Exporting LNG: When Counting Becomes a Battle of the Experts

EPA and FERC don't agree how to assess the impact of a major LNG export project. That's a real problem for NEPA.

When does a natural gas export terminal facilitate more gas development and combustion than current practices or business-as-usual projections expect?  Answer: every time one’s actually built and brought online.  But in the race to build out the capacity market watchers believe can be supported, the Federal Energy Regulatory Commission is becoming a smaller and smaller player in an increasingly global drama.  And that mostly has to do with FERC’s reactionary posture and ostrich-like refusal to examine its choices in a broader context.

In a just-minted final environmental impact statement (FEIS), FERC examines a truly massive proposal to build out the Port of Lake Charles as a major liquefied natural gas (LNG) export hub.  It is, by most estimates, one among several such projects in the pipeline (so to speak).  The Lake Charles FEIS’s publication starts a 90-day clock for cooperating agencies using FERC’s EIS to make some needed permitting decisions.

Lake Charles: One Among Many?

Port of Lake Charles

Port of Lake Charles, LA

Our story on Dominion Cove Point in the lower Chesapeake is here.  An LNG export terminal like the one proposed for Lake Charles would assure suppliers in the eastern US ready demand that may not exist here at home, depending on how things shake out in wholesale electricity markets under the still-to-be finalized Clean Power Plan.  From Lake Charles, relatively cheap US natural gas could be exported anywhere.  Assuming it makes money, that is.

Svetlana Valonis, a director in [PriceWaterhouseCooper]’s Houston-based U.S. energy advisory practice, said that most export projects would need $60 global oil to be comfortable and at least $50 to make money. “We believe these projects need at least $50 a barrel to go forward,” Valonis said in a presentation at the University of Houston’s Bauer College of Business. For many, she said, viability even at $50 is uncertain.  And the bar may rise further as companies face stiff competition from other gas exporters and struggle to secure billions in capital amid turbulent oil and gas markets, she said.

The midstream companies developing the Lake Charles proposal, Energy Transfer Partners, have remained cautious about its actual construction:

The Lake Charles LNG project was originally slated for construction in 2015 and first exports in 2019. However, after a FERC permitting delay, Energy Transfer said in a recent statement that the final investment decision for the project had been moved to 2016.

—Fuel Fix Blog, Houston Chronicle.  Construction may not even begin until 2020 at this pace.  But Lake Charles would be a significant change in supply and demand dynamics.  All of the uncertainty was borrowed by Energy Transfer partners in 2013 when they sought and received U.S. Department of Energy permission to export LNG to “non-free trade agreement” countries.

Of course, just building the massive facilities involved will require further permissions from the Corps of Engineers, EPA and others.  The local footprint of this facility’s construction and operation would be enormous.  Big enough, in fact, to fill a 500+ page EIS.  Consideration of those effects, the reasonable alternatives thereto, and “mitigation opportunities” dominated FERC’s FEIS.  So what was missing?  The greenhouse gas implications of a giant export terminal like this.  According to EPA’s comment letter, that sort of analysis should’ve been included, too.

Additionality Again: Why Won’t FERC Count LNG’s GHGs Among the “Indirect Effects” of Lake Charles?

EPA’s comments on FERC’s FEIS say a lot about the stakes of FERC’s decision.  When the EIS was still in draft form back in June, EPA had this to say:

[T]he Draft EIS concludes that the nature of natural gas supply and pipeline system in the U.S. makes it difficult to predict accurately where the additional gas development activity will occur and thus concludes that it is not feasible to more specifically evaluate localized environmental impacts.

But, as EPA pointed out to FERC, the Department of Energy’s National Energy Technology Laboratory (NETL) recently released two big analyses helping someone like FERC do exactly that: estimate what enabling the export of natural gas from the US will do, big picture.  One of those analyses, an “addendum” DOE released in May 2014, noted at the outset that “[e]xporting natural gas may accelerate the timing of the development [of] unconventional resources and the associated potential impacts.”  U.S. Dept. of Energy, Addendum to the Environmental Review Documents Concerning the Exports of natural Gas from the U.S. at 2.

There’s the rub: if development’s timing is accelerated, will that result in increased development or even increased emissions from the development?  Conventional wisdom is gradually accepting that fossil fuels—all of them—will have to be left in the ground to some (rather enormous) extent if we are to have any hope of averting a climate catastrophe as a species.  {I say conventional wisdom is doing so because former EPA Administrator William K. Reilly recently admitted as much in this video.  If Reilly admits it, it’s conventional wisdom.}

Even leaving the resources in the ground for some lengthened interval of time can decrease emissions.  As the NETL document observed, methane and other emissions “upstream” that result from insufficient capture technologies or flawed well completions might be inevitable at this stage in our history but wholly avoidable in decades to come.  {The study published in PNAS last year that made a stir estimated as much as 40% of the gas produced in some wells vents directly to the atmosphere.}  Many states still don’t do anything to regulate these emissions in well development.  But they will eventually as new source performance standards (NSPS) under the Clean Air Act come into force, along with other restrictions. well in marcellus land

If that’s the case, the argument for deliberations that include the GHG additionality in some proposal like Lake Charles should stem not from the EIS mandate in NEPA § 102(2)(C), but rather from NEPA’s alternatives mandate in § 102(2)(E).  That provision, unobtrusive and easy to miss, holds that

all agencies of the Federal Government shall . . . study, develop, and describe appropriate alternatives to recommended courses of action in any proposal which involves unresolved conflicts concerning alternative uses of available resources.

42 U.S.C. § 4332(2)(E).

Notice that this duty holds irrespective of “significance” of expected impact from any given, discrete “proposal” or “actions.”  Those terms are confined to sub-subsection (C).  This alternatives duty in sub-subsection (E) is, therefore, unalloyed to the EIS’s usual troubles with causation or, likewise, with the proper scope of an EIS.

Thus, even without being able to quantify the “additionality” of upstream development at stake in any given export terminal, is it enough to say it can’t be calculated precisely so FERC’s commissioners need not consider it?  That was FERC’s “Office of Energy Projects” conclusion in their FEIS.  It now heads to the commissioners for their consideration along with Energy Transfer’s permit application.  As the above analysis suggests, though, that renders NEPA inert to the biggest environmental challenge of our time at FERC.  The right legal challenge to agency action like the one FERC seems poised to take could reorient us all to a more functional and substantive NEPA.

I teach environmental, natural resources, and administrative law at Penn State Law. Before teaching I was an enforcement lawyer at U.S. EPA. Along the way I've done work for environmental nonprofits and written a fair bit about NEPA.
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