NextDecade Corp.’s Rio Grande LNG project has cleared a major hurdle that opens a clearer path to reaching a final investment decision (FID) after FERC reaffirmed its approval for the facility and an associated pipeline in a long-awaited order issued late Thursday.
In a 3-1 vote, the Federal Energy Regulatory Commission found its 2019 approvals for the Rio Grande project, along with the Rio Bravo Pipeline and the Texas liquefied natural gas export project, are in the public’s interest and can move ahead. The decision came 18 months after the U.S. Court of Appeals for the District of Columbia Circuit ordered the Commission to review its authorizations for the South Texas projects.
The 27 million metric tons/year (mmty) Rio Grande facility is among a coterie of U.S. export projects under development that are considered closest to being sanctioned. It has met more than 60% of the contractual obligations needed to underpin financing and move ahead with the first 17.6 mmty stage. The bulk of the deals were signed last year, but contracting has slowed in what the market had attributed to FERC’s inaction.
‘Critical’ For Commercialization
“We view this FERC order as critical to NextDecade’s ability to finish commercialization of the project,” said Evercore ISI analysts led by Sean Morgan. Morgan and his team said in a note earlier this month that additional offtakers, prospective project equity backers and Rio Grande’s debt syndicate had likely been waiting on a positive outcome at FERC.
In August 2021, the DC appeals court found the Commision had not adequately explained its approach in evaluating the potential impacts on climate change and environmental justice (EJ) communities. The court’s decision came in response to a petition for review filed by project opponents that want to stop it over its environmental impact and carbon emissions.
The court agreed with opponents that the FERC assessment of the projects’ impacts on climate change was deficient. The opponents, which include environmental groups and local activists, argued that FERC should have used a “social cost of carbon” protocol to calculate environmental impacts.
The DC court also agreed that FERC’s reliance on census blocks within two miles of the project sites to assess impacts on EJ communities was arbitrary. The opponents had argued that environmental effects from the potential projects would extend well beyond that distance.
FERC Chairman Willie Phillips said FERC has now included the social cost of carbon figures in its latest order reaffirming the Rio Grande, Rio Bravo and Texas LNG authorizations. He said the Commission also conducted a full review throughout 2022 of how all three projects would impact EJ communities within a 30 mile radius.
The order on Thursday, Phillps said, takes “an unprecedented and bipartisan step to protect environmental justice communities from potential concerns about the projects’ effects on air quality.”
FERC is now requiring Rio Grande, Rio Bravo and Texas LNG to file a plan ensuring that overlapping construction and operation of the projects do not exceed federal air quality standards. Phillips stressed that the order also “illustrates how the Commission is making progress on the critically important issue of cumulative impacts.”
Dissenting Opinion
Democratic Commissioner Allison Clements, however, dissented. She said the Rio Grande approval is likely to create additional legal problems as it “creates an incomplete and inadequate record.”
Indeed, the Sierra Club said it would seek a rehearing of the Commission’s decision. The environmental group again accused FERC of acting “as a rubber stamp for the fossil fuel industry…despite not adequately evaluating the environmental impacts of the projects and amidst widespread community and environmental justice concerns.”
NextDecade was reviewing the order. It said it is still aiming to make an FID by the end of June.
Both Rio Grande LNG and Glenfarne Energy Transition LLC’s 4 mmty Texas LNG project would be in Cameron County, near the U.S.-Mexico border. Rio Bravo would move 4.5 Bcf/d from the Agua Dulce supply hub near Corpus Christi to the Rio Grande export facility in Brownsville. Enbridge Inc. acquired the pipeline project in 2020.
FERC on Thursday also approved Driftwood Pipeline LLC’s Line 200 and 300 projects in Louisiana. The pipelines would provide up to 5.7 million Dth/d to Tellurian Inc.’s Driftwood LNG project south of Lake Charles, LA, which has yet to be sanctioned.
