New Fortress Energy's natural gas terminal in San Juan Bay was constructed at a cost of $100 million and provides natural gas to units five and six of PREPA's San Juan generator complex. The service contract with PREPA, which extends for five years, is valued at $1,500 million.
New Fortress Energy's natural gas terminal in San Juan Bay was constructed at a cost of $100 million and provides natural gas to units five and six of PREPA's San Juan generator complex. The service contract with PREPA, which extends for five years, is valued at $1,500 million. (NEIDY ROSADO)

The natural gas (LNG) terminal that New Fortress Energy (NFE) has in San Juan Bay, and which serves the Puerto Rico Electric Power Authority (PREPA) and private clients, was built without the authorization of the Federal Energy Regulatory Commission (FERC), a federal agency that does have jurisdiction over the facility, a panel of judges in the District of Columbia concluded.

In an 11-page decision, the panel of judges, including Patricia M. Millet, Cornelia L.T. Pillard, and David S. Tatel, denied a request by NFE since FERC’s determination was consistent with other FERC decisions and because that regulatory body’s jurisdiction does not rest on the type of connection used at an LNG terminal but on the way that fossil is transported in the context of interstate commerce.

“Can a 75-foot pipe be a pipeline?” The Federal Energy Regulatory Commission thinks so. Because petitioner has given us no basis to question that judgment, we deny the petitions for review,” reads the opinion issued by Judge Tatel.

The appeals court panel’s decision is a setback for NFE, a company that for the past two years has argued to FERC that it did not need its authorization to build the terminal it operates in San Juan Bay.

NFE will continue operations

However, NFE told El Nuevo Día that the San Juan terminal is operating at full capacity, as the company continues to work with FERC to obtain certification. The San Juan terminal operates under NFE’s subsidiary, NFE Energía LLC.

In March 2021, when FERC concluded that it had jurisdiction over NFE’s San Juan terminal, it also determined that the gas company should continue to operate because it was acting in the public interest.

FERC’s order noted back then that the project was built with the Coast Guard and the U.S. Army Corps of Engineers’ resources.

NFE went to the appeals court last year, because from its perspective, in an “arbitrary and capricious” action, FERC would have changed its requirements to claim jurisdiction over the terminal, whose construction was announced for 2019. But in turn, NFE decided to process the permit it should have received from FERC, the regulatory agency that has the final say when it comes to LNG terminals in the United States.

NFE built its facility in San Juan Bay in the context of an agreement with PREPA to transform San Juan units #5 and #6 to generate power with LNG. This is a five-year agreement, through which NFE also supplies the LNG used in those units. The contract totals approximately $1.5 billion.

For NFE, the 75-foot connection between its facility and PREPA is a pipe of about 10 inches in diameter, which would be different from the concept of a pipeline as large-scale transportation, and therefore FERC has no jurisdiction over its installation.

In contrast, FERC, now endorsed by the D.C. appeals court, understands that the physical characteristics of the connection do not determine its jurisdiction, but the role the pipeline plays in the process of shipping gas to or from an LNG terminal as part of international trade.

In its ruling, the appellate court acknowledges that while NFE was constructing the facility, the company received “informal” notice from FERC staff that the regulatory agency would not claim jurisdiction over the project. However, the ruling also states that such opinions do not represent FERC´s “official” position and that, therefore, the federal energy regulatory agency’s objections were justified.

The NFE dispute

The appellate panel’s ruling against NFE, a company that as part of the Encanto Power LLC consortium is also interested in operating the PREPA generators that will be transferred through a public-private partnership (P3), is the most recent development in the controversy surrounding the construction of the LNG terminal in San Juan.

From the beginning of the project, by 2019, communities and environmental organizations alleged that the construction was FERC’s responsibility and raised in several forums, including the Puerto Rico Energy Bureau (NEPR, Spanish acronym), that the project represented a safety risk to communities and commercial and industrial operations in the area and that the required environmental studies were not carried out.

In June 2020, when the project was already at an advanced stage, FERC asked NFE to explain why the federal regulatory agency should not have reviewed the project before it started.

Almost a year later, when FERC concluded that it had jurisdiction over NFE’s terminal and therefore, NFE had to apply for authorization to operate the terminal already in operation, NFE decided to appeal the decision in court. Then, SP Global Insight, an analysis unit linked to Standard & Poor’s, noted that the dispute could have effects on PREPA’s power grid and its customers.

Victory for the communities

After learning of the ruling, Earth Justice, an organization that filed an amicus curiae brief on behalf of several civic and environmental organizations, said the court decision will now allow “the impacted communities living in and around the Port of San Juan the opportunity to weigh in on the unlawfully constructed gas import facility,” something that did not happen when the project was announced.

“We are vindicated by the D.C. Circuit’s order rejecting New Fortress’ continued attempts to sideline those most endangered by its operations,” said Raghu Murthy, Earthjustice attorney

“This motivates us to continue demanding ecojustice for our communities,” said Reverend Dr. Sary N. Rosario Ferreira, a local pastor and member of the Faith Committee of El Puente Enlace Latino de Acción Climática.

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