline announced by New Fortress Energy was based on statutory time limits for offshore facilities that do not apply to land-based ones. However, as we cautioned then, the regulator involved had found a way to avoid the statutory limits and we did not expect it to comply with the announced timeline. Now, one year later, not only has that come true, we are not even sure when the project, if ever, will be approved.

Why Offshore Is Different

One year ago in New Fortress Energy Announces Aggressive Plans for New Offshore LNG Facility, we noted that, unlike land-based LNG terminals that must be approved by FERC, facilities located in waters beyond the territorial limits of the states are regulated under the Deepwater Port Act of 1974 (DWPA), which designates the Secretary of Transportation as the person responsible for approving any applications. In 2003, the Secretary of Transportation delegated the authority for processing such applications to the administrator of the U.S. Maritime Administration (MARAD).

Anyone with access to our FERC project database knows that there are no time limits on FERC’s review of applications. The DWPA, however, purportedly requires MARAD to complete the various steps of its review within certain specified time periods and to essentially issue its record of decision (ROD) within 356 days. Thus, when NFE announced its project, it seemed to presume that MARAD would actually comply with the statute.

MARAD Finds a Way Around the Statute

As we noted one year ago, however, MARAD has devised a method for avoiding the statutory requirements by issuing what it terms as “stop clock letters.” These letters purport to suspend the review periods in the statute until MARAD issues a subsequent letter that restarts the clock. We noted then that MARAD almost never finishes its permitting review within the 356 day limit.

As seen above, MARAD has only completed one of its reviews under the DWPA within the 356 day limit in the statute. All of the rest of the approved projects took longer and many of them took much much longer, up to almost four times as long as the statutory limit.

NFE’s Application

MARAD started its review of NFE’s application in a positive manner and satisfied both of the first two statutory limits, the time to declare the application complete and the time to issue the public notice. However, since then it has issued two stop clock letters, the second one of which remains in effect.

On August 12, 2022, MARAD issued the first stop clock letter. According to that letter, MARAD had advised NFE, on July 12, 2022, that its application had information gaps and requested NFE to fill those gaps by July 26, 2022. However, MARAD determined that NFE’s responses were insufficient and so it stopped the clock on day 137 of the 356 day period.

NFE expressed some frustration with MARAD in a response dated August 22, 2022. That letter questioned why MARAD would issue a stop clock letter “without providing NFE either: (1) an opportunity to discuss any open information points in the application that prompted the stop clock letter or (2) the list of specific information that MARAD and USCG believe NFE must provide in order to lift the stop clock.”

However, it appears that NFE continued to work with the agency and was able to fill the gaps so that on October 28, 2022, MARAD restarted the clock on day 137. But the day before it restarted the clock, MARAD had provided NFE with yet another list of gaps that it requested be filled by November 10, 2022. Once again NFE’s responses were apparently insufficient and MARAD once again stopped the clock on November 22, 2022 at day 162 of the 356 day limit.

As of this writing that stop clock remains in effect. In fact, on February 21, 2023, MARAD notified NFE that its responses, the most recent of which had been filed on January 9, remained insufficient to restart the clock. While these gaps apparently concern information that MARAD requires to prepare the Draft Environmental Impact Statement, there may also be other issues that could lead to a denial of the permit.

There May Be a Safety Issue as Well

NFE’s current plans describe the project in two phases, with each phase being able to produce 1.4 million metric tonnes of LNG per year. Both liquefaction systems, referred to as Fast LNG 1 (FLNG1) and FLNG2, will be installed in the Gulf of Mexico (GoM). Each system will contain three platforms consisting of natural gas processing, liquefaction and accommodations. FLNG1 will use self-elevating platforms, also referred to as jack-up rigs, and FLNG2 will use fixed platform structures. FLNG2 will also house feed gas compressors. Both systems will connect to the natural gas pipeline system of Kinetica Energy Express via two new 24-inch and 20-inch pipeline laterals.

Perhaps more troubling for the project than the gaps in information necessary to complete the Draft Environmental Impact Statement is a safety issue that has been raised about the use of the jack-up rigs for FLNG1. In a letter dated January 18, 2023, MARAD relayed to NFE its discussions with the Bureau of Safety and Environmental Enforcement (BSEE). The BSEE, which acts as the safety agency for NWPA licenses, apparently has recommended that MARAD deny the application. According to that letter, BSEE has experience with the performance of jack-up rigs in storm events like hurricanes which “cause the whole self-elevating platform/jack-up rig to fail (topple).” In addition, NFE’s plan to place three such rigs within close proximity to each other “(+/- 30ft. apart) increases the risk of a cascade of platform failures in the event one of the self-elevating platforms/jack-up rigs topples and strikes the other two self-elevating platforms/jack-up rigs.” In an earlier data response, NFE had indicated that the use of fixed platforms for “both FLNG1 and FLNG2 would delay in-service of FLNG1 by 6 months and FLNG2 by approximately 12 months,” and therefore should be excluded from MARAD’s consideration of viable alternatives.

No Date for End of Limbo

There have been no substantive communications filed in the public docket subsequent to MARAD’s letter on February 21, 2023 extending the stop clock letter issued in November 2022. Because the clock does not start running again until MARAD decides it has sufficient information to resume its review of the project, it is impossible at this point to predict with any precision when the clock will resume or when the project might be approved. MARAD has denied projects in the past and perhaps this project is in a state of limbo between the impracticality from a commercial perspective of using fixed platforms for FLNG1 and the opinion of BSEE that jack-up rigs are not acceptable from a safety perspective. As we stated over a year ago, the mere fact that the DWPA has deadlines in it which are not present in the statutes FERC applies to land-based projects does not mean that the approval will necessarily happen any more quickly. So for now, NFE waits for the clock to restart.