On April 16, 2012, FERC issued a precedent setting order approving a proposal by Sabine Pass Liquefaction, LLC and Sabine Pass LNG, L.P. (collectively, "Sabine Pass") to site, construct and operate facilities to liquefy domestic natural gas for export to world markets.The Sabine Pass Liquefaction Project will be constructed at the existing Sabine Pass LNG, L.P. terminal in Cameron Parish, Louisiana.Upon completion of the Liquefaction Project, the Sabine Pass terminal will be the first bi-directional LNG facility in the U.S., capable of importing and regasifying foreign-sourced LNG, and liquefying and exporting domestically produced natural gas as LNG. FERC's approval follows the DOE authorization last year enabling Sabine Pass Liquefaction, LLC to export domestically produced LNG for a 20-year period to all U.S. trading partner countries.In the same sweep, FERC surprised industry watchers by vacating, without prejudice, an order previously authorizing Jordan Cove Energy Project, L.P. ("Jordan Cove") to construct and operate an LNG import terminal in Coos County, Oregon along with the related pipeline certificate authorization for the proposed 234-mile-long Pacific Connector pipeline.The Commission seemed to base its decision to vacate those prior approvals on recent statements by Jordan Cove that it did not intend to construct and operate its authorized import facilities at this time in light of current market conditions, but rather was seeking authorization to construct LNG export facilities.In a strongly worded dissent, Commissioner Philip Moeller noted that FERC chose to vacate the Jordan Cove authorization "based upon little more than statements about current market conditions by Jordan Cove and the market views of three Commissioners."Commissioner Moeller further stated that "[r]evoking an authorization to build during the third year of a five-year authorization could fundamentally change how the public views whether this Commission will stand by its decisions."In conclusion, FERC's authorization of the Liquefaction Project signals that export projects may lead the next wave of LNG development in the U.S. for those project sponsors able to obtain DOE export approval.While the Commission's decision with respect to the Jordan Cove import project and the Pacific Connector pipeline undoubtedly will become part of any LNG regulatory risk dialogue, we do not believe that FERC's decision should be interpreted as a death blow for all LNG import capacity development.Rather, we believe the FERC has put developers on notice that proposals for LNG import capacity will have to address existing U.S. market conditions that strongly support exports, but which also may vary by region.Thus, LNG developers are well advised to design their projects in a manner that takes into account changing market conditions. For this reason, a bi-directional facility, such as the Sabine Pass terminal, is well positioned to withstand regulatory challenges based on changing market conditions.
This article was prepared by Lisa M. Tonery (email@example.com or 212 318 3009), Tania S. Perez (firstname.lastname@example.org or 212 318 3147) and Rabeha Kamaluddin (email@example.com or 202 662 4576) of the Fulbright's Energy practice.
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The need for alternative energy source is very imminent and it can be expected that as the years pass, new and better forms of energy will be in use.