$18.4 billion gas project’s life on the line – Court ruling poses a threat to US LNG infrastructure buildout, developer says

Calming the turbulent energy waters in the U.S. has become more challenging after the storm in the form of a court ruling surged across a liquefied natural gas (LNG) export project at Texas’ Port of Brownsville, putting its development in danger by revoking the reauthorization granted by the Federal Energy Regulatory Commission (FERC).

The blow the U.S. Court of Appeals for the D.C. Circuit dealt to NextDecade’s Rio Grande LNG project, consisting of the Rio Grande terminal and Rio Bravo pipeline, by tossing out its FERC authorization, is still in evidence and does not seem to be slated to fade away soon. After the motions for a 30-day extension of the period to file a petition for rehearing were contemplated, they ended up being granted.

As a result, any petitions for rehearing are now due by October 21, 2024. On the heels of the court’s decision to vacate the reauthorization, Houston-headquartered NextDecade put the wheels in motion to retract an application made to the FERC for a proposed carbon capture and storage (CCS) project, envisioned to be deployed as a way to curb the carbon footprint of its LNG export terminal.

The U.S. player has urged supporters to stand in solidarity with the $18.4 billion Rio Grande LNG project, directing them to a newly created website, called Stand with RGLNG, to back it up as its development has been exposed to the risk of being called off in light of the unprecedented court ruling that has “far-reaching implications that threaten all other infrastructure projects subject to federal regulation,” in the company’s view.

If the D.C. Circuit’s ruling for the LNG project, envisioned to be built on the northern shore of the Brownsville Shipping Channel in Cameron County, is upheld and construction of the project cannot continue, NextDecade points out that it will spur the loss of thousands of local jobs in the Rio Grande Valley.

It will also jeopardize billions of dollars of investment and economic growth in the Rio Grande Valley region, including housing, patronage to local business, and the attraction of other industries, alongside the funding for the Brazos Island Harbor (BIH) improvement project related to the dredging of the Brownsville Ship Channel.

In addition, such a move is forecast to place global energy security at risk by reducing long-term LNG supply from Rio Grande LNG, totaling almost 6% of the current global supply, while compromising other infrastructure projects through a precedent inviting courts to upset federal permits.

While emphasizing that it is unprecedented to vacate an existing order for an LNG project under construction, the developer underscores that the court’s move threatens to snuff out “a reliable supply of cleaner burning natural gas to Rio Grande LNG’s customers at a critical time when our allies around the world need energy to help reduce their dependency on higher-carbon intensive energy, such as coal.”

The D.C. Circuit moved to axe the permit as it disagreed with how FERC handled certain procedural matters, but NextDecade claims that the important thing to keep in mind is that the court did not find any substantive flaws with the Rio Grande LNG project. The permitting process for the LNG terminal started in 2016.

Since the positive final investment decision (FID) for Phase 1 in 2023 regulatory agencies involved in the Rio Grande LNG project included but were not limited to FERC, U.S. Department of Energy; U.S. Army Corps of Engineers; U.S. Environmental Protection Agency; U.S. Coast Guard;  National Oceanic and Atmospheric Administration; U.S. Department of the Interior; Texas Parks and Wildlife; Texas General Land Office; Texas Historical Commission; Texas Railroad Commission; and Texas Commission on Environmental Quality.

“The decision reached by the D.C. Circuit has chilling and far-reaching implications. If the ruling stands, the precedent that would be set by the D.C. Circuit’s action has the potential to impact the viability of all federally permitted infrastructure projects because it will be difficult for projects to attract capital investments until they receive final unappealable permits,” highlighted Rio Grande LNG project developer.

Headwinds appeared on the Rio Grande LNG project’s horizon with the court’s ruling, marking a new setback in the development which has been forced to hit the brakes until further legal action in the form of an appeal overturns the decision.

Rio Grande LNG is also dealing with growing opposition from local South Texas communities and environmental activist groups, as illustrated by more than 70 organizations from around the world, which signed on the dotted line to throw support behind a letter addressed to financial institutions associated with the LNG terminal, in an attempt to pressure them into withdrawing their financial backing for the project.

The plot thickens further for this LNG project with CHUBB, an insurance company, being removed from its role as an insurer of the terminal, as confirmed by an insurance statement. The project is also facing the loss of support from banks, as BNP Paribas, La Banque Postale, and Societe Generale are on the list of the ones that severed their ties with the project in recent years.  

With BlackRock and GIP undergoing a merger, the former will get a stake in the Rio Grande
LNG terminal if the business combination goes through, thus, opponents of the project have lost no time in requesting a meeting to raise their concerns about the LNG development and make BlackRock aware of their stance. The financial and legal woes Rio Grande LNG has to contend with are being used by climate and environmental activists to push investors to drop the project.

However, the LNG terminal is also enlarging its support base, especially with community leaders across the Rio Grande Valley and Texas, as hammered home by those who decided to stand up for the project and call on others to follow suit.

Traci Wickett, Retired Local Executive, commented: “About a year ago construction began on the Rio Grande LNG facility at the Port of Brownsville, and thousands of local workers don hard hats and safety vests every day, earning good wages as they contribute to the construction effort. This huge increase in local employment pays dividends not only for the workers’ families, but for the community at large. The billions of dollars pouring into Brownsville because of this project are life-changing, rippling through every sector of our economy, improving lives directly and indirectly.

“I shudder to think of the negative consequences of shutting down the RGLNG project, consequences that will resonate across homes in Northern Europe where families need this fuel for heating without being dependent on supplies from Russia right down to the consequences for the families of these construction workers of the Rio Grande Valley, who feel so fortunate to be able to carry out their labors in their home towns, instead of having to leave their homes and families to bring in a much-needed paycheck. Jobs are the most effective tool in our fight against poverty. Southern Cameron County needs Rio Grande LNG.”

In line with this, Bernard Barcena, Chairman of the Lipan Apache Tribe of Texas, expressed its belief in the project’s potential to deliver “thousands of well-paying jobs that will uplift the entire community, bringing prosperity and progress to the Rio Grande Valley,” thus, he  fully endorsed and advocated for the development of the Rio Grande LNG export facility.

Rafael Vela, Executive Director at Workforce Solutions Cameron, outlined: “Rio Grande LNG has the potential to create 5,000-6,000 construction jobs at its peak and 500 permanent positions once operational. These jobs represent significant opportunities for our community. Additionally, the project will result in the deepening of our channel, a crucial development for future generations.

“Although every venture carries some risks, we believe that the benefits to our people and the Valley’s economy far outweigh these concerns. This project is not just for one city—it’s a transformative opportunity for the entire Valley and a bright future for our workforce.”

Thinking along the same lines, David A. Garza, Cameron County Commissioner, Pct. 3, warned that Cameron County would face significant financial limitations, if the LNG projects were not completed, as the projected tax revenue from those projects is seen as “a critical component of the county’s budget, directly funding essential services and infrastructure improvements.”

For Garza, Rio Grande LNG’s investment in Cameron County goes beyond economic impact, signifying “a substantial environmental commitment,” thanks to millions of dollars allocated to conserve over 4,000 acres of land, compared to the 761 acres affected by the facility. Therefore, he is convinced that Rio Grande LNG demonstrates its dedication to environmental stewardship, “balancing development with the responsible management of the region’s natural resources,” through these initiatives.

Garza continued: “While there are numerous pros and cons to consider, my primary responsibility as a County Commissioner is to ensure that I approach development with the utmost environmental sensitivity. The potential financial benefits for Cameron County are significant, particularly in terms of funding quality of life initiatives that directly impact our residents.

“My focus is on making a meaningful difference for the people of this county by securing the resources needed to invest in job creation and other environmentally sustainable projects. It is essential that we strike a balance between economic growth and environmental stewardship, ensuring that our actions today lay the foundation for a prosperous and sustainable future.”

The project also managed to get support from John Cowen, Mayor of the City of Brownsville, who expressed concern over the court’s ruling, saying he had to “respectfully disagree with the court’s conclusion,” as the nation is strong when “a growing economically disadvantaged region, such as the Rio Grande Valley, can find common ground between an $18B investment by a producer of a lower carbon intensive LNG, and the protection of our environment for the good of generations to come.”

Val Champion, Executive Director of the Los Fresnos Chamber of Commerce, stated: “If the Rio Grande LNG project does not go forward there will be a serious slowdown on our efforts to diversify our economy. We could have attracted other businesses and industries that would have fostered greater economic growth. […] The Rio Grande LNG project will of course benefit Los Fresnos and the entire Rio Grande Valley as well as South Texas. I completely support and endorse the continuation of this project which will also create benefits for NextDecade customers throughout the world.”

Daniel Silva, President/CEO of RGV Partnership, said: “The development of NextDecade and Rio Grande LNG in the Rio Grande Valley is a game-changer, with the average wage for jobs associated with the project expected to reach $100,000. This level of income will significantly elevate the standard of living for many families in our region, creating more disposable income and stimulating local businesses across sectors such as retail, housing, and services. Over the course of the 10-year project, the long-term impact will be profound.

“In addition to the direct jobs created, indirect jobs will emerge through supporting industries like construction, transportation, and supply chains. The influx of capital investment will improve regional infrastructure, positioning the Rio Grande Valley as a competitive destination for further industrial and commercial investments. This, in turn, will attract other companies and industries looking to capitalize on the region’s growing prominence, making the Rio Grande Valley a dynamic hub for economic development and opportunity for years to come.”

Once fully developed, the Rio Grande LNG project is forecast to bring 27 million metric tonnes per annum of LNG, delivering energy to heat and cool the equivalent of nearly 34 million U.S. households annually. Sitting on 984 acres of land on the north shore of the industrial Brownsville Ship Channel, the project currently employs over 1,400 workers and the number is expected to jump to more than 6,000 in the coming years.

Joey Lopez, Cameron County Commissioner, Precinct 2, remarked:“As a Cameron County Commissioner, I support the Rio Grande LNG project for its ability to bring economic growth and job creation to our region. This project has generated thousands of local jobs, boosted small businesses, and increased tax revenue to improve infrastructure and public services.

“While environmental concerns exist, the project is committed to meeting high standards and minimizing its impact. Their pay scale has brought back many skilled workers back home. Supporting this initiative is a key step toward a more prosperous and sustainable future for Cameron County.”