DC Circuit LNG Case Has Massive Energy Transition Implications
A recent decision by a panel of the DC Circuit Court of Appels to revoke final FERC permits for a pair of Texas LNG export facilities will have massive implications for the future progress of the energy transition if it is not reversed. A bipartisan group of US Senators and House members organized by Texas Sen. Ted Cruz and Texas Rep. Dan Crenshaw are urging the full DC Circuit to reverse the decision.
The 2024 Election Signals Community SupportOne of the more interesting aspects of the 2024 elections in Texas came in the fact that most South Texas counties voted solidly red for Donald Trump in the presidential race. Just 4 of the 31 counties south of San Antonio and only 12 of the 253 counties in Texas favored Kamala Harris in this election. The shift in voter sentiment in South Texas is particularly striking, given that as recently as the 2008 presidential race the heavily Hispanic counties along Texas's border with Mexico were a solid sea of blue.
One Democrat down-ballot candidate who survived the election is Congressman Vicente Gonzales, a moderate who was able to keep his seat representing Texas's 34th congressional district, which runs from Corpus Christi south along the Gulf Coast to Brownsville.
While this year's race against Republican challenger Myra Flores was complex and involved a number of issues, including border security and inflation, one issue on which both candidates agreed was their support for the Rio Grande LNG export facility under development near Brownsville by NextDecade . Gonzalez has been a strong supporter of the massive facility which promises to bring thousands of good-paying jobs to the area, provide a boost to the local economy, and is broadly popular with local citizens and voters.
During an August 2023 public meeting held in Brownsville, Gonzalez pointed to the fact that Rio Grande LNG will be the first such US project offering 90% carbon emissions reductions in its construction and operations. "So, it's the first of its kind," Gonzalez said. "We're real proud and happy to have it here and I tell my green friends, including AOC (New York Democrat Alexandria Ocasio-Cortez) and everyone about this amazing project that we have here – that really reduces carbon emissions."
Following a complex, years-long process, the Federal Energy Regulatory Commission (FERC) approved a final permitting decision to allow NextDecade to proceed with Rio Grand LNG in April of last year. Construction involving billions of dollars in investments has been underway since NextDecade reached a final investment decision in July 2023.
Interventions By Biden, Court Force Costly DelaysSince that time, though, the process has been undermined, first by President Joe Biden's decision in January to sign an executive order invoking a "pause" in LNG export permitting. More recently, NextDecade was forced to halt construction due to a decision by a panel of the DC Circuit Court of Appeals in an activist driven suit styled City of Port Isabel, et al. v. FERC. NextDecade is now awaiting an en banc hearing on the matter.
The DC Circuit Court decision vacated the duly issued final FERC permits for both Rio Grande LNG and second already-permitted facility. If it is upheld in an en banc hearing of the full DC Circuit and in a likely appeal to the US Supreme Court, the vacating of such permits would potentially have wide-ranging impacts on not just future LNG development, but all forms of energy development these activist groups choose to challenge.
In late October, Cong. Gonzalez j oined a bipartisan group of fellow members of the US House and Senate in signing an amicus brief urging the DC Circuit to reverse the panel's decision. In the brief, the signatories argue the following:
"The panel opinion is incorrect and will have devastating effects: freezing a distinctly important and job-creating South Texas project years in the making, unsettling long-standing FERC project-approval norms across the country, and weakening America's national security by making it less likely that the United States will continue to supply natural gas to the Nation's friends and allies while increasing our Nation's dependence on non-domestic energy sources."
"The panel's error is especially egregious because the panel used the flimsiest "environmental" whims to undermine the public interest in building LNG facilities; and the panel chose the wrong remedy— vacatur—to fix the regulators' supposed mistake. Both the decision and its use of vacatur are inconsistent with federal law and this Court's decisions. Together, they amount to a devastating, wrong answer to an exceptionally important question: who gets to decide the public interest?"
President-elect Donald Trump has vowed to rescind Biden's permitting pause as part of his Day 1 agenda in January. But he can't rescind this court decision, which, so long as it remains unresolved, is costing NextDecade and other developers millions. This decision by the DC Circuit panel is an unprecedented intervention into the permitting process that threatens to render orderly development of major US energy infrastructure unsustainable.
Rio Grande LNG represents a commitment of more than $18 billion in capital investment - it is the kind of capital commitment that may no longer be possible if activist courts destroy the ability of developers to trust the legal principle that "final" permitting decisions by FERC and other federal agencies truly are final, and not mere recommendations subject to further review.
The Bottom LineMost Americans agree that valid environmental considerations are important priorities in US society. But ensuring that societal compact is maintained is what the permitting processes at FERC and other federal and state agencies are set up to decide and is the main driver of why those processes are so complex and time consuming.
If permitting decisions can no longer be trusted to be final, then this vaunted energy transition in the US will find itself on life support.
