New Fortress Energy Still Pursuing LNG Facility Off Louisiana Coast

Originally published for customers November 23, 2022

What’s the issue?

At the end of March, New Fortress Energy announced that it had filed for permits from the U.S. Maritime Administration, the U.S. Coast Guard and U.S. Department of Energy to site, construct and operate a new offshore LNG liquefaction terminal off the coast of Louisiana with a capacity of approximately 145 Bcf of natural gas per year. NFE said it expected to begin commercial operations as early as the first quarter of 2023.

Why does it matter?

A week later, we noted that there was certainly an incentive for the U.S. to quickly bring additional LNG capacity online to assist Europe. But our review of the regulatory process raised substantial doubt that the proposed in-service date would be met, and indicated that commercial operation in early 2024 would be challenging unless much of the construction work can be done on land and in parallel with the regulatory review process.

What’s our view?

Much of what we projected has come true, but it also appears that much of the construction work is, in fact, being done in parallel with the regulatory review. The regulatory review may conclude by late June 2023, but it still appears optimistic that the project will be able to provide LNG in time to help Europe with its gas needs for the winter of 2023-2024.


 

At the end of March, New Fortress Energy (NFE) announced that it had filed for permits from the U.S. Maritime Administration (MARAD), the U.S. Coast Guard and U.S. Department of Energy to site, construct and operate a new offshore LNG liquefaction terminal off the coast of Louisiana with a capacity of exporting approximately 145 Bcf of natural gas per year. NFE said it expected to begin commercial operations as early as the first quarter of 2023.

A week later, we noted that there was certainly an incentive for the U.S. to quickly bring additional LNG capacity online to assist Europe. But our review of the regulatory process raised substantial doubt that the proposed in-service date would be met, and indicated that commercial operation in early 2024 would be challenging unless much of the construction work can be done on land and in parallel with the regulatory review process.

Much of what we projected has come true, but it also appears that much of the construction work is, in fact, being done in parallel with the regulatory review. The regulatory review may conclude by late June 2023, but it still appears optimistic that the project will be able to provide LNG in time to help Europe with its gas needs for the winter of 2023-2024.

 

Regulatory Oversight

As we discussed back in April, unlike land-based LNG terminals that are regulated by FERC, terminals beyond the coastal waters of the U.S. are regulated by MARAD under the Deepwater Port Act of 1974 (DWPA). Anyone familiar with the timeline for FERC review of LNG terminals would be stunned by the NFE’s proposed commercial operation date.

 

time for FERC approval for LNG terminal

 

As seen above, the typical time period to get FERC approval for an LNG terminal has been just about two years. The construction period has been even longer. Thus, NFE’s proposed in-service date that was one year following the filing of its application did seem astonishing. But, the DWPA has one key feature missing from the Natural Gas Act and that is time limits on the review period for an application.

 

MARAD 356-day Timeline

Download Timeline

As seen above, the entire review process is supposed to be completed within 356 days following the filing of the application. Based on the March 31, 2022 filing date of the NFE application, the final decision is supposedly due on March 22, 2023. However, as we noted last April, MARAD almost never abides by these statutory deadlines.

 

Deadlines

MARAD has developed a process by which it will issue what it refers to as a “stop clock” notice at any point in the process to delay all of the remaining time periods by the number of days during which the clock is stopped. As we suspected back in April, they have done that in NFE’s case, but so far only once, at least that has been disclosed.

 

Stop Clock Letter Issued and Lifted

MARAD complied with th​​e first deadline and issued the notice of application on the 26th day. The process appeared to be moving along smoothly until August 16. MARAD had held the public scoping meeting on May 11, issued its first data request to NFE on July 12 and received an answer just two weeks later, on July 26. But then on August 16, MARAD issued a stop clock notice because MARAD and the U.S. Coast Guard “determined that the responses are insufficient to properly develop and process the NFE application and [prepare the] DEIS within the time limit set forth” in the DWPA. It noted that the clock had stopped on day 137 of the timeline set forth above.

 

MARAD 356-Day Timeline

Download Timeline

While the clock was stopped, on October 6, the U.S. Coast Guard issued a second set of data requests and requested a response by October 20. We do not yet see a response by NFE reflected on the docket. However, on October 28, MARAD sent a letter lifting the stop clock as of that date, which means October 28 is now considered to be day 137 on the timeline. However, if that were still true, we would have expected the Draft Environmental Impact Statement (DEIS) to have been issued on day 151, which would have been November 11. But we still have yet to see the DEIS issued which means that there may be yet another stop clock letter issued that has yet to be disclosed on the docket. If we presume the DEIS is issued by December 2, then MARAD could still issue its record of decision by June 26 barring any more stop clock letters.

 

Construction

We noted back in April that these delays are inherent to the regulatory review process and that following the issuance of the decision it typically takes about ninety days for the license to be issued. That would likely put the final decision off until September of next year. It is unclear, though, how long the project will take to construct because NFE has indicated that it is currently constructing the facility itself onshore while it awaits final approval. According to a presentation from August, NFE has secured all long lead time items and construction is on schedule for the liquefaction and gas treatment modules to be ready to sail away in the first quarter of 2023.

 

Gas Supply

Back in April, NFE had not specified how it intended to source the almost 400,000 dth/day of gas that the facility will need for its operations. But based on the location of the project, we suspected that the pipeline it will be connecting to is Kinetica Energy Express, which connects onshore with Tennessee Gas Pipeline. Since then, NFE confirmed that it would be connecting to Kinetica Energy Express via two newly constructed pipeline laterals, one 20-inch and one 24-inch. As we suspected in April, Kinetica Energy Express appears to be planning to construct these laterals under its blanket certificate and will not need to even provide notice to FERC of the project, but rather must simply report it in its annual construction report filed the year after the project is placed into service. This appears to be confirmed by the fact that FERC declined to participate as a cooperating agency in the preparation of MARAD’s review because it “determined that FERC does not have an action before the Commission for this project that would trigger [its] participation.”

 

Timing Will Become More Certain

The likely timing of the project will become more certain once the DEIS is issued. Unless there are real concerns raised in the comment period on that document, the likelihood of a stop clock letter being issued during the preparation of the final statement should be small. Also, the forty-five day period given in the timeline for approval by the adjacent coastal states may not take nearly that long.

MARAD has apparently determined that the only adjacent coastal state is the state of Louisiana. The current governor is a Democrat, John Bel Edwards, whose first term began in 2016 and whose current term will end in 2024. The Secretary of the Louisiana Department of Transportation, who was appointed by Governor Edwards in 2016, has already filed a comment letter putting “on the record” the agency’s support of the project as a “great asset to Louisiana’s infrastructure portfolio,” and praising NFE for quickly becoming a “great partner in Louisiana.”

Recent Articles

April 19, 2022

New Fortress Energy Announces Aggressive Plans for New Offshore LNG Facility

April 25, 2023

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

September 13, 2023

DOE Changes Rules on LNG Export Licenses; Will It Matter?