Delfin LNG LLC; Application for Long-Term Authorization To Export Liquefied Natural Gas Produced From Domestic Natural Gas Resources to Non-Free Trade Agreement Countries for a 20-Year Period

AGENCY:

Office of Fossil Energy, DOE.

ACTION:

Notice of application.

SUMMARY:

The Office of Fossil Energy (FE) of the Department of Energy (DOE) gives notice of receipt of an application (Application) filed on November 12, 2013, by Delfin LNG LLC (Delfin), requesting long-term, multi-contract authorization to export liquefied natural gas (LNG) produced from domestic sources in a volume equivalent to approximately 657.5 billion cubic feet per year (Bcf/yr) of natural gas, or 1.8 Bcf per day (Bcf/d). Delfin seeks authorization to export the LNG for a 20-year term from a proposed floating liquefaction project to be located in West Cameron Block 167 (WC 167) of the Gulf of Mexico, offshore of Cameron Parish, Louisiana (Liquefaction Project). Delfin states that the floating liquefaction facility will be a “deepwater port” within the meaning of the Deepwater Port Act (33 U.S.C. 1501, et seq.), and therefore also will require a license from the U.S. Department of Transportation's Marine Administration (MARAD), in conjunction with the U.S. Coast Guard.

Delfin seeks authorization under § 3(a) of the Natural Gas Act (NGA), 15 U.S.C. 717b(a), to export this LNG by vessel from the Liquefaction Project to any country with which the United States does not have a free trade agreement (FTA) requiring national treatment for trade in natural gas (non-FTA countries), and with which trade is not prohibited by U.S. law or policy. Delfin seeks to export the LNG on its own behalf and as agent for third parties. Delfin requests that this authorization commence on the earlier of the date of first export or seven years from the date the authorization is issued.

DATES:

Protests, motions to intervene or notices of intervention, as applicable, requests for additional procedures, and written comments are to be filed using procedures detailed in the Public Comment Procedures section no later than 4:30 p.m., Eastern time, May 27, 2014.

ADDRESSES:

Electronic Filing by email:, fergas@hq.doe.gov

Regular Mail

U.S. Department of Energy (FE-34), Office of Oil and Gas Global Security and Supply, Office of Fossil Energy, P.O. Box 44375, Washington, DC 20026-4375.

Hand Delivery or Private Delivery Services (e.g., FedEx, UPS, etc.)

U.S. Department of Energy (FE-34), Office of Oil and Gas Global Security and Supply, Office of Fossil Energy, Forrestal Building, Room 3E-042, 1000 Independence Avenue SW., Washington, DC 20585.

FOR FURTHER INFORMATION CONTACT:

Larine Moore or Lisa Tracy, U.S. Department of Energy (FE-34), Office of Oil and Gas Global Security and Supply, Office of Fossil Energy, Forrestal Building, Room 3E-042, 1000 Independence Avenue SW., Washington, DC 20585, (202) 586-9478; (202) 586-4523.

Edward Myers, U.S. Department of Energy, Office of the Assistant General Counsel for Electricity and Fossil Energy, Forrestal Building, Room 6B-256, 1000 Independence Avenue SW., Washington, DC 20585, (202) 586-3397.

SUPPLEMENTARY INFORMATION:

Background

Applicant. Delfin is a Louisiana limited liability company with its principal place of business in Dallas, Texas. Delfin states that it is a wholly-owned subsidiary of Fairwood Peninsula LLC (Fairwood Peninsula), a Delaware limited liability company formed by executives from both the Fairwood Group (based in India and Singapore) and the Peninsula Group (based in the United States). Delfin describes the corporate structure as follows:

• Fairwood Peninsula is owned by FWNR Energy Holdings (USA) Corporation (Fairwood USA) and the Peninsula Group.
• Fairwood USA is a Delaware corporation and a subsidiary of Fairwood Welbeck Natural Resources Pte. Ltd. (or FWNRL).
• Fairwood Welbeck Natural Resources Pte. Ltd. is part of the Fairwood Group, an India-based group of companies with investments in energy, transportation, and urbanization. FWNRL is a company organized and existing under the laws of Singapore, with its principal place of business in Midland House, Singapore 188970. It is engaged in developing natural gas activities, including natural gas production and LNG liquefaction within the United States and regasification facilities and offtake contracts in Asia.
• The Peninsula Group is a privately owned, Texas-based group of companies with interests in land development, construction projects, and oil and gas.

Delfin states that principals of Fairwood Welbeck Natural Resources Pte. Ltd. and the Peninsula Group have been working on the development of the Liquefaction Project for several years and are engaged in advanced negotiations with major strategic partners.

Procedural History. On October 7, 2013, concurrently with its filing of this Application, Delfin filed a separate application requesting authorization under NGA section 3(c), 15 U.S.C. § 717b(c), to export the same volume of LNG requested herein from the Liquefaction Project to FTA countries—i.e., those countries with whom the United States currently has, or in the future will have, a FTA requiring the national treatment for trade in natural gas, and with which trade is not prohibited by U.S. law or policy. On February 20, 2014, DOE/FE granted that application in DOE/FE Order No. 3393, authorizing Delfin to export domestically produced LNG to FTA countries in a volume equivalent to 657.5 Bcf/yr (1.8 Bcf/d) for a 20-year term. Delfin states that the volumes requested for export under this Application and its FTA application, now granted in Order No. 3393, are not additive.

Liquefaction Project. Delfin proposes to develop, own, and operate a floating liquefaction facility in WC 167 of the Gulf of Mexico, approximately 30 miles offshore of Cameron Parish, Louisiana. As stated above, Delfin asserts that the facility will qualify as a “deepwater port” under the Deepwater Port Act, 33 U.S.C. 1501 et seq., and thus will require Delfin to obtain a separate license from MARAD, working in conjunction with the U.S. Coast Guard.

Delfin states that liquefaction at the new deepwater port will utilize floating liquefaction and storage vessels (FLNGV) to be moored near an existing platform located in WC 167, approximately 30 miles offshore of Cameron Parish, Louisiana. Delfin states that the platform is the terminus and metering point of the existing Enbridge Offshore Pipelines (UTOS) natural gas pipeline system, and is connected to the shore via an existing 42-inch diameter, 30-mile long gas pipeline. Delfin states that the pipeline system commenced operation in 1978 and previously was utilized for the purpose of transporting offshore natural gas production to onshore connections with Transcontinental Gas Pipe Line (Transco), Natural Gas Pipeline Company of America (NGPL), and ANR Pipeline Company (ANR), as well as to nearby gas processing plants. Delfin asserts that, because of significantly decreased flow volumes, the UTOS gas pipeline could no longer be economically operated for its original purpose. As a result, in 2011, the Federal Energy Regulatory Commission (FERC) authorized the pipeline to abandon its services and certificates, while deferring the final disposition of its facilities. Delfin maintains that the system has been idle since that time and is currently filled with nitrogen.

Delfin states that it has entered into a letter of intent with the owner of the pipeline system that provides Delfin the exclusive right to acquire the pipeline system, subject to the satisfaction of certain conditions including regulatory approvals. Delfin intends to recommission and to reverse the flow on the existing 42-inch pipeline for purposes of delivering feed gas to the Liquefaction Project. According to Delfin, the existing pipeline is anticipated to have capacity to transport up to 1.8 Bcf/d of natural gas from the Louisiana coastline to the new Delfin deepwater port facility. Delfin states that, following the reactivation of its previous onshore interconnections with major interstate pipelines (Transco, NGPL, and ANR) and modifications to reverse flow, the pipeline will allow the Liquefaction Project to access the domestic natural gas interstate pipeline system.

Delfin states that the planned liquefaction will be provided on FLNGVs that will be moored at purpose-built single point moorings located as near the terminus of the existing pipeline in WC 167 as operationally and safely as possible (expected to be within approximately 2000 feet). According to Delfin, the FLNGVs will have the capability to export LNG to off-taking LNG carriers utilizing a proven ship-to-ship, side transfer process. Delfin states that the precise location and spacing of the FLNGVs around the existing WC 167 platform will depend on further design work, as well as consultation with MARAD and the Coast Guard. Delfin states that it has begun consultation with these agencies concerning the licensing of the new port.

Delfin states that the Liquefaction Project will be constructed in four LNG trains. Delfin states that it has entered into a memorandum of understanding (MOU) with a midstream LNG company to provide at least the first two FLNGVs. According to Delfin, the focus of the MOU is to develop fast track, modular, and mid-scale liquefaction solutions of approximately 2.5 million metric tons per annum (mtpa) per train, based on existing technology and using completed front-end engineering and designs. Delfin estimates that, subject to all regulatory approvals, it will begin operation of the first train in 2017 and the second train in 2018.

Delfin anticipates that the third and fourth LNG trains will be provided by FLNGVs ordered and constructed for purposes of this Project. Delfin states that it is engaged in advanced discussions with a ship-building company and a LNG carrier company concerning these trains. Delfin anticipates contracting with the ship-builder for the construction of a new FLNGV(s) for the third and fourth trains. Delfin states that these two trains will provide liquefaction capacity of 4.0 million mtpa each, bringing the total capacity of the Liquefaction Project to approximately 13 million mtpa. Delfin anticipates beginning operation of the third and fourth trains in 2019 and 2021, respectively.

Current Application

Delfin seeks authorization to export a volume of LNG equivalent to 657.5 Bcf/yr of natural gas (1.8 Bcf/d) from the Liquefaction Project to non-FTA countries for the requested 20-year term, beginning on the date of first export or seven years from the date of issuance of the authorization requested by this Application, whichever is sooner. As noted above, Delfin states that the export volume requested in this Application is not additive to the same volume requested in its FTA application, granted in DOE/FE Order No. 3393.

In light of the planned phased development of the Liquefaction Project—with successive trains expected to become operational from 2017 through 2021—Delfin requests that the “date of first export” be determined on a train-specific basis. Delfin explains this request as follows: “For example, exports from the first train, if placed in operation in 2017 as planned, would extend for twenty years from that first export . . . but if the third train were placed in operation in 2020, exports from it also would be authorized for twenty years from the start of that train's export operations (rather than only approximately seventeen years, based on the original date of first export).” Delfin notes that the export authorization for all trains would commence no later than seven years from the date of the order authorizing exports, consistent with its request above. According to Delfin, this phased approach, while not previously adopted by DOE/FE, will facilitate the orderly, phased developments of its facility and its contracts with customers.

Delfin is requesting authorization to export LNG on its own behalf or as agent for other entities who hold title to the LNG at the time of export. Delfin states that it will comply with all DOE/FE requirements for exporters and agents, including registration requirements articulated in recent DOE/FE orders.

Delfin further states that it intends to export domestically produced natural gas sourced from both conventional and non-conventional production. Delfin anticipates that this gas will be available from the interstate pipeline grid, and delivered through the connection to its dedicated, existing pipeline to the new deepwater port. Delfin states that its connection with the interstate pipeline system will provide access to abundant, diverse supplies of natural gas produced from Louisiana and Texas (specifically in the Eagle Ford Shale) and across the United States.

Delfin states that it is engaged in commercial negotiations with numerous potential customers. Delfin anticipates that it will contract some of its capacity—in particular, portions of its first and possibly second LNG trains—with customers in FTA countries, and expects to contract other amounts of capacity with customers located in non-FTA countries. Delfin states that, consistent with DOE/FE precedent, it will file under seal any relevant long term commercial agreements for natural gas liquefaction and LNG export services between Delfin and its customers, once those agreements have been executed.

Delfin further asserts that, as a practical matter, the requested authorization will not be actionable until MARAD grants Delfin authorization for the facilities needed for the liquefaction of natural gas and the export of LNG. According to Delfin, an environmental review under the National Environmental Policy Act (NEPA), 42 U.S.C. 4321 et seq., will be completed by MARAD and the Coast Guard, together with the participation of DOE and other consulting agencies, prior to granting the requested authorizations. Accordingly, Delfin requests that DOE/FE issue a conditional authorization in this proceeding, conditioned on completion of the environmental review by MARAD and the Coast Guard.

Public Interest Considerations

Delfin states that DOE/FE should grant the requested authorization to allow LNG exports under NGA § 3(a) because the proposed exports are consistent with, and will advance, the public interest.

According to Delfin, allowing Delfin and its customers to freely negotiate contracts to respond to market conditions and to utilize the proposed Liquefaction Project will be consistent with the pro-competition focus of DOE's 1984 Policy Guidelines for implementing NGA § 3. Delfin states that North American gas reserves are more than adequate to satisfy demand in the United States, even under the most aggressive demand projections including a large domestic LNG export industry. Delfin states that its proposed exports could not pose a threat to domestic gas supply security. Rather, the proposed exports will provide a steady, incremental demand for natural gas, thereby supporting natural supply development and producing economic and employment benefits. Delfin states that other benefits of LNG exports include reducing the U.S. trade imbalance, complying with the nation's long-standing support of free-trade, and promoting positive consequences in international relations.

Delfin also references the recent two-part macroeconomic study commissioned by DOE to assert that the general benefits of LNG exports are well known to DOE/FE. Delfin states that the first part of the study, conducted by the Energy Information Agency (EIA), evaluated the potential impact of additional LNG exports on domestic energy consumption, production, and prices under several export scenarios. Delfin states that the second part of the study, conducted by NERA Economic Consulting, assessed the potential macroeconomic impact of LNG exports using NERA's energy-economy model. According to Delfin, DOE/FE has held that the NERA study supports the proposition that proposed exports of LNG are not inconsistent with the public interest. Delfin further states that NERA's findings—that the United States will benefit from the export of domestically produced LNG—are confirmed by numerous other persuasive studies, such as studies published by the Brookings Institution in June 2012 and by ICF International in May 2013. Citing the extensive evidence of the benefits of LNG exports presented in these studies, Delfin states that it is incorporating these studies into the record of this proceeding and is not submitting any studies of its own.

Delfin also discusses the unique public interest benefits associated with its Liquefaction Project. Specifically, Delfin states that the Project is unique because it will be located off-shore. According to Delfin, the off-shore location enables it to avoid certain environmental and land-owner concerns that frequently arise concerning shore-based facilities. Delfin states that the off-shore location also avoids seaway congestion by limiting the number of LNG tankers entering the crowded port terminal system—an issue which it states may be problematic for some proposed terminals on the Gulf Coast. Delfin notes that its FLNGVs will be powered and mobile, enabling them to move away from the mooring location to escape a hurricane or other storm that could cause interruptions in service from damaged facilities of on-shore LNG terminals. Delfin further states that its liquefaction trains on the FLNGVs will be constructed in the controlled environment of a shipyard, which it maintains will result in improved quality controls and will promote increased safety in operations. Delfin expects to be among the most environmentally friendly LNG liquefaction facilities in the world, burning only natural gas, using air cooling and closed loop cooling, and using no sea water, for all systems. According to Delfin, its proposed use of the existing UTOS gas pipeline also avoids the need for new construction and provides a new use for infrastructure that was otherwise slated for abandonment. For these and other reasons, Delfin asserts that the Liquefaction Project will result in economic benefits to the Louisiana coastal region.

Delfin provides additional discussion in asserting that: (1) Projected natural gas supplies in the United States are more than sufficient to support exports, (2) any effect of Delfin's proposed exports on domestic gas prices would be minor and should help to reduce price volatility, and (3) LNG exports, such as those proposed by Delfin, will significantly benefit the United States, both domestically and with respect to international consequences.

Additional details can be found in Delfin's Application, which is posted on the DOE/FE Web site at: http://www.fossil.energy.gov/programs/gasregulation/authorizations/2013_applications/Delfin_LNG_LLC_-_FE._DK._-_13-147-LNG.html .

DOE/FE Evaluation

The Application will be reviewed pursuant to section 3(a) of the NGA, 15 U.S.C. 717b(a), and DOE will consider any issues required by law or policy. To the extent determined to be relevant, these issues will include the domestic need for the natural gas proposed to be exported, the adequacy of domestic natural gas supply, U.S. energy security, and the cumulative impact of the requested authorization and any other LNG export application(s) previously approved on domestic natural gas supply and demand fundamentals. DOE may also consider other factors bearing on the public interest, including the impact of the proposed exports on the U.S. economy (including GDP, consumers, and industry), job creation, the U.S. balance of trade, and international considerations; and whether the authorization is consistent with DOE's policy of promoting competition in the marketplace by allowing commercial parties to freely negotiate their own trade arrangements. Parties that may oppose this Application should address these issues in their comments and/or protests, as well as other issues deemed relevant to the Application.

NEPA requires DOE to give appropriate consideration to the environmental effects of its decisions. No final decision will be issued in this proceeding until DOE has met its environmental responsibilities.

Due to the complexity of the issues raised by the Applicant, interested persons will be provided 60 days from the date of publication of this Notice in which to submit comments, protests, motions to intervene, notices of intervention, or motions for additional procedures.

Public Comment Procedures

In response to this Notice, any person may file a protest, comments, or a motion to intervene or notice of intervention, as applicable. Any person wishing to become a party to the proceeding must file a motion to intervene or notice of intervention, as applicable. The filing of comments or a protest with respect to the Application will not serve to make the commenter or protestant a party to the proceeding, although protests and comments received from persons who are not parties will be considered in determining the appropriate action to be taken on the Application. All protests, comments, motions to intervene, or notices of intervention must meet the requirements specified by the regulations in 10 CFR Part 590.

Filings may be submitted using one of the following methods: (1) Emailing the filing to fergas@hq.doe.gov with FE Docket No. 13-147-LNG in the title line; (2) mailing an original and three paper copies of the filing to the Office of Oil and Gas Global Security and Supply at the address listed in ADDRESSES; or (3) hand delivering an original and three paper copies of the filing to the Office of Oil and Gas Global Security and Supply at the address listed in ADDRESSES. All filings must include a reference to FE Docket No. 13-147-LNG. Please Note: If submitting a filing via email, please include all related documents and attachments (e.g., exhibits) in the original email correspondence. Please do not include any active hyperlinks or password protection in any of the documents or attachments related to the filing. All electronic filings submitted to DOE must follow these guidelines to ensure that all documents are filed in a timely manner. Any hardcopy filing submitted greater in length than 50 pages must also include, at the time of the filing, a digital copy on disk of the entire submission.

A decisional record on the Application will be developed through responses to this notice by parties, including the parties' written comments and replies thereto. Additional procedures will be used as necessary to achieve a complete understanding of the facts and issues. A party seeking intervention may request that additional procedures be provided, such as additional written comments, an oral presentation, a conference, or trial-type hearing. Any request to file additional written comments should explain why they are necessary. Any request for an oral presentation should identify the substantial question of fact, law, or policy at issue, show that it is material and relevant to a decision in the proceeding, and demonstrate why an oral presentation is needed. Any request for a conference should demonstrate why the conference would materially advance the proceeding. Any request for a trial-type hearing must show that there are factual issues genuinely in dispute that are relevant and material to a decision, and that a trial-type hearing is necessary for a full and true disclosure of the facts.

If an additional procedure is scheduled, notice will be provided to all parties. If no party requests additional procedures, a final Opinion and Order may be issued based on the official record, including the Application and responses filed by parties pursuant to this notice, in accordance with 10 CFR 590.316.

The Application is available for inspection and copying in the Division of Natural Gas Regulatory Activities docket room, Room 3E-042, 1000 Independence Avenue SW., Washington, DC 20585. The docket room is open between the hours of 8:00 a.m. and 4:30 p.m., Monday through Friday, except Federal holidays. The Application and any filed protests, motions to intervene or notice of interventions, and comments will also be available electronically by going to the following DOE/FE Web address: http://www.fe.doe.gov/programs/gasregulation/index.html .