Nopetro LNG Effort to Evade Federal Oversight of Natural Gas Exports

By Tyson Slocum

Nopetro LNG’s April 20 petition for declaratory order threatens to rupture a  loophole in FERC’s regulations of LNG exports big enough to pilot a fleet of Q-Max tankers. Nopetro’s proposed LNG export operation appears explicitly designed to circumvent the Commission’s jurisdiction by placing its liquification facility a mere 1,329 feet from the dock where Nopetro will export the LNG. Having already secured permission from the U.S. Department of Energy to export as much as 51.75 billion cubic feet of gas per year, Nopetro makes the dubious claim that moving shipping containers via truck 1,329 feet from Nopetro’s liquification terminal to its export dock should render it exempt from the Commission’s regulatory oversight. The Commission must dismiss the petition and treat Nopetro’s project as an LNG export terminal subject to FERC regulation.

To provide the Commission with a clear idea of just how short 1,329 feet is, it is almost exactly the distance from FERC’s front door at 888 First Street NE to Union Station’s Metro side entrance on First Street NE.

Should the Nopetro petition succeed, there will be nothing stopping liquification developers from placing facilities 500 feet or 50 feet from export docks to exploit the Nopetro Loophole. To preserve the Commission’s Natural Gas Act authority over LNG export terminals, the petition must be denied.

Nopetro’s petition provides sparse information on its ownership, identifying only a series of limited liability corporations as the ultimate upstream owners. The petition states that Nopetro LNG LLC is a wholly-owned subsidiary of Nopetro-CH4 Holdings, LLC, which in turn is owned by CH4 Venture, LLC (38.1759%), Nopetro, LLC (36.8241%) and TLW CNG, LLC (25%).

Nopetro’s U.S. Department of Energy application, however, contains far more necessary detail, noting that CH4 Venture, LLC is owned by Jay Demetree and Hawley Smith; Nopetro, LLC is owned by Jorge Herrera and Jonathan “Jack” Locke; and TLW CNG, LLC is owned by Tom Ward, with media reports describing Mr. Ward as a “natural gas icon”.

Nopetro LNG plans to construct, finance and operate a natural gas liquification terminal on 60 acres in the Florida gulf coast town of Port St. Joe. The gas will be delivered to Nopetro’s liquification terminal via pipeline. The LNG will be offloaded from Nopetro’s liquification terminal via shipping container, and delivered via truck to an export port 1,329 feet away from the liquification terminal. The petition does not indicate whether these trucks will traverse a public road to reach the export dock, or whether the journey will occur entirely on private land. The LNG containers will be loaded on to ships for export by a crane constructed and owned by Nopetro. Nopetro has already obtained the necessary LNG export authorization from the U.S. Department of Energy, and so the natural gas liquified at Nopetro’s terminal at Port St. Joe will be exported by Nopetro.

Nopetro claims that, according to FERC precedent, its liquification terminal and its export operations at a dock 1,329 feet away are not an LNG terminal as defined by federal law because the exports are not being delivered to marine vessels via pipeline.  Nopetro seeks a determination from the Commission that its proposed Port St. Joe liquification and export operations are not subject to FERC’s jurisdiction under sections 3 or 7 of the Natural Gas Act.

The unambiguous intent of the Natural Gas Act is that that “no person shall export any natural gas from the United States to a foreign country . . . without first having secured an order of the Commission authorizing it to do so”. The Nopetro petition clearly states that its proposed natural gas liquification facility in Port St. Joe is intended to produce LNG destined for export—and not for domestic consumption. Furthermore, the U.S. Department of Energy has granted authorization for Nopetro LNG LLC to export as much as 51.75 billion cubic feet of LNG per year.

The 1,329 feet between Nopetro’s LNG terminal and the export dock is such a short distance that even in the Florida summer heat traversing the route by foot would be a brief, pleasant stroll. To claim that an LNG terminal located a stone’s throw from an export dock renders the facility to not be subject to FERC’s regulation would eviscerate the Commission’s NGA authority and likely usher a wave of similar LNG export terminals located within shouting distance from an export dock in an effort to evade Commission oversight.

The FERC docket is CP21-179, and you can read the full, five-page filing here: Nopetro