On November 23, 2016, the Federal Energy Regulatory Commission (FERC) confirmed its authorization of the construction of a $3.5 billion liquefied natural gas (LNG) export facility in Lake Charles, Louisiana and rejected the Sierra Club’s request for rehearing on the matter.
In an April 15, 2016 Order, FERC authorized Magnolia LNG, LLC to site, construct, and operate a new LNG terminal and liquefaction facility in Lake Charles, Louisiana designed to export 8 million metric tons of domestically-produced natural gas per annum, with a capacity equivalent to pipeline receipts of up to 1.4 billion standard cubic feet per day (Magnolia LNG Project). In the same April 2016 Order, FERC authorized Kinder Morgan Louisiana Pipeline LLC to construct and operate facilities necessary to enable Kinder Morgan’s existing pipeline, which currently operates in a northerly direction, to transport domestically-produced natural gas in a southerly direction for export from the Magnolia LNG facility (Lake Charles Expansion Project). FERC agreed with the conclusions in the final environmental impact statement (FEIS) for the projects and required the construction and operation of the facilities to adhere to 115 prescribed environmental conditions and safeguards. The Sierra Club is the only party that requested a rehearing on FERC’s authorization of the Magnolia LNG Project and Lake Charles Expansion Project.
The Sierra Club asserted that the FEIS for the projects too narrowly applied the National Environmental Policy Act (NEPA) analysis by ignoring what the Sierra Club believed were indirect and cumulative effects of the projects. The Sierra Club argued that the projects could result in the increased combustion of exported gas in importing markets, leading to increased exports of natural gas, leading to increased domestic gas prices, leading to increased use of coal as a fuel for industrial and electric generation facilities, potentially causing adverse environmental impacts.
FERC concluded, in part, that the Sierra Club’s contentions were too attenuated to grant the request for rehearing. More specifically, FERC determined that the potential effects of induced upstream production, increased foreign end use, and possible market-based, gas-to-coal switching were not reasonably close causal relationships and were not reasonably foreseeable consequences of FERC’s authorization of construction of the facilities in Lake Charles, Louisiana. FERC added that the claimed indirect and cumulative effects of increased export of natural gas were not legally relevant to FERC’s consideration because the Department of Energy, not FERC, has sole authority to license the export of natural gas.
The Sierra Club also argued that the analysis of cumulative effects should have been conducted via a programmatic EIS. FERC rejected this contention, explaining that the projects are not in response to a broad federal action such as the adoption of a new agency program or regulations that might necessitate a programmatic EIS. Further, according to FERC, a nation-wide programmatic EIS would draw the NEPA circle too wide; instead, the geographic area for its analysis of cumulative impacts was reasonably limited to the Louisiana parishes where the facilities would be located.
Pursuant to FERC’s authorizations, the Magnolia LNG Project and Lake Charles Expansion Project are to be constructed and made available for service within five years.
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