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Time for FERC to Step Up in Support of Key LNG Project in Puerto Rico

Activists have notched some high-profile wins over the past several weeks aimed at slowing the advance of key energy infrastructure projects that, had they been built, would’ve led to lower prices, greater reliability and the cleaner air and water for the communities they serve. But hey, being angry at an activist for pushing an activist agenda is like being angry at a tiger for having stripes. We’re not happy about it, but at least we can understand it.

Far tougher to understand is the position that the Federal Energy Regulatory Commission (FERC) appears to be taking on an important liquified natural gas (LNG) project in Puerto Rico that, if allowed to stand, could deny that island and its people the cost, reliability and clean-air benefits that follow LNG-to-power conversions seemingly wherever they’re installed.

We get why activists have a problem with the siting and installation of critical energy infrastructure. What’s harder for us to wrap our heads around is: why does FERC?

Last month, FERC demanded that a small modular LNG development explain why it did not seek FERC approval before constructing and commencing operations of a small LNG terminal on the island. Strangely, the FERC request appears to have been spurred by a letter sent to the commission by House Democrats, including “squad” member Rep. Alexandria Ocasio-Cortez and other Democrats on the House Natural Resources Committee. The reason that’s strange is that FERC isn’t even one of the agencies that reside under the jurisdiction of the committee. But nonetheless, these folks demanded to know why FERC wasn’t taking a more aggressive tack in stepping in to claim jurisdiction over the facility.

Federal Overreach?

While FERC does generally regulate large-scale LNG import and export facilities, it does not have jurisdiction over all LNG facilities – or even most of them. In fact, of the 110 LNG facilities currently in the United States, only 24 of them fall under commission jurisdiction. In cases where FERC is not the sole oversight agency, projects are instead regulated by other federal, state, and territorial agencies – as is the case with the New Fortress Energy facility under discussion here, but which does involve U.S. Coast Guard oversight, and that of many others.

Jurisdictional determinations are made weighing a variety of factors – such as size of the infrastructure, pipelines, and the size of the ships bringing LNG into the facility – and are not a “one-size fits all” decision.  For instance, a different company, with a project several orders of magnitude larger than NFE’s project has recently filed with FERC laying out a compelling case for why it should also be considered non-jurisdictional.

The push by both activists and non-jurisdictional House Democrats to delay planned projects and halt existing operations isn’t new – as was evident in the reactions to pipeline decisions earlier this month – nor is the demand for action without realistic plans to supplement losses in resources, economic stimulus and jobs. In the case of Puerto Rico, PREPA, the local electric utility, has explained the risk if FERC orders the already operational NEF facility to close:

“If NFE were to be directed to cease operation of its LNG handling facility, PREPA would no longer have ability to consume natural gas in Units 5 and 6. As a consequence, PREPA would need to reduce its dispatch of these units on diesel to ensure that their emissions remain below the applicable annual limits. We are now entering hurricane season, and PREPA must be able to rely on San Juan Units 5 and 6 to maintain service to the San Juan region and beyond if PREPA’s transmission system again were to sustain hurricane-related damage. Moreover, given the impacts of this winter’s earthquake activity on PREPA’s Costa Sur generating facility, two of PREPA’s largest generating units remain unavailable, and will not be fully available until the end of this year. This makes the continued availability of San Juan Units 5 and 6 even more critical.” (emphasis added)

Considering Rep. Ocasio-Cortez’s tone-deaf, now deleted tweet in response to falling oil prices and companies laying off workers – “You absolutely love to see it” – it shouldn’t come as too big of a surprise that these House members appear to be ignoring PREPA’s legitimate concerns in service of a more ideological agenda.

Same Playbook, Different Place

The letter in April 2020 from Democrats on the Natural Resources Committee came on the heels of previous actions by the Institute for Energy Economics and Financial Analysis (IEEFA), a group that has repeatedly attacked the project and testified on it before the committee. In 2019, during a congressional hearing on Puerto Rico’s electric utility, IEEFA’s Tom Sanzillo admitted the project meets “a longstanding need” by “reinforcing generation capacity in the San Juan area,” but claimed it failed to consider all of the other options – most of which were diesel facilities. Just a few months prior to the hearing, IEEFA had begun discussing the project, alleging it threatened to displace renewable energy, and disregarding the emissions reduction benefits of the Puerto Rican power grid converting from predominantly diesel and coal power generation to natural gas.

It’s a familiar playbook for IEEFA, which draws its main support and funders from the very same group (the Rockefeller Family Fund) that continue to pour millions into climate litigation campaigns targeting oil and gas firms large and small. Indeed, IEEFA was originally a Rockefeller project called the Power Plant Finance Project. For the past few years, Rockefeller has been throwing money behind “Keep It In the Ground” activists such as Greenpeace, 350.org, and “news sites” such as InsideClimate. IEEFA, however it may describe itself, fits a similar mold.

The attack on Puerto Rico’s new LNG facility is just another iteration of activists ongoing and relentless campaign against hydrocarbons, this time targeting Puerto Ricans who are asking for nothing more than reliable, clean, and affordable energy that can help them fully recover from the string of natural disasters that have befallen the island in recent years.

Fact Check: LNG Offers Clean, Reliable Power Option for Puerto Rico

The use of LNG is providing more reliable, affordable energy globally, especially in places with limited resources or that have traditionally relied on coal and oil to supply their energy needs, like Puerto Rico.

According to the U.S. Energy Information Administration, fuel oils and diesel still make up over 40 percent of electricity generation in Puerto Rico, but that is quickly changing. Last year, Puerto Rico’s electric utility, PREPA, announced a plan that would transform its electrical grid. In its 20-year Integrated Resource Plan released last year, PREPA said it plans to retrofit oil-fired power plant plants to burn natural gas, replacing higher-emitting, and more costly, heavy fuel oil.

After the barrage of natural disasters to hit the island – Puerto Rico reevaluated its power structure and LNG stood out as a fuel source that could help power the island, while reducing emissions and cost.

The island’s transition to natural gas is being welcomed by many. Last year, Department of Energy Assistant Secretary Bruce Walker said that DOE “believes an increase in the natural gas generation in San Juan would be one of the single most valuable investments for PREPA’s long-term recovery.”

New projects, like NEF’s LNG import facility, will continue to aid the recovery of the island and its transition to lower emitting fuel sources. In a recent American Petroleum Institute study, researchers at ICF International found that electric generation from U.S. LNG emitted nearly 50 percent less methane than coal in both China and India. In Germany, the benefits were even greater, with U.S. LNG emitting 53 percent less than German coal.

Conclusion

LNG demand is increasing all around the world, not just in Puerto Rico. A Shell report released earlier this year found that demand for LNG worldwide grew by 12.5 percent last year to 359 million tons. The rise in demand is forecast to continue, with the United States expected to grow its LNG exports by 340 percent and lead the world in supplying LNG by 2040.

LNG, both in the United States and abroad, is rapidly transforming power production. The benefits provided help countries and territories like Puerto Rico transition to a clean and reliable fuel, while mitigating other climate impacts. While Puerto Rico’s road to recovery is uncertain, LNG is already demonstrating its capability to meet the island’s energy needs.

Expecting IEEFA and other professional activist organizations to put the interests of everyday Puerto Ricans ahead of their own ideological and financial pursuits is probably a bridge too far – remember what we said about tigers and stripes. But FERC? Yes, we should and do expect more. And the people of Puerto Rico demand it.

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