[Federal Register Volume 79, Number 156 (Wednesday, August 13, 2014)]
[Notices]
[Pages 47446-47448]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-19124]


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DEPARTMENT OF ENERGY

[FE Docket No. 14-005-CIC]


Freeport LNG Expansion, L.P.; FLNG Liquefaction, LLC; FLNG 
Liquefaction 2, LLC; and FLNG Liquefaction 3, LLC; Request for Change 
in Control

AGENCY: Office of Fossil Energy, DOE.

ACTION: Notice of application.

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SUMMARY: The Office of Fossil Energy (FE) of the Department of Energy 
(DOE) gives notice of receipt of an application (Application), filed on 
July 3, 2014, by Freeport LNG Expansion, L.P., FLNG Liquefaction, LLC, 
FLNG Liquefaction 2, LLC, and FLNG Liquefaction 3, LLC (collectively, 
FLEX), requesting approval to transfer indirect control of four export 
authorizations jointly held by these entities, including two 
authorizations to export liquefied natural gas (LNG) to any country 
with which the United States has a free trade agreement (FTA) that 
requires national treatment for trade in natural gas (FTA countries), 
and two conditional authorizations to export LNG to countries with 
which the United States does not have a FTA that requires national 
treatment for trade in natural gas (non-FTA countries). FLEX seeks 
approval to transfer its authorizations pursuant to 10 CFR 590.405, 
which states that ``[a]uthorizations by the Assistant Secretary to 
import or export natural gas shall not be transferable or assignable, 
unless specifically authorized by the Assistant Secretary.''
    This Notice addresses the proposed indirect changes in control of 
FLEX's two non-FTA conditional authorizations, which DOE/FE issued 
pursuant to section 3(a) of the Natural Gas Act (NGA), 15 U.S.C. 
717b(a). The portion of the Application addressing FLEX's two FTA 
authorizations will be reviewed separately pursuant to section 3(c) of 
the NGA, 15 U.S.C. 717b(c), and are not subject to this Notice.

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, September 2, 
2014.

ADDRESSES: Electronic Filing by email: [email protected].
    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 Benjamin Nussdorf, 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) 586-9387.
Cassandra S. Bernstein, U.S. Department of Energy (GC-76), Office of 
the Assistant General Counsel for Electricity and Fossil Energy, 
Forrestal Building, 1000 Independence Ave. SW., Washington, DC 20585, 
(202) 586-9793.

SUPPLEMENTARY INFORMATION:

Background

    Applicants. Freeport LNG Expansion, L.P. is a Delaware limited 
partnership and a wholly owned subsidiary of Freeport LNG Development, 
L.P. Its principal place of business is in Houston, Texas.
    FLNG Liquefaction, LLC, FLNG Liquefaction 2, LLC, and FLNG 
Liquefaction 3, LLC are Delaware limited liability companies and wholly 
owned subsidiaries of Freeport LNG Expansion, L.P. They also have their 
principal place of business in Houston, Texas.
    The ultimate FLEX parent company, Freeport LNG Development, L.P., 
is a Delaware limited partnership. It owns and operates the Freeport 
LNG Terminal located on Quintana Island, southeast of the City of 
Freeport in Brazoria County, Texas.
    Procedural History. FLEX's Application concerns the indirect 
control of four export authorizations issued by DOE/FE, beginning in 
2011. The detailed procedural history of these authorizations and 
related amendments is summarized in DOE/FE Order Nos. 3282-B and 3357-
A.\1\ Below, we provide a brief overview of each of the four 
authorizations:
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    \1\ See Freeport LNG Expansion, L.P., et al., DOE/FE Order Nos. 
3282-B, 3357-A, Docket Nos. 10-161-LNG, 11-161-LNG, Order Amending 
DOE/FE Order Nos. 3282 and 3357, at 2-5 (June 6, 2014).
    \2\ Freeport LNG Expansion, L.P., et al., DOE/FE Order No. 2913, 
Docket No. 10-160-LNG, Order Granting Long-Term Authorization to 
Export Liquefied Natural Gas from the Freeport LNG Terminal to Free 
Trade Nations (Feb. 10, 2011), as amended, DOE/FE Order No. 2913-A 
(Feb. 7, 2014).
    \3\ Freeport LNG Expansion, L.P., et al., DOE/FE Order No. 3282, 
Docket No. 10-161-LNG, Order Conditionally Granting Long-Term Multi-
Contract Authorization to Export Liquefied Natural Gas by Vessel 
from the Freeport LNG Terminal on Quintana Island, Texas to Non-Free 
Trade Agreement Nations (May 17, 2013), as amended, DOE/FE Order No. 
3282-A (Feb. 7, 2014) & DOE/FE Order No. 3282-B (June 6, 2014) 
[hereinafter Freeport I].

                               LNG Export Authorizations Held by the FLEX Entities
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                                                                                                      Subject to
 DOE/FE Docket No.    DOE/FE         Type of              Date issued             Export volume          this
                     Order No.    authorization                                     authorized         notice?
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10-160-LNG........  \2\ 2913-A  FTA..............  February 10, 2011........  1.4 billion cubic      No.
                                                                               feet per day (Bcf/d)
                                                                               (511 Bcf per year
                                                                               (Bcf/yr)).
10-161-LNG........  \3\ 3282-B  Non-FTA            May 17, 2013.............  1.4 Bcf/d (511 Bcf/    Yes.
                                 Conditional.                                  yr).
11-161-LNG........  \4\ 3357-A  Non-FTA            November 15, 2013........  0.4 Bcf/d (146 Bcf/    Yes.
                                 Conditional.                                  yr).
12-06-LNG.........  \5\ 3066-A  FTA..............  February 10, 2012........  1.4 Bcf/d (511 Bcf/    No.
                                                                               yr).
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[[Page 47447]]

    In sum, FLEX is currently authorized to export LNG from the 
Freeport LNG Terminal as follows: (1) To FTA countries, in a total 
volume equivalent to 2.8 Bcf/d of natural gas (1022 Bcf/yr), and (2) to 
non-FTA countries, in a total volume equivalent to 1.8 Bcf/d (657 Bcf/
yr). We note that the export volumes authorized in the two FTA orders 
are not additive to the export volumes conditionally authorized in the 
two non-FTA orders.\6\
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    \4\ Freeport LNG Expansion, L.P., et al., DOE/FE Order No. 3357, 
Docket No. 11-161-LNG, Order Conditionally Granting Long-Term Multi-
Contract Authorization to Export Liquefied Natural Gas by Vessel 
from the Freeport LNG Terminal on Quintana Island, Texas to Non-Free 
Trade Agreement Nations (Nov. 15, 2013), as amended, DOE/FE Order 
No. 3357-A (June 6, 2014) [hereinafter Freeport II].
    \5\ Freeport LNG Expansion, L.P., et al., DOE/FE Order No. 3066, 
Docket No. 12-06-LNG, Order Granting Long-Term Authorization to 
Export Liquefied Natural Gas by Vessel from the Freeport LNG 
Terminal to Free Trade Nations (Feb. 10, 2012), as amended, DOE/FE 
Order No. 3066-A (Feb. 7, 2014).
    \6\ See, e.g., Freeport II, DOE/FE Order No. 3357, at 5-6, 163, 
165 (Ordering Para. C).
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    FLEX filed its Application in this proceeding on July 3, 2014. 
Thereafter, FLEX submitted to DOE/FE a total of four supplements to the 
Application via electronic mail, all of which are posted on the docket 
and incorporated herein.

Current Application

    Pursuant to 10 CFR 590.405, FLEX seeks approval for the proposed 
indirect changes in control of FLNG Liquefaction, LLC (FLIQ1) and FLNG 
Liquefaction 2, LLC (FLIQ2). Both are Delaware limited liability 
companies with their principal place of business in Houston, Texas.
    According to FLEX, the proposed indirect changes in control are 
necessary components of the financing of the FLEX liquefaction project. 
FLEX further asserts that DOE/FE approval is ``critically time 
sensitive'' in light of certain financing requirements anticipated to 
occur early in the fourth quarter of 2014.\7\
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    \7\ App. at 2.
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    Proposed Ownership of Liquefaction Trains. As stated in the 
Application and discussed in prior orders,\8\ the FLEX export 
facilities initially will include three liquefaction trains, each 
having long-term liquefaction tolling agreements (LTAs) as follows:
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    \8\ See Freeport II, DOE/FE Order No. 3357, at 13-15 (discussing 
these LTAs and the ownership of each liquefaction train).
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     FLIQ1 will own the initial liquefaction train (Train 1). 
It has entered into a LTA with each of Osaka Gas Co., Ltd. (Osaka Gas) 
and Chubu Electric Power Co., Inc. (Chubu Electric).\9\ The LTAs will 
commence upon achieving commercial operation of Train 1.
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    \9\ FLEX states that Osaka Gas and Chubu Electric are two of the 
largest utilities and LNG end users in Japan.
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     FLIQ2 will own the second liquefaction train (Train 2). It 
has entered into a LTA with BP Energy Company (BP) that will commence 
upon achieving commercial operation of Train 2.
     FLNG Liquefaction 3, LLC (FLIQ3) will own the third 
liquefaction train (Train 3). It has entered into a LTA with each of 
Toshiba Corporation and SK E&S LNG, LLC. The LTAs will commence upon 
achieving commercial operation of Train 3.

According to FLEX, the capital costs for the construction of Train 1, 
Train 2, and Train 3 will be separately financed by FLIQ1, FLIQ2, and 
FLIQ3, respectively, with equity and debt financing provided by third 
parties.

    FLNG Liquefaction 1, LLC (FLIQ1). FLEX states that the FLIQ1 debt 
requirements will be provided by the Japan Bank for International 
Cooperation and a consortium of commercial banks. The approximately 
$1.2 billion FLIQ1 equity requirements for Train 1 will be provided 50% 
each by Osaka Gas and Chubu Electric through their wholly owned U.S. 
subsidiaries, which have not yet been formed. For purposes of the 
Application, these planned U.S. subsidiaries are referred to as ``Osaka 
Gas Member'' and ``Chubu Member,'' respectively.\10\
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    \10\ FLEX anticipates that, once these new subsidiaries are 
formed, both Osaka Gas Member and Chubu Member will be Delaware 
corporations with their principal place of business in Houston, 
Texas. We note that FLEX will be required to file relevant 
information with the Office of Oil and Gas Global Security and 
Supply within 30 days of the establishment of these entities.
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    In exchange for this capital, Osaka Gas Member and Chubu Member 
each will receive an ownership interest in FLIQ1's 100% parent company, 
FLIQ1 Holdings, LLC. The remaining ownership interest in FLIQ1 Holdings 
will be retained by its current parent, Freeport LNG Expansion, L.P.
    FLEX further states that, following the new equity investments by 
Osaka Gas Member and Chubu Member in FLIQ1 Holdings, all votes with 
respect to FLIQ1 Holdings and indirectly, FLIQ1, will require the 
unanimous consent of Freeport Expansion, Osaka Gas Member, and Chubu 
Member (or, at a minimum, one appointee of each of them to the Board of 
Managers of FLIQ1 Holdings). According to FLEX, this voting control 
will grant each of Freeport Expansion, Osaka Gas Member, and Chubu 
Member equal power to direct management and policies of FLIQ1.
    FLNG Liquefaction 2, LLC (FLIQ2). FLEX states that the FLIQ2 debt 
requirements will be sourced from the U.S. project finance bank 
markets. The approximately $1.3 billion in FLIQ2 equity requirements 
for Train 2 will be provided by the IFM Global Infrastructure Fund 
(IFM), a global infrastructure investment fund advised by IFM 
Investors.\11\ FLEX states that IFM is a trust company established 
under the laws of the Cayman Islands, where it has its principal place 
of business.
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    \11\ According to FLEX, IFM Investors is a global fund manager 
(with nearly $50 billion in funds under management) and one of the 
largest infrastructure investors in the world. It is owned by 30 
major not-for-profit pension funds, with investments in the United 
States, Australia, and Europe. Therefore, FLEX states that the 
capital investment in FLIQ2 will be owned by some of the largest 
pension funds globally, including 5 of the top 10 U.S. public 
pension funds.
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    In exchange for the capital, IFM will receive an ownership interest 
in FLIQ2's 100% parent company, FLIQ2 Holdings, LLC. The IFM entity 
that will hold the ownership interest in FLIQ2 Holdings will be IFM 
FLIQ Holding GP, which is a general partnership under Delaware law. The 
remaining ownership interest in FLIQ2 Holdings will be retained by its 
current parent, Freeport Expansion.
    FLEX states that, following the new equity investment by IFM in 
FLIQ2 Holdings, all votes with respect to FLIQ2 Holdings and, 
indirectly, FLIQ2, will require the unanimous consent of Freeport 
Expansion and IFM. Consequently, this voting control will grant each of 
Freeport Expansion and IFM equal power to direct the management and 
policies of FLIQ2.\12\
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    \12\ FLEX asserts that the source of debt and equity funding for 
FLNG Liquefaction 3, LLC's (FLIQ3) capital costs for construction of 
Train 3 has not yet been finalized. FLEX states that it will submit 
a separate request to DOE/FE for approval of any proposed change in 
control related to FLIQ3, as appropriate.
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    Freeport LNG Terminal Operations and Export Administration. FLEX 
asserts that, under its proposal, operation and maintenance of the 
Freeport LNG facilities (both regasification and liquefaction) will 
remain under the control of Freeport LNG Development, L.P. through 
various contractual arrangements with FLIQ1, FLIQ2, and FLIQ3. As noted 
above, Freeport Development is the ultimate 100% parent of Freeport 
Expansion. No change in control is proposed with respect to either 
Freeport Development or Freeport Expansion. FLEX states that Freeport 
Expansion will be the single point of contact with DOE/FE with

[[Page 47448]]

respect to reporting and administration under all of FLEX's FTA and 
non-FTA export authorizations.

Public Interest Considerations

    Citing DOE/FE precedent, FLEX states that the proposed indirect 
transfer of control is in the public interest under the NGA. 
Specifically, FLEX asserts that the proposed change will have no effect 
on any of the terms and conditions of its existing non-FTA 
authorizations (as well as its FTA authorizations not subject to this 
Notice), which DOE/FE granted under the public interest standard set 
forth in section 3(a) of the NGA. FLEX maintains that there are no 
facts presented in the Application that should cause DOE/FE to alter 
those prior public interest determinations. In particular, FLEX asserts 
that DOE/FE has previously held that foreign investment in LNG export 
facilities is not inconsistent with the public interest.\13\
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    \13\ See App. at 3.
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    FLEX further states that, because the transactions described above 
are required to finance construction of the Train 1 and Train 2 export 
facilities, approval of the proposed indirect changes in control is a 
prerequisite to FLEX beginning construction, and ultimately, to 
exporting LNG from the Freeport LNG Terminal. For these reasons, FLEX 
contends that the proposed changes in control will facilitate the 
realization of the significant benefits associated with its 
liquefaction project.

Environmental Impact

    FLEX states that the proposed changes in control of FLIQ1 and FLIQ2 
will not change the nature, extent, location, or operations of the 
proposed FLEX liquefaction project facilities. Therefore, FLEX 
maintains that a grant of its Application would not constitute a 
federal action significantly affecting the human environment within the 
meaning of the National Environmental Policy Act (NEPA), 42 U.S.C. 4321 
et seq., nor would an environmental impact statement or environmental 
assessment be required.

DOE/FE Evaluation

    The portion of FLEX's Application subject to this Notice will be 
reviewed pursuant to section 3(a) of the NGA, as amended, and the 
authority contained in DOE Delegation Order No. 00-002.00N (July 11, 
2013) and DOE Redelegation Order No. 00-002.04F (July 11, 2013). In 
reviewing this Application, DOE will consider the Application, any 
comments filed in response to this Application, and as well as any 
other issues determined to be appropriate including conformity with the 
regulations at 10 CFR 590.405 and with NGA section 3(a), 15 U.S.C. 
717b(a). Parties that may oppose this Application should comment in 
their responses on these issues.
    NEPA requires DOE to give appropriate consideration to the 
environmental effects of its proposed decisions. No final decision will 
be issued in this proceeding until DOE has met its NEPA 
responsibilities, to the extent any are deemed to exist.

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 [email protected], with FE Docket No. 14-005-CIC 
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 
Supply at the address listed in ADDRESSES. All filings must include a 
reference to FE Docket No. 14-005-CIC. 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.

    Issued in Washington, DC, on August 7, 2014.
Marc P. Talbert,
Acting Director, Division of Natural Gas Regulatory Activities, Office 
of Oil and Gas Global Security and Supply, Office of Oil and Natural 
Gas.
[FR Doc. 2014-19124 Filed 8-12-14; 8:45 am]
BILLING CODE 6450-01-P