July 11, 2022


Cheniere Seeking Renewal of Air Toxics Exemption

Cheniere is asking the US Environmental Protection Agency (EPA) to renew a longstanding exemption for some gas-fired turbines from air toxics rules, warning the regulations would impose significant costs and possible operations disruption for its two US Gulf coast facilities.

“The rule would have implications across the domestic energy sector and particularly in the LNG industry at a time when Russia’s invasion of Ukraine has shaken global energy markets and threatens to disrupt energy supply to Europe, where US LNG has a significant role to play in providing reliable supplies of natural gas,” Brittany Pemberton, an attorney with the firm Bracewell, representing Cheniere, writes in a March 8 letter to EPA officials.

At stake is potentially half of US LNG capacity, with Cheniere's two facilities — Sabine Pass LNG and Corpus Christi LNG — representing 45 million tons out of a total US LNG nameplate export capacity of about 91.3 million tons. Due to an explosion on Jun. 8, Freeport LNG, with 15 million tons of capacity is already out of action.

Clean Air Act

At issue is a 2004 rule governing toxic air pollutants under the Clean Air Act from certain types of gas-fired turbines, which has long been halted by the EPA for some energy facilities. The agency in March announced it would move forward with the requirements of the rule even while it continues to determine whether to remove the turbines as a regulated entity altogether.

According to the letter, Cheniere uses 62 of the regulated combustion turbines at its Texas and Louisiana facilities, and that they are necessary to drive compressors integral to the LNG refrigeration process. Moreover, the company argues that the turbines are located on elevated pedestals with limited space to install emissions control equipment.

“Potentially imposing significant costs and operational disruption on the US LNG industry at the same time the Administration is focused on Europe’s strategic need to break its reliance on Russian gas is counterproductive,” the letter says.

Under the Clean Air Act, industrial facilities with stationary equipment are required to curb emissions of “hazardous air pollutants,” or those with known human health effects, such as known carcinogens or chemicals linked to reproductive toxicity. For emissions from combustion turbines, the EPA has identified formaldehyde, toluene, benzene, and acetaldehyde as possible pollutants, though Cheniere argues that risks from turbine emissions are minimal.

Though it isn’t clear how broadly the turbine rules would impact other LNG or energy facilities, the regulatory flap illustrates some of the tension between the Biden administration’s stated pledge to supply more US LNG to Europe and its other climate and environmental agenda. Air toxics rules are a hot button issue for environmentalists, because of the human health implications, and especially relevant to Biden’s vow to protect vulnerable “environmental justice” communities often affected disproportionately by industrial pollution.
Bridget DiCosmo, Washington and Michael Sultan

Manufacturers Group Protests Lake Charles LNG

The Industrial Energy Consumers of America (IECA) has submitted a motion to intervene in the Lake Charles LNG application to have its non-free trade agreement country export authorization extended until the end of 2050.

Since late March, the long-dormant Lake Charles LNG export project has racked up five offtake deals covering 5.8 million tons of exports, the latest deal was last month with Chinese private city-gas distributor China Gas.

IECA, a perennial opponent of US LNG exports, said in its motion that it is not in the "public interest" to extend the current US Department of Energy (DOE) authorization to export LNG to non-free trade agreement countries. The extension would be until December 31, 2050. IECA added that the existing DOE authorization is also not in the public interest.

IECA disputes the DOE's 2018 study that said US LNG exports were consistent with the public interest.

The lobby group cited data that US domestic gas prices rose with levels of US LNG exports as well as recent data that showed US domestic gas prices falling in response to the Freeport LNG explosion, which kept a significant amount US domestic gas from being exported.

IECA says that the Biden Administration’s DOE has the latitude to define the public interest as, “the export volume, individually or collectively, [that] must not materially impact the price of natural gas in the US."

The Natural Gas Act (NGA) "does not state that once a terminal is approved that it is in the public interest forever. As 100 percent consumers, we interpret the NGA public interest to mean that export volumes must 'always' be in the public interest."

A public interest declaration "is not a one and done."
Michael Sultan, Washington

Canada Okays Return of Russian Gas Pipeline Turbine

Canada has approved the return of a turbine for the Nord Stream 1 gas pipeline after maintenance work, which could pave the way for an increase in Russian gas flows to Europe in a couple of weeks.

The decision was announced on Sunday by Natural Resources Minister Jonathan Wilkinson, just before Nord Stream 1 went offline on Monday for annual maintenance work that will last until Jul. 21.

The pipeline is capable of delivering around 170 million cubic meters of gas per day but it shipped only 68 MMcm/d last week.

Russian gas giant Gazprom has cited the delayed return of the turbine as the reason for the reduced flows.

The Canadian decision appeared to calm the European gas market, which had already priced in the closure of the pipeline for annual maintenance.

On Monday the front-month Dutch TTF gas futures contract fell by around 7% from Friday's closing price to €163.5 per megawatt hour ($48.5 per million Btu).

Tight Market

The turbine in question — from the pipeline's Portovaya compressor station in Russia — was shipped to a Siemens plant in Canada for maintenance work.

It had been stranded there since mid-June because of Canadian sanctions against Russia in response to Moscow's invasion of Ukraine.

The reduction in Nord Stream 1 volumes has put additional pressure on an already tight European gas market. State-controlled Gazprom has not stepped up deliveries to Europe via Ukraine to offset the loss of deliveries to Germany.

There have been concerns in Europe that Russia might not resume gas flows via Nord Stream 1 after the scheduled maintenance outage.

The Kremlin said last week that volumes could rise if the turbine was returned from Canada, but it has denied using its energy resources as a weapon.

Russian Gas Pipelines To Europe


Revocable Permit

Wilkinson said on Sunday that Canada will grant a "time-limited and revocable permit" for Siemens to return the turbine to Germany. He said the decision was intended to facilitate European energy supplies and spare Germany from "significant hardship."

Siemens — based in Germany — said "our goal is to transport the turbine to its place of operation as quickly as possible."

Media reports indicated that the turbine could be shipped from Canada to Germany some time after Jul. 14 and then from Germany to Russia for reinstallation — a process that could take a couple of weeks.

Although Nord Stream 1 volumes were limited to 68 MMcm/d last week, Gazprom has kept transit flows via Ukraine relatively low. Volumes via Ukraine were planned at 39.4 MMcm for Monday, down slightly from an average of 41 MMcm/d last week.

Eni said that Gazprom reduced flows to the Italian company to around 21 MMcm/d on Monday from a recent average of 32 MMcm/d. Italy is Europe's second biggest importer of Russian gas after Germany.

Gazprom has stopped all shipments of gas to Germany via the Yamal-Europe pipeline as a result of Russian sanctions against the owner of that pipeline’s Polish section.

Flows of Russian gas via the Turk Stream pipeline do not reach most of the European markets supplied by Nord Stream 1.
Staff Reports

In Brief

Brownsville Ship Channel Dredging

The Brownsville Navigation District and the US Army Corps of Engineers have signed an agreement to deepen the 17-mile Brownsville Ship Channel from 42 feet to 52 feet, which will allow LNG tankers to access the planned Rio Grande LNG project.

NextDecade, owner of the future $15.6 billion plant at the Port of Brownsville will cover 100% of Phase 1 dredging costs, or more than $300 million.

The dredging project runs about nine miles from the channel's outer jetties to the western end of the Rio Grande LNG property.

The five-train, 27 million ton/yr project is expected to begin operations as early as 2027.
Tom Haywood, Houston

Data Snapshot

LNG Netbacks at Key Receiving Terminals

LNG Exporter Netbacks Between Key Receiving Ports
($/MMBtu)AlgeriaAustralia WestAustralia EastMalaysiaNigeriaNorwayOmanPeruQatarRussiaTrinidadUS GulfUS East Coast
Dahej, India38.2938.7738.3738.7737.9237.7339.2837.3539.1838.3937.5637.2637.67
Sodegaura, Japan38.8840.3740.4140.4938.8435.1139.9837.6639.8340.8738.0337.1139.07
Zeebrugge, Belgium35.5533.8033.4433.8935.0235.3934.6333.3934.4733.4035.1434.1535.25
Huelva, Spain36.0934.3834.0134.4635.5335.3135.1733.8835.0233.9835.5834.5235.61
Isle of Grain, UK24.7323.0922.7623.1624.2524.5723.9722.7123.7122.7224.3523.4324.45
Everett, US5.173.674.053.744.884.740.014.474.243.335.37----
Created with Highcharts 9.0.0($/MMBtu)QATAR TO NORTHEAST ASIANetbackNetback7. Feb21. Feb7. Mar21. Mar4. Apr18. Apr2. May16. May30. May13. Jun27. Jun11. Jul102030405060Energy Intelligence

LNG Market Indicators

Spot LNG Pricing
Latest WGIDailyDaily Chg.Chg. From Latest WGI
NE Asia0.0041.650.0141.65
SW Europe0.0036.784.5136.78
Futures Pricing
($/MMBtu)Chg.LatestPreviousWeek Ago
Henry Hub, US (futures)0.396.436.03--
NBP, UK (futures)-3.9626.4330.3933.57
European Spot Pricing
Chg.LatestPreviousWeek Ago
Dutch TTF-0.9549.0650.0147.84
Zeebrugge (Belgium)-0.3031.4831.7833.87
German NCG1.0850.7249.6448.54
NBP (UK)4.7625.5720.8127.24
US Markets
US Spot Prices
Sabine Pass, Louisiana0.376.776.40--
Corpus Christi, Texas----6.14--
Cove Point, Maryland1.116.205.09--
Elba Island, Georgia----6.10--
Nymex Henry Hub Futures
Near Month0.396.436.03--
Second Mth0.356.325.97--
Third Mth0.346.305.96--
Created with Highcharts 9.0.0($/MMBtu)GLOBAL GAS PRICINGUS NymexDutch TTFNE AsiaAug '21Sep '21Oct '21Nov '21Dec '21Jan '22Feb '22Mar '22Apr '22May '22Jun '22Jul '22020406080Energy Intelligence