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FERC asks Puerto Rico LNG importer why it built terminal without agency approval

The Federal Energy Regulatory Commission demanded that the owner of a natural gas import terminal in Puerto Rico explain why it did not seek agency approval before building the infrastructure that is now in service at the Port of San Juan.

FERC said in a rare show-cause order issued June 18 that it believed that New Fortress Energy LLC built and began operations on an LNG handling facility, which supplies a gas-to-power project at an adjacent power plant, without seeking the prior authorization from the regulator that is required by the Natural Gas Act. FERC has jurisdiction over most LNG import and export terminals, but it does not regulate all facilities that handle LNG. Exceptions include facilities that cannot load LNG directly onto oceangoing tankers and facilities that do not send out the LNG as gas by pipeline.

"Here, it appears that New Fortress Energy has constructed dedicated LNG facilities that directly offload LNG from tankers, regasify the LNG, and then transport the natural gas to an adjacent power plant, presumably via a short pipeline," FERC said in the order. "Given the above, it appears that New Fortress Energy's LNG import facilities located in San Juan are subject to the commission's jurisdiction, and New Fortress Energy is directed to show cause why its construction and operation of the subject facilities are not subject to the prior authorization requirements of section 3 of the [Natural Gas Act]."

FERC said its jurisdiction does not hinge on whether the agency has jurisdiction over the pipeline connecting LNG to the power plant, pointing to other cases of export terminals in Texas that would be supplied by pipelines outside of the agency's jurisdiction.

New Fortress did not immediately respond to a request for comment.

The LNG imported by the facility feeds a San Juan combined-cycle power plant belonging to the island's government-owned power company, which tapped New Fortress in 2019 to support a project switching two units from running on diesel to natural gas for cost savings and emissions reductions.

New Fortress' local subsidiary, NFEnergía LLC, signed a contract in March 2019 with the Puerto Rico Electric Power Authority, or PREPA, for the natural gas supply and conversion services. The contract had an initial five-year term, with options for PREPA to extend it by three additional five-year terms. The agreement called for NFEnergía to provide the plant with natural gas from its micro fuel-handling facility in the Port of San Juan, which was built with multiple truck-loading bays to deliver liquefied natural gas to industrial customers and microgrids.

New Fortress said in regulatory filings that it expects to supply the units, which have a combined capacity of about 440 MW, with an amount of natural gas equivalent to about 860,000 gallons of LNG per day, or about 70,000 MMBtu per day. Natural gas deliveries to both units had started by early May, New Fortress said when it reported first-quarter earnings.

New Fortress, which launched an IPO in January 2019, is majority-owned by a fund managed by an affiliate of investment management firm Fortress Investment Group LLC.

New Fortress is also the developer of a proposed LNG-by-rail project that would export gas in ISO containers.

That project, which would expand the Gibbstown Logistics Center deepwater port in Gloucester County, N.J., received a special permit from the U.S. Pipeline and Hazardous Materials Safety Administration in late 2019.

(FERC docket CP20-466)