Speaking to attendees at Hart Energy’s North American LNG Exports conference in Houston recently, Jon Wellinghoff, immediate past chairman of the Federal Energy Regulatory Commission (FERC), expounded on a variety of issues, including renewable energy, energy efficiency, slowing worldwide demand, the effect of new technologies and future regulations on the LNG application process and Germany’s shift to the use of renewables in its fuel mix. All of these issues, he explained, matter and will have effects on the permitting of LNG export terminals.

Wellinghoff, who is now a partner in the San Francisco and Washington, D.C. offices of Stoel Rives LLP, began his tenure with the FERC in 2006. At that time, there were 13 LNG import facility applications; now there are at least double that number for LNG export applications.

His advice to project developers: “If you are interested in getting your project through that [FERC] process as quickly as possible, it’s incumbent upon on you to do everything correctly before you get to the preapplication stage. You want to ensure you have all of your papers laid out, all of your prestudies done so that ultimately the entities that FERC hires, the independents who do the studies for FERC, basically ratify the studies that you [project developers] have done.”

He recommended going into prefiling with the project’s office and laying everything out, working through all the questions, through all problems, and the process can be accelerated in many instances, he said.

Working with lawyers who know the FERC is helpful, he said. “Find someone who knows the projects office very well. Make sure that you have a premeeting prior to your filing with each one of the FERC commissioners and the chairman.

“It is essential that you sit down with them and go over your project in detail. Go over your time line—What is your financing? What is your projected point to final production? Where do you want to be? How do you want to get there?—and how can they help you get there.

“If you do that, they will help you; bring them into the process. A lot of people make that big mistake of not doing that. Because the day you file that application, it’s ex parte, then you will be prohibited from speaking with any of the commissioners or anyone at FERC other than the project’s office staff who may ask you about more project details.”

He said there has been pressure at the FERC to look at a wider view of pipeline and LNG licensing, the impact of climate change and global warming and carbon impacts. “From my own view, this is outside the purview of the statutory responsibilities of FERC so I don’t expect the FERC to go in that direction. I don’t think it’s appropriate.”

Commenting on outside pressure for the FERC commissioners to quicken the review process, Wellinghoff said he thinks it would be “a huge mistake for a number of reasons because ultimately not every project is the same. Each is unique in its local environmental impacts, how it’s going to be constructed and how FERC needs to ensure the project is in the public interest and how it meets health and safety requirements. So saying that FERC should do this in 60, 90 or 180 days in a statute is a huge problem,” he said.

“If a specific time deadline is required, mistakes will be made, problems will be caused, and it will foster environmental suits.”

He encouraged project developers to study LNG demand statistics. How much supply will there be? He showed a graph that after 2016, LNG supply will exceed demand. “If you’re a commissioner at FERC, [you may ask] do we need to be spending time and money doing this?” he asked.

Methane regulation

He explained new portable technology from Picarro Inc. called a G2132-i Analyzer that can detect methane leaks in real time, whether they’re in a neighborhood or at an LNG facility or a fracking field. He said that this technology and device will lead the Environmental Protection Agency to move into methane emission regulations.

The impacts he described will be two-fold: more emphasis will be placed on how energy efficient the LNG trains are and whether there may be any methane-leak risks, and he believes the cost of natural gas will be affected by increased emission regulations. This will not only affect LNG but will apply to fracking and all the other oil and gas production, including pipeline construction.

“It’s something to consider; how technology is going to impact you and how it will get translated into regulation. I think it’s coming,” Wellinghoff said.

Environmental stewardship

“Be careful of the undertow,” Wellinghoff said as he showed slides of anti-fracking protesters in front of the FERC building in Washington, D.C. He noted that environmental protests are a “game-changer.”

He doesn’t believe it will impact those inside the FERC from doing their work, but he said it will have an impact “somewhere.”

Wellinghoff said that LNG developers need to “deal with it and figure out how to address these peoples’ [protesters] concerns in some way; these people aren’t going away.”

“Figure out how you can address local environmental concerns … find out some way of working with people and not have an increasing level of opposition.” He said by mitigating the opposition, developers will come out way ahead in getting projects approved and completed.

Also, “How do you make your facility greener and more efficient?” he asked session attendees. This is something that can be done. “Whatever you can do to make your own facility as emission-free and clean overall, it’s a story you can tell to regulators, and you’re going to get that person [at the FERC] on board. It’s a very important story to tell,” he said.

Taking questions from attendees, Wellinghoff shared candid thoughts on these topics:

  • Environmental opposition: “Find out what they [protestors] need and how to address that need. If it’s ignored, it will get worse. Ultimately, they have tremendous political power, locally with their congressional delegations.” He reiterated that the FERC goes by the book and the statutes. To his knowledge, “the FERC has never been influenced by that kind of political protest, but it can still impact a project in other ways.”
  • His guess as to the number of LNG export terminals that will be operational by 2025: “I don’t think there will be more than eight to 10, because what I have seen from the analysts is that worldwide supply [of LNG] is going to accelerate and that will depress prices. I think our supply here will be on the margin, I don’t think it will be baseload supply unless the early facilities have long-term take-or-pay contracts. Beyond that, I think there is going to be a limit.”
  • Pace of renewable energy alternatives outside of the U.S.: “There are places that operate very differently than we do [in the U.S.] and can respond quickly to new technology. China is under great pressure right now from its population over local air pollution.”
  • Looking at the permitting process and possible excess capacity in the next few years, does being first matter vs. being cost-competitive? “Yes, absolutely. Convincing those commissioners in that preapplication meeting that your project will be built and you won’t be wasting the project office’s time by processing the application is extremely important. Getting in there first but also being in there first with a complete project that is convincing economically and environmentally is important.”
  • One key piece of advice to give an LNG developer: “Get all your ducks in a row in your preapplication and sit down with each commissioner and explain it to them. If you can’t explain it to them in a way that’s convincing and compelling, then go home.”