Item C-2: Commissioner James Danly Dissent Regarding New Fortress Energy LLC

Commissioner James Danly Statement
July 15, 2021
Docket No. CP20-466-001
Item C-2

I dissent from the Commission’s order addressing arguments on rehearing for the same reasons that I dissented from the Commission’s March 19 Order.[1]  As an initial matter, I continue to disagree with the Commission’s finding that the LNG handling facility owned and operated by New Fortress Energy LLC (New Fortress Energy) is an LNG terminal as defined by the Natural Gas Act (NGA)[2] and subject to the Commission’s jurisdiction under NGA section 3.[3]  In my view, the Commission should have granted rehearing, fully applied its precedent, and declined to exercise jurisdiction in this case. 

Today’s order is problematic for three reasons:  (1) it reaffirms the Commission’s overly expansive view of its jurisdiction; (2) it impermissibly expands the reasoning set forth in Shell U.S. Gas & Power, LLC;[4] and (3) it overlooks the fact that the Commission is changing policy. 

First, I disagree that the Commission should take an expansive view of its jurisdiction.  As I stated in my dissent to the March 19 Order, when in doubt, and when not compulsory, I would always disclaim jurisdiction.  Prudence counsels the most limited possible exercise of our authority to accomplish the objectives assigned to us by Congress.  To do otherwise is to insert ourselves into decision making that is best left to others and in some cases, as here, to create obstacles to the development of the very industries we are charged with encouraging and overseeing.[5]  With these principles in mind, I turn to the language of the statute.

NGA section 3(e)(1) provides that “[t]he Commission shall have the exclusive authority to approve or deny an application for the siting, construction, expansion, or operation of an LNG terminal.”[6]  The Energy Policy Act of 2005 (EPAct 2005) amended the NGA to add section 2(11) to define “LNG terminal” to

include[] all natural gas facilities located onshore or in State waters that are used to receive, unload, load, store, transport, gasify, liquefy, or process natural gas that is imported to the United States from a foreign country, exported to a foreign country from the United States, or transported in interstate commerce by waterborne vessel, but does not include—

(A) waterborne vessels used to deliver natural gas to or from any such facility; or

(B) any pipeline or storage facility subject to the jurisdiction of the Commission under section 717f of this title.[7]

The text of NGA section 2(11) is ambiguous and broad.  Although LNG facilities are typically marine terminals that take receipt of LNG by ship for storage and processing, by its plain terms the statute could be read to encompass any facility that takes receipt of LNG from a foreign country or handles natural gas that is destined for export.[8]  The Commission’s decision in both the March 19 Order and today’s order addressing arguments on rehearing take an overly expansive view of our jurisdiction.  I doubt that this text was ever intended to be interpreted so broadly.[9]

Second, today’s order impermissibly expands the reasoning set forth in Shell.  The Commission states that “Shell’s Lake Michigan Facility did not constitute a jurisdictional NGA section 3 LNG import terminal because it would not connect to a pipeline (or piping) of any type” and that “the Commission’s finding in Shell was based on the absence of piping of any kind that would enable the Lake Michigan Facility to receive natural gas for liquefaction or to send out natural gas as revaporized LNG.”[10]  That is not correct.  Nothing in Shell suggests that the Commission equated piping of any kind with a pipeline system.  In fact, paragraph 42 of Shell—which the Commission cites in support of its contention—states that “Shell will not use pipeline facilities to import Canadian LNG, and none of the facilities that it will use to import Canadian LNG will be connected to a pipeline.”[11]  Similarly, Shell later states that the “facilities used to receive imported Canadian LNG transported by waterborne vessels and to liquefy and send out domestic LNG by waterborne vessels that will be delivered to the ultimate end users without entering a pipeline system will not be subject to our jurisdiction as LNG terminals under section 3 of the NGA.”[12] 

Nor would such reading be consistent with the facts in Shell.  The LNG facility in Geismar, Louisiana, that the Commission found to be non-jurisdictional, had short segments of pipe to move boil-off and tail gas to its industrial customers adjacent to facility.[13]  Likewise, New Fortress Energy’s facility includes short segments of internal plant piping that move LNG and regasified LNG within the facility.  These flows terminate at the facility’s fence line where the gas directly enters the adjacent San Juan Power Plant to be burned.[14]  This is a pipe, not a “pipeline.”[15] 

Given that the definition of “LNG terminal” is so broad as to encompass virtually every “facility” that encounters LNG (aside from section 7 pipelines and marine vessels, of course), the Commission imposed rational limits on what would be deemed an LNG terminal for the exercise of its jurisdiction in Shell.[16]  Notably, Shell explained that although section 2(11) “sets forth a very broad definition of ‘LNG Terminal’ . . . it does not seek to redefine the term ‘natural gas facilities’ as commonly understood for purposes of Commission jurisdiction.”[17]  I agree with this precedent insofar as it establishes some limit upon the Commission’s jurisdiction.

The majority also asserts that two prior Commission orders support its position that “[t]he physical characteristics of the piping, and whether the piping connects the facility to the interstate or intrastate pipeline grid, are immaterial to this determination.”[18]  I disagree.  Shell explained that it based its decision upon the connection to (and the effect on) the interstate or intrastate natural gas transportation system.  Since “jurisdictional determinations concerning LNG projects are made on a case-by-case basis,” they do not always provide the guidance for which a reader might hope.[19]  So it is here.  To the degree to which either EcoElectrica or Aguirre appear to establish jurisdiction over facilities contrary to the holding in Shell, those improvident decisions were reached without an explanation as to why jurisdiction was being asserted.  Try as the majority might, it cannot formulate a compelling argument for jurisdiction in this case based on the implicit jurisdictional findings in those cases, especially when, as in Aguirre, that jurisdiction was asserted in seeming tension with an earlier issuance and without explanation for any apparent departure.  

Finally, my colleagues overlook the fact that the Commission is changing policy.  As I have previously stated, reversing course on a matter of such consequence in a one-off adjudication is doubtless the Commission’s prerogative under the Administrative Procedure Act.  Whether the Commission can employ such a maneuver is different from whether it ought to.  And if it does, the Commission should at least acknowledge that it is doing so.  Instead, the Commission denies that its issuance today constitutes a change.[20]  It is beyond cavil that an agency must explain its departure from prior precedent and “the requirement that an agency provide reasoned explanation for its action would ordinarily demand that it display awareness that it is changing position.”[21]  In my view, a change of this magnitude—one that goes directly to the scope of our jurisdiction—is better accomplished through a rulemaking or policy statement.  Then, everyone would have notice, everyone could participate, and the Commission would have a better, more comprehensive record upon which to base such a significant decision.

For these reasons, I respectfully dissent.