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DC Circuit upholds DOE LNG export approvals for three terminals

Washington — A US federal appeals court cast aside Sierra Club arguments challenging Department of Energy approval of exports from three more LNG terminals, in a decision further setting back the environmental group's argument that agencies have failed to adequately assess greenhouse gas emissions from upstream production induced by the projects.

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In a judgment issued Wednesday, a three-judge panel of the US District of Columbia Circuit Court of Appeals Monday denied Sierra Club's petitions challenging authorization of LNG exports from Dominion Energy Cove Point LNG in Maryland, Sabine Pass LNG in Louisiana and Corpus Christi LNG in Texas.

Combined, the three facilities will represent peak liquefaction capacity of 5.4 Bcf/d by 2020, more than half of all liquefaction capacity currently under construction.

Related Commodity Pulse video: US LNG exporters face fierce competition in an oversupplied market

The court said it considered as precedent its own recent ruling denying Sierra Club's petition related to the Freeport LNG facility in Texas, and ruled in DOE's favor on three other remaining "narrow issues." In the August 15 Freeport decision, the court found that indirect effects of gas production induced by the project were not reasonably foreseeable and that DOE did its best to determine the environmental impacts of the project.



The decisions add to prior rulings in which the DC Circuit upheld FERC approvals of the terminals. In those cases, the court found FERC's analysis "did not have to address the indirect effects of the anticipated export of natural gas because the Department of Energy and not the commission, has sole authority to license the export of natural gas."

Charles Riedl, executive director of the Center for Liquefied Natural Gas, said in an interview that Wednesday's ruling would help reduce the perception of legal risk for US LNG projects, given the number of decisions now finding that DOE is utilizing the National Environmental Policy Act appropriately. He was hopeful it would discourage more challenges along similar lines, just as Sierra Club's losses on the rulings affecting FERC had.

"We hope today's decision will put an end to the unnecessary and costly challenges by Sierra Club that delay LNG projects," he said in a statement.

Sierra Club has not yet determined whether it will seek rehearing of the recent decision. But Nathan Matthews, Sierra Club staff attorney, said in an interview that the group is continuing to fight LNG projects around the country, including the Jordan Cove project in Oregon and three projects in Brownsville, Texas. In most instances, the group will engage on different issues than were tackled in the prior litigation, he said.

In a recent protest related to Jordan Cove, Sierra Club focused on environmental impacts of the terminal itself and land adjacent to the natural gas facilities, as well as whether adequate need for the project had been demonstrated, he said.

"Common sense dictates, and even the Department of Energy agrees, that expanding exports of fracked gas would drive an increase in fracking and the air and water pollution that comes with it," he said in a statement released by the group. "We will continue to work to protect communities from the threats of fracked gas pollution."

Christi Tezak of ClearView Energy Partners said in an email that the decision Wednesday considers the GHG issue substantively closed in the Freeport decision and that precedent controls, provided that the agencies continue their current level of review. On the other hand, she noted that a separate ruling related to the Sabal Trail pipeline made clear where FERC's downstream NEPA review was insufficient.

"Going forward, we have maintained that FERC [and] DOE reviews are not likely to expand further, compared to an even deeper dive had the election turned out differently," she said. "That said, we don't expect them to meaningfully contract for larger projects, given that this much analysis went into these decisions and both agencies could be vulnerable on judicial review if they were to backslide without sufficient justification."

Addressing the remaining issues not covered in the Freeport case, the court Wednesday, in the Cove Point and Sabine Pass cases, found that DOE's findings -- that there was no significant environmental impact and that an environmental impact statement was not needed -- were neither arbitrary nor capricious.

In addition, in the Cove Point case, it found that given the speculative and non-specific nature of information about where incremental gas production would occur, it was neither arbitrary nor capricious for DOE not to engage in a more localized analysis of such impacts.

Finally, it rejected Sierra Club's argument in all three cases that DOE erred in its assessment of "distributional impacts" when determining whether exports were in the public interest under the Natural Gas Act.

The court said DOE had in fact acknowledged that some segments of the economy would face higher energy costs, but found the exports would benefit the economy as a whole, and that without more record evidence about distributional consequences, it could not find exports to be inconsistent with the public interest.

--Maya Weber, maya.weber@spglobal.com

--Edited by Lisa Miller, lisa.miller@spglobal.com