The Rio Grande and Texas LNG projects are potentially facing lengthy delays after a federal appeals court on Tuesday vacated their FERC authorizations, effectively leaving them without a key approval to move ahead with construction and operation.
The U.S. Court of Appeals for the District of Columbia Circuit again sent the authorizations back to the Federal Energy Regulatory Commission for further consideration of the projects’ environmental impacts. Environmental groups challenged the projects, arguing that FERC did not adequately consider their environmental justice impacts and emissions.
The court upheld most of the petitioners’ arguments. FERC must now issue a new draft supplemental environmental impact statement and start a new public comment period, both lengthy processes.
For now, construction can continue on the $18.4 billion Rio Grande liquefied natural gas project, said developer NextDecade Corp. The company said late Tuesday it was reviewing the court’s decision and evaluating the impact on the timing of a positive final investment decision (FID) on its next phase, which includes a fourth train. The expansion cannot move ahead until FERC reauthorizes the project.
Nathan Matthews, the lead attorney on the case for the Sierra Club, told NGI that construction at the Rio Grande site near Brownsville, TX, would have to be stopped 52 days from the court’s decision if FERC or the developers do not file for a rehearing. If they do, the court’s mandate invalidating the FERC certificates would likely be delayed.
Matthews added, however, that FERC would not have to wait, and could ultimately issue a stop work order in response to the court’s order. The Commission did the same in 2018 during a similar situation for Mountain Valley Pipeline LLC.
Texas LNG, which has been working to sign up offtakers and advance the project to FID, said the court’s move to vacate its authorization was “a procedural decision” to correct a “technical deficiency.” It expected FERC to address the decision “judiciously and efficiently.” Texas LNG was planning to start construction this year, but cannot without federal authorization.
The DC Circuit’s decision marked the first time a court has vacated FERC approval of an LNG terminal. It came as opposition groups have stepped up resistance to the Gulf Coast LNG buildout.
The order also was the latest in a series of legal setbacks for the liquefaction terminals and the Rio Bravo Pipeline. The pipeline would serve the Rio Grande terminal and was included in Tuesday’s decision.
In April 2023, after 18 months, FERC reaffirmed its initial authorizations for the projects. The reauthorizations cleared a major regulatory obstacle for Rio Grande LNG, which was sanctioned just three months later. At the time, the company said it was the “largest greenfield energy project financing in U.S. history.”
FERC was previously forced to reconsider its authorizations after the DC Circuit found in August 2021 that the Commision had not adequately explained its approach to evaluating the projects’ potential impacts on climate change and environmental justice communities. At the time, the court remanded the authorizations, or sent them back to FERC, but did not vacate them.
In July 2023, a group led by the Sierra Club filed lawsuits challenging FERC’s decision to reaffirm its authorizations. While the Sierra Club first challenged the projects, it was joined by the city of Port Isabel and the Carrizo Comecrudo Tribe of Texas in filing last year’s complaints.
Rapidan Energy Group said Tuesday’s decision is likely to delay progress at Rio Grande LNG and “hinder efforts to reach” FID on Texas LNG. It said FERC’s new review of the projects would likely take a minimum of six months. The firm also did not rule out that construction could stop at the Port of Brownsville site, about 20 miles southwest of Port Isabel.
ClearView Energy Partners LLC agreed that the projects are likely to suffer delays as a result of the court’s decision, but how long those delays might last remains unclear.
Rapidan also noted that the court rejected the petitioners’ argument that FERC improperly refused to evaluate whether the emissions from the projects were significant.
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“This is the third precedent in as many weeks that supports our contention that, while courts are getting frustrated with FERC’s dancing on this issue, it should not present a vacatur risk to LNG projects, provided FERC supports its inability to reach a significance determination with a reasoned explanation,” Rapidan said in a note to clients.
Indeed, the DC Circuit has now vacated four FERC orders in 11 days, including canceling approval of Williams’ Regional Energy Access Expansion project last week.
Those decisions marked “process grounds,” ClearView said, or a “failure by FERC to either provide adequate comment opportunity or a failure to address arguments put before it.”
The new obstacles for Rio Grande and Texas LNG came as snags have slowed down other projects along the Gulf Coast and in Mexico. The market has been crowded with export terminal development in both locations,creating a host of challenges. More than 80 million metric tons/year of new LNG supply is under construction in both regions.
Earlier this month, sponsors pushed back the startup of the Golden Pass LNG project in Texas until later next year after its construction contractor filed for bankruptcy. Sempra Infrastructure also said Tuesday that the Energía Costa Azul project in Mexico would not come online until next year amid labor and productivity issues.
