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Cheniere, PHMSA clash over LNG tank shutdown order

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Cheniere, PHMSA clash over LNG tank shutdown order

Two leaking LNG tanks at Cheniere Energy Inc.'s Sabine Pass export facility posed no public safety threat and should not have been subject to a corrective action order that required them to be removed from service, lawyers for the company argued at a Pipeline and Hazardous Materials Safety Administration hearing on March 21.

Attorney Kevin Ewing of Bracewell LLP said PHMSA's corrective action order to shut down tanks 101 and 103 at Cheniere's Sabine Pass LNG export facility was based on "materially incorrect initial findings" and did not meet the federal agency's own standards. Cheniere went to the hearing at a federal building in Houston to ask the agency to lift the order.

"The [corrective action order] was not warranted because the incident did not substantially or imminently endanger public safety," Ewing said. He said the fact that it took PHMSA 17 days to order the tanks offline was proof the standard was not met. Cheniere took tank 103 offline after discovering the leak and de-inventoried it before the corrective action order was issued.

The incident in question came to light on the evening of Jan. 22, when tank 103 was reported to be visibly leaking. When PHMSA issued its order on Feb. 8, the agency said the tank had released supercooled LNG into the space between the inner and outer tank walls, called the "annular space," which eventually caused cracks in the outer wall. Further investigation found a problem with tank 101.

At the hearing, PHMSA said the order was put in place to help get a full understanding of the situation. The agency said a similar design flaw could have affected both tanks as well as tank 102. When it came to solving the problem, the agency said Cheniere was hesitant to work with them.

"They showed some reticence about what went wrong … They had an idea of what happened but didn't want to say it right off," PHMSA attorney Adam Phillips said.

Cheniere countered that cracks in the outer tank of 103, which affected an area that measured roughly 50 feet by 50 feet, were not indicators of an unsafe environment, because the outer wall is not a safety mechanism. The safety features are the insulated inner tank and dikes built around each tank, designed to contain any natural gas that does not vaporize, the attorneys said.

"The outside tank is not secondary containment. The dike is," Ewing said. "You're telling the public that there's a serious threat to them [with the order]."

The Cheniere attorneys said they would give more detail on the design of the tanks and why the leaks should not be a concern, but only after S&P Global Market Intelligence and other media outlets were asked to leave the public meeting. Before that happened, however, PHMSA senior investigator Julie Halliday said relying on one tank and a dike to handle spills could be disastrous.

"A pool of fire of that sort is extremely hot. There's no way to put out a dike filled with LNG," she said. "It would burn for days [or] weeks."