[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]
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