DC Circuit Rulings are Harming the U.S. LNG Export Industry, David Blackmon, Forbes
Those rulings, if left unchallenged, put future LNG growth in this country in doubt. So says energy expert David Blackmon, writing for the Forbes magazine website.
The liberal judges on the U.S. Court of Appeals for the District of Columbia issued a string of rulings this year that have greatly damaged the country’s LNG export industry.
Those rulings, if left unchallenged, put future LNG growth in this country in doubt. So says energy expert David Blackmon, writing for the Forbes magazine website. The D.C. Circuit has been coloring WAY outside the lines by using White House Council on Environmental Quality (CEQ) criteria for what should be included in environmental reviews conducted under the National Environmental Policy Act (NEPA).
In August, the D.C. Circuit vacated a FERC permit issued more than a year ago for NextDecade’s Rio Grande LNG project at the Port of Brownsville, Texas. The court agreed with arguments by the Sierra Club and other Big Green groups that FERC should apply policy directives from the CEQ when considering what must be included in environmental reviews conducted under NEPA.
NextDecade responded in a filing that the court erred in using the pronouncements of the CEQ because it functions as an advisory council solely to the executive branch. The CEQ’s directives cannot have the same authority held by regulatory agencies such as FERC.
The problem is, of course, that these issues must be litigated and it will take years. Meanwhile, companies that want to build LNG export plants will find investors unwilling to wait for the years it may take to litigate. Investors have better things to do with their money than tie it up on a project that may or may not get built. In addition, customers will be unwilling to sign long-term contracts for LNG from a facility that may or may not get built due to Big Green lawfare and colluding courts like the D.C. Circuit. It’s a BIG problem for our LNG industry, as Blackmon explains…
The year 2024 has been a tough one for America’s liquefied natural gas (LNG) export industry, especially when it comes to the ability of developers to have any degree of certainty around its future growth prospects.
The first stumbling block to progress came in January, when President Joe Biden invoked a “pause” in permitting processes for proposed new LNG export facilities pending a review and updating of “the underlying analyses for authorizations” to be conducted by the Deparment of Energy. Energy Secretary Jennifer Granholm told attendees at the CERAWeek conference in Houston in March that the pause would be “well in the rearview mirror” when they reconvene in 2025, but her remarks were poorly received by businessmen and women concerned about the investment-dampening impacts of such an unprecedented intercession into an entire U.S. industry sector.
Another event that could dampen enthusiasm for committing to multi-billion-dollar investments into what has been a rapidly expanding sector came in August in the form of a ruling by the DC Circuit Court of Appeals to vacate the FERC permit issued more than a year ago for NextDecade’s Rio Grande LNG project at the Port of Brownsville, Texas. This ruling is the latest in a series of decisions by the DC Circuit in which it agrees with arguments by the Sierra Club and other plaintiffs that it should apply policy directives from the White House Council on Environmental Quality (CEQ) when considering what must be included in environmental reviews conducted under the National Environmental Policy Act (NEPA). Two similarly reasoned prior decisions involved an LNG export facility being developed by Commonwealth LNG and a pipeline project under development by Williams Company.
On Wednesday, NextDecade filed a brief arguing that, by intertwining CEQ directives with NEPA review requirements, “the court has deviated from NEPA’s text and purpose, to create a regime that will substantially deter and hamper the construction of major energy infrastructure projects.”
The brief further argues that, because CEQ functions as an advisory council solely to the executive branch, its directives cannot have the same authority held by regulatory agencies such as FERC. “The D.C. Circuit’s reliance on CEQ regulations in this case (and more broadly) to inform the meaning of NEPA is wholly improper because CEQ lacks authority to promulgate substantive NEPA regulations in the first place,” NextDecade says in the brief.
Referring to a 2021 DC Circuit decision in the Food & Water Watch v. U.S. Dep’t of Agric. case, the brief quotes from the ruling: “No statute grants CEQ the authority to issue binding regulations.” Id. Courts thus cannot properly rely on CEQ regulations to inform the demands of NEPA. It is axiomatic that “[a]n agency … ‘literally has no power to act’ … unless and until Congress authorizes it to do so by statute.”
These and other arguments will ultimately be resolved either at the appellate court or by the U.S. Supreme Court, a process that could linger on for years. In the meantime, companies aspiring to mount projects to expand America’s LNG export sector are almost certain to find sourcing capital to fund such projects increasingly difficult.
Phase I of the Rio Grande LNG project requires a projected $18.4 billion in capital investment. These are projects that take 8-10 years to develop, and the process of raising capital alone can consume years under the most ideal conditions.
Mockup of an aerial view of the Rio Grande LNG project at the Port of Brownsville, Texas. NextDecade
It should be obvious to everyone involved that such projects cannot hope to come to full development unless those taking such massive financial risks can have some level of confidence in the stability and equal application of the laws and regulations of the United States. America’s longstanding ability to maintain high levels of confidence in that arena has given it a decided advantage over most other countries.
The Bottom Line
This new philosophy on display by the DC Circuit could also have a chilling impact on the ability of export operators to secure long-term supply contracts with international customers. After all, what country in Europe, Asia or other parts of the world is going to be anxious to enter into a 20-year supply agreement when it can no longer even assume that permits duly issued by the governing agencies won’t be revoked by the courts at some indeterminate later date?
It’s a real problem, one that cries out for a quick resolution.
