Dive Brief:

• The Federal Energy Regulatory Commission could decide on Thursday whether it has jurisdiction over a liquefied natural gas (LNG) terminal that feeds a power plant owned by the Puerto Rico Electric Power Authority (PREPA).
• The San Juan LNG Terminal was developed by New Fortress Energy and came online in March 2020, to supply a PREPA gas-burning plant after the utility announced a decarbonization goal. The developer built the facility without FERC authorization, claiming the terminal is outside of the commission’s jurisdiction under Section 3 of the Natural Gas Act based on a variety of technical factors and the advice of commission staff.
• Environmental groups pushing PREPA to more rapidly adopt renewable energy are calling for FERC to revisit a permitting process for the LNG terminal and consider shutting it down. PREPA officials say the utility's strategy to continue burning gas is saving money compared with diesel-fired generation, while also lowering emissions. 

Dive Insight:

If New Fortress is required to stop operations at the San Juan LNG plant, PREPA's nearby dual-fuel plant will need to switch over to the costlier, higher-emission diesel fuel, according to FERC filings by the gas importer. The utility expects to save $500 million over the next five years due to the higher price of diesel, said New Fortress. 

FERC's decision could also impact PREPA's plans to utilize additional natural gas from the terminal, say clean energy advocates

New Fortress did not respond to requests for comment on its San Juan LNG plant. The item is on the agenda for FERC's Thursday open meeting.

The proceeding began in June 2020 when FERC issued a show cause order directing New Fortress to demonstrate why its San Juan facility is not subject to the commission’s jurisdiction. The company replied in July that FERC "has never asserted Section 3 jurisdiction over any facility even remotely similar to New Fortress’s facility."

New Fortress maintains the facility does not include a pipeline, does not receive LNG from an ocean-going, bulk-carrier LNG tanker, and does not have "sufficient physical elements that constitute natural gas facilities as commonly understood by the commission and the regulated community."

Clean energy advocates say some of these claims are untrue. The facility does receive LNG from ocean tankers, said Earthjustice staff attorney Raghu Murthy. The group has filed comments in support of FERC claiming jurisdiction over the facility.

According to Murthy, Earthjustice believes New Fortress' consent to build the facility was obtained in meetings and contracts with PREPA that were "secret and possibly illegal." He also notes the Puerto Rico Legislature has launched an investigation into any safety and environmental risks posed by the LNG terminal to nearby environmental justice communities. 

Sierra Club filed more than 15,000 comments with FERC, many of which support closing down the facility and utilizing more renewables. The group says the LNG terminal is "at odds" with Puerto Rico's goal to reach 100% renewable energy.

FERC is likely to claim authority over the facility, according to ClearView Energy Partners.

"We are inclined to think that FERC may move to assert jurisdiction, potentially on a 3:2 vote, but the outcome appears to depend on Commissioner [Neil] Chatterjee's views on the 'jurisdictional issues,'" ClearView analysts wrote in a preview of the commission's meeting.

In a statement by PREPA Deputy Director of Operations Fernando Padilla, the utility defended its continued use of the San Juan gas plant while growing its renewable resources. It did not comment, however, on questions regarding development of the New Fortress LNG terminal.

"PREPA will continue to implement the overall infrastructure and energy transformation strategy towards more economic fuel and transition towards renewable energy," Padilla said. "The current natural gas supply contract continues to deliver lower cost fuel prices when compared to diesel, and also provides clear fuel to the environment."

PREPA's 10-year infrastructure plan will enable the rapid increase of clean energy technologies, said Padilla. He pointed to a current request for proposals for 1,000 MW of renewable energy and 500 MW of battery storage.

The utility's strategic vision "is one that has a customer-centric, affordable, reliable, resilient, and sustainable electric power system," said Padilla.

The utility has asked FERC to take a hands-off approach to the LNG terminal.

Should FERC determine it has jurisdiction over the New Fortress terminal, in a July 2020 letter PREPA CEO José Ortiz Vázquez asked the commission to "do nothing to disrupt its ongoing operation, given the very substantial emissions reductions and cost savings the facility is enabling PREPA to achieve."