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New Fortress seeks US court review of FERC decision over Puerto Rico LNG facility

Highlights

Outcome could test limits of commission jurisdiction

Developer is growing player in supplying fuel to Caribbean

New Fortress Energy is asking a federal appeals court to review US regulators' decision to force the developer to apply for a permit certificate for an LNG import terminal in Puerto Rico that is already in operation.

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The outcome of the dispute could impact the island's energy consumers and power grid, as well as test the limits of Federal Energy Regulatory Commission jurisdiction.

Beyond Puerto Rico, New Fortress is a growing player in the supply of LNG to the Caribbean, where the bulk of energy consumed is in the form of imported petroleum products including from the US. Near full utilization at US liquefaction facilities continues amid strong global LNG demand and end-user market prices.

Commissioned in April 2020, New Fortress' LNG facility in Puerto Rico supplies LNG to industrial users and microgrids via trucks, as well as supplies gas to two units of the adjacent San Juan Combined Cycle Power Plant. The LNG facility has multiple truck loading bays to allow the fuel to be delivered to on-island industrial, commercial and transportation customers.

Two months after the LNG facility started up, FERC issued an order for New Fortress to show cause why the facility it had already built was not subject to FERC's jurisdiction under section 3 of the Natural Gas Act.

In March 2021, FERC asserted its jurisdiction over the facility. FERC's requirement that the developer apply for a federal permit within six months of that decision could involve a lengthy environmental review. New Fortress' subsequent request to FERC for a rehearing was effectively denied recently when the agency did not act on the request within a certain timeframe, setting up the developer's May 24 petition for review to the US Court of Appeals for the DC Circuit.

"New Fortress reserves the right to further petition this court for review in the event that FERC takes further action to modify or set aside the FERC order, in whole or in part, or takes additional action in response to the parties' requests to rehear that order," the developer said in the appeals court petition.

While FERC's order about the permit application did not require the facility to shut down, it is not clear what may happen in the future.

New Fortress and its key customer, the commonwealth-owned Puerto Rico Electric Power Authority, have argued that disrupting operations at the LNG import facility would be a severe setback in meeting the island's energy needs.

That issue is in clearer focus now with the Atlantic hurricane season set to begin June 1. The US territory was devastated in 2017 by Hurricane Maria, which disrupted power to Puerto Rico for almost a year.

Elsewhere in the Caribbean, New Fortress operates regasification facilities in Jamaica. It also has LNG operations in Brazil and is developing LNG import facilities and affiliated power plants in Mexico and Nicaragua.

In the US, New Fortress has talked about a project to move LNG by rail from a proposed liquefaction plant in the Marcellus shale region in Pennsylvania to a small export facility on the East Coast.