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Case number 22-1235 et al.

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Sierra Club and Public Citizen Petitioners versus Federal Energy Regulatory Commission.

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Mr. Matthews for the petitioners, Mr. Glover for the respondent, Ms.

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Stetson for the respondent interveners.

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Good morning again, Mr. Matthews.

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The podium is at the right hand.

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We're all good for right now.

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So again, Nathan Matthews this time on behalf of the petitioners of Sierra Club and Public Citizen.

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also challenges FERC's decision to extend the deadline for construction of a gas infrastructure project.

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In the prior case, our argument was that FERC failed to confront evidence, affirmatively indicating a lack of good cause.

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And in this case, the issue is really the lack of any evidence whatsoever.

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The primary issue here is the lack of facts.

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FERC's entire analysis here

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Consists of the statement that the pandemic had adverse economic and logistical impacts on 10 years investment in construction decision that's in their brief at page 27.

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Seven citing J a. The interveners starting on page one of their brief admit that the logistics are not actually an issue.

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There's no facts in this case similar to the stay-at-home order that was found in NTE, Connecticut.

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Nothing saying that they couldn't get stuff they needed to actually build the stuff or couldn't get workers to the site.

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And in fact, they did build a compressor station in 2020.

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So it's clear that they could build things in Texas during this time.

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As the intervenors argue, what's at issue really is just the second half of FERC's sense of analysis about impacts on the global LNG market and purely economic issues.

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And our claim here is just that that half a sentence isn't enough to be the entire support for FERC's conclusion.

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So it seems to me, Mr. Matthews, that you're asking for a super clear statement rule.

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Like your problem appears to be with the way they phrase this.

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And if I may, what it said in the request for extension of time was the onset and duration of the COVID-19 pandemic resulted

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in adverse economic and logistical conditions that slowed commercial progress and precluded CCL stage three for making a timely final investment decision on the stage three project in order to meet the current permitted construction duration.

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So, and then it says this delay in full commercialization has resulted in the need for additional time to construct and place the stage three project in service.

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And you're saying that that's

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It's not sufficient to say that they were prevented from moving forward with the project based on these COVID-related problems.

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And I'll note, too, that it was helpful in the intervener's brief to note that final investment decision is a term of art that people in the industry would understand to mean we couldn't get to this decision, which our financing depends on this decision.

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So it just seems to me that you're asking for a super clear statement rule

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that you're refusing to just look at what this means more broadly, but you're picking apart the words, that it doesn't use the word prevent.

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So maybe I can take one issue off the table, which is, at this point, I think all parties agree that FERC's finding of a good cause here did rest on the conclusion that Chenier was prevented from meeting the deadline.

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The first orders didn't ever say sure.

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Junior was prevented from meeting the deadline.

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I think it did because the extension order said the companies explained that good cause exists because the adverse economic and logistical impacts of the COVID-19 pandemic prevented them from making a timely investment decision on the project to meet construction deadlines.

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So that's in the order.

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And then they go on to grant the extension.

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The implication is they agree with that.

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So we are fine to narrow the issues here to being the question of whether the record supports the conclusion that Chenier was prevented from meeting the deadline.

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And I think that asking for more facts beyond what is in the record here is not equivalent to asking for a

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This is an unusual or heightened super clear statement rule.

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FERC says repeatedly in its brief that it makes a case by case evaluation.

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And there are no case specific facts here.

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Meeting a final investment decision is not a prerequisite for all construction.

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And we know that here because they built a compressor station in 2020 well before having made final investment decisions.

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And as Chenier says in its brief, they did a lot of other construction in January through March of 2022, even though they didn't actually make a final investment decision until after FERC issued the extension here.

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FERC issued the order in May when FERC was aware that Chenier was already resuming a lot of construction.

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But why isn't this project specific?

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They couldn't make the final investment decision in order to meet the current permitted construction duration.

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Well, so we don't know why they couldn't reach the final investment decision.

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You know, there's nothing about how much financing did they have, how much did they need?

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Well, because of the adverse economic and logistical conditions is what they said, because of COVID.

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So there's no information about how many contracts for buyers do they need before they can reach

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I think that some sort of facts are necessary and that is one type of facts that they could have provided.

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I think that there are probably quite a few different types of facts they could have presented other than just saying there's a pandemic and so we'd like some more time.

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One path would have been to say we can't be confident in this project until we have got investment sufficient, you know, contracts for 70% of our output or something.

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We've only got 20% and so we think it's going to take some time to get more

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something like that, just anything other than markets are in a slump and we'd like more time.

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I also think that, as we argue here, and it's stated in the extension order here, a change in market support for a project

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can constitute a changed circumstance that would undermine a public convenience and necessity, or here it's both section three and section seven, but undermine a public interest finding.

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And so it is a departure from FERC precedent to just rely on changed market circumstances here.

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That's not necessarily arbitrary, but it needs to be explained.

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And given that there's not any facts explaining

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know, exactly how much investment they were missing, how much they had, if that really is the mechanism here, or if it's just, you know, we could pursue this project, but we're not sure it's going to be, and maybe it'd even be profitable.

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We don't know if it's going to be as profitable as we thought.

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If FERC thinks that that's a good enough reason for a delay, we just needed

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some sort of specifics.

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And part of that is because FERC has recognized the need to accept public comment on these.

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And if there are no facts, there's no possibility for us to rebut any of those facts.

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There's nothing for us to push back on here.

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And maybe they would have put forth facts, and we would have been forced to say, yeah, that seems pretty good.

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We haven't made good cause challenges to every project that's on an extension by any means.

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But there needed to be something here for the links in the causal chain, explaining why did the market downturn prevent you from getting the final investment decision, and why did not getting the final investment decision mean you couldn't have been doing more construction than the construction that they already did?

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I see I'm cutting into my rebuttal time, but if there are further questions.

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Any questions from my colleagues?

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None from me.

[00:08:05] Speaker 01:
No, thank you.

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Thank you very much.

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Oh, yes, please.

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Yes.

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Judge Rogers, is the mic loud enough?

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Great.

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Thank you.

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May it please the court, Matthew Glover, and I represent the respondent federal regulatory commission.

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Before I begin, I'll just make a note.

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This is the first time I've appeared in the court since the passing of your colleague, Judge Buckley, and I extend my condolences.

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He was an excellent public servant, and I always enjoy admiring his portrait when I'm in the courtroom.

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Thank you.

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Judge Panna, as you asked both housing counsel here and in the prior case, the good cost standard is flexible.

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I think you had quoted again in the earlier argument that we've said, if you ask for an extension during the time in which your environmental findings

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will still be valid, we will generally grant it if you establish good cause.

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Here, we stated one way that you can establish good cause is by showing that you've made a good faith effort to continue with the project, and you were prevented from doing so by unforeseeable circumstances.

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We tied that here to their efforts with respect to pre-construction activities, their Plan B implementation, their continued preparation, their placing a compressor service into service, excuse me,

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And then we added that they were, you know, stopped by unforeseen circumstances.

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You know, I won't repeat, Judge Pan, what you've read to my colleague from Paragraph 11, talking about, or Paragraph 10, sorry, on JA6, talking about what we found in terms of their attempts to make a final investment decision in the adverse economic and logistical consequences of the pandemic.

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I would also note, you know, we cited in Paragraph 11 and in Footnote 29, the Delfin case, which also dealt with a

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Further description, Judge Rogers, again, in the first case, you mentioned these other cases, where FERC has described in greater detail some of the pandemic impacts.

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We were citing one of those cases there.

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We distinguished Chestnut Ridge, and if anything, Chestnut Ridge shows that this good cause case-by-case determination is not merely a rubber stamp.

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We look at things like, is the project still commercially viable?

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In Chestnut Ridge, they had taken no action since receiving their certification.

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They had waited till the week before this deadline for construction to even ask for an extension.

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And we said it appeared that it was no longer economically viable.

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Here, I believe that they're pronounced cheneer, but the project sponsor has taken these pre-construction actions.

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They asked for the extension early.

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And we made a predictive judgment about the viability of the project and all of that, given what they told us.

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And in fact, our prediction has been proven correct.

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The most recent monthly construction report that they filed, which I believe

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captured July, but not August, but it may, I may be confused August or July of this year, showed the project is 39.1 percent complete.

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You know, and even in the two monthly construction reports we put in the JA, the January and the May, they showed pre-construction activities.

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I think it's at JA, I think it's at 43 in the May 2022 construction report talks about stabilizing a workforce or

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you know, beginning to, I think the subcontractor is bringing on board is the term for getting workers ready.

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They're sort of engaged in all of these behaviors that COVID has obviously impacted.

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We did mention that COVID impacts the LNG markets, it impacts these contracts.

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We cited the EU's recent requests.

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We discussed the uptick in demand from the European Union for LNG.

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You know, so I think that there's enough evidence here.

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Have you ever denied a request for an extension?

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Uh, chestnut Ridge.

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The case I was mentioning was a denial of a request for an extension.

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And actually, I think this

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I'll answer a question you asked my colleague, and I can't remember which one specifically, Your Honor, but a couple of times when parties have asked for an extension of a certain period of time, we've actually granted them a shorter extension.

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If that's important, I can go back and look at my notes to figure out which of those orders it is.

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But Chestnut Ridge was a denial of an extension, and then in some of these other matters, we have granted shorter extensions of time.

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So again, I would reiterate that this is not a rubber stamp by the commission.

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We didn't depart from precedent.

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I heard my friend say that here.

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We absolutely didn't depart from precedent.

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We discussed Delphin, which was citing Chestnut Ridge and was applying sort of or discussing Chestnut Ridge.

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That's paragraph 11 of the order.

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We're entirely consistent with our other precedents.

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We just haven't required parties to come in and give us a long laundry list of how COVID has logistically and economically impacted LNG markets, their final investment decisions.

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We noted that they had entered contracts, I believe,

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six million or six something, I think it's decathermes is how we measure this, you know, long-term supply contracts, they and their affiliates were continuing to seek those kind of contracts.

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We noted all of that in the record.

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Again, we cited the EU report showing an optimism for the rebound of the LNG markets and that this was still viable.

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Chestnut Ridge, we determined the project wasn't viable.

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I just I want to correct one more thing because I think it was a misrepresentation twice in the reply brief and then my friend said it here today.

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The whole economic and logistical impacts of COVID-19.

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Yes, it appears in our brief at page 29 footnote 7.

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That's not the only place it appears in our brief.

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It appears in our affirmative argument at page 24.

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We discuss it there.

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So the idea that we

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sort of put that argument forward only in a footnote is factually incorrect to one who reads our brief.

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So I didn't want that to go un-responded to.

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If the court has no questions, I'm happy to sit down and receive the time to intervene.

[00:13:45] Speaker 01:
Well, I would like to know the examples of cases where you granted a shorter extension than what was requested, and maybe you could figure that out while I hear from the interveners.

[00:13:55] Speaker 03:
Yeah, let me check my notes and I'll come back.

[00:13:57] Speaker 01:
Okay, thank you.

[00:14:01] Speaker 01:
Ms.

[00:14:01] Speaker 01:
Detson.

[00:14:15] Speaker 00:
Thank you, Your Honor.

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May I please the court?

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Can everyone hear me all right?

[00:14:19] Speaker 02:
Yes.

[00:14:22] Speaker 00:
So just a few quick points.

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The first is, I believe I heard Mr. Matthews concede that the only issue remaining in this case at this point is a substantial evidence question, whether the record supports FERC's conclusion.

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There was, of course, an argument made in Sierra Club's opening brief to the effect that FERC had not

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sufficiently articulated the standard.

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We pointed out, as did FERC, that that was jurisdictionally barred.

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He appears to be no longer pursuing that.

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The second is, Judge Pan, you're absolutely right that what Sierra Club is arguing here is for a super clear statement rule.

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And what you proceeded to hear from Mr. Matthews was all of the ways in which perhaps more could have been said about how COVID impacted Chenier's ability to get this project done on a timeline in 2020 and 2021.

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But Judge Rogers, as you said in the prior case, we are all aware of the effects of the COVID pandemic on the world and on the country, on the supply chain, on people's ability to get to work and to operate.

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There are all kinds of things that were unprecedented, I believe are the words that Judge Rogers used.

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And more to the point, if you look at the record itself and what was actually said in the extension request, in addition to the fact that work had to be suspended at the site in March of 2020, that Chenier was precluded from making a timely final investment decision in order to meet the deadlines.

[00:16:00] Speaker 00:
At page 27 of the Joint Appendix, there is a whole paragraph talking about the impact of COVID-19 on the global markets and, importantly, the forward-looking statements about what Chenier expects after this letter.

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What Chenier says is,

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Long-term contracting activity has experienced significant growth in 2021.

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During the last 12 months, Chenier and its affiliates have signed multiple long-term contracts.

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The strong global LNG market continues to drive commercial momentum.

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CCL Stage 3 anticipates imminently restarting early construction activities.

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A revised construction schedule is provided in Attachment 1.

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I'm reading all that because those are the things that were said in the record.

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And they were said pursuant to 18 CFR 385.2005, which requires people to make statements that they certify are true and correct to their knowledge.

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And all of those statements

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are evidence both of Chenier's inability to commit to the project, to that final investment decision, and to its forward-looking intention, which in fact has been carried out to complete the project.

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If there are no further questions.

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Anything from my colleagues?

[00:17:26] Speaker 00:
No, thank you.

[00:17:29] Speaker 01:
Thank you very much.

[00:17:29] Speaker 01:
Thank you, Your Honors.

[00:17:32] Speaker 01:
Mr. Glover, are you prepared to address that question?

[00:17:35] Speaker 03:
I brought about 30 orders here.

[00:17:37] Speaker 01:
I'm only about halfway through what I have in town.

[00:17:42] Speaker 01:
All right.

[00:17:42] Speaker 01:
I'm sorry.

[00:17:42] Speaker 01:
I didn't ask my colleagues before.

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Do my colleagues have any questions for Mr. Glover?

[00:17:47] Speaker 00:
No.

[00:17:49] Speaker 01:
OK.

[00:17:49] Speaker 01:
Thank you.

[00:17:50] Speaker 01:
We'll give you two minutes for rebuttal.

[00:18:06] Speaker 04:
Thank you again, Your Honor.

[00:18:07] Speaker 04:
So Chestnut Ridge is, to my knowledge, the only time FERC has ever denied an extension request.

[00:18:14] Speaker 04:
I don't recall the citations.

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I don't dispute, though, that sometimes FERC may have said, we're giving you a shorter extension now, but we'll give you another one later.

[00:18:22] Speaker 04:
But the only time FERC has said no is Chestnut Ridge.

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I just also want to reiterate that there is no evidence in the record here or even an assertion on the record here

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pandemic restrictions on the workforce or supply chain issues about getting materials had anything to do with the ability to complete this project here.

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Not only did Chenier complete construction of a compressor station in 2020, but other projects at FERC overseas, including other LNG terminals in Texas,

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did substantial construction through 2020 and 2021, including the Golden Pass project and the Port Arthur project.

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So FERC both didn't have evidence that there was anything other than the global LNG market impact at issue here.

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And I think that if anyone had looked into the issue, they would have seen that that was not the case.

[00:19:21] Speaker 04:
Again, we are not asking for like a long treatise on this, just some facts on the causal chain, explaining both what would it have taken for Chenier to make a final investment decision so that we would know something about what to push back on.

[00:19:39] Speaker 04:
and some more facts explaining why Chenier was saying that they had to halt the project because they weren't able to reach a final investment decision, but they were still doing other things on the project.

[00:19:49] Speaker 04:
And so there's no information about what could or couldn't have been done while waiting for that decision.

[00:19:56] Speaker 04:
There are no further questions.

[00:19:57] Speaker 04:
I thank the court for your consideration.

[00:19:59] Speaker 01:
Thank you, Mr. Matthews.

[00:20:00] Speaker 01:
Anything else from my colleagues?

[00:20:02] Speaker 01:
No.

[00:20:03] Speaker 01:
All right.

[00:20:04] Speaker 01:
Thank you.

[00:20:05] Speaker 01:
All right.

[00:20:06] Speaker 01:
It appears Mr. Glover has a follow-up on a question that I asked and will allow you to do that.

[00:20:12] Speaker 03:
We did have citations if you were still looking for them.

[00:20:14] Speaker 01:
Yes, please.

[00:20:15] Speaker 03:
The one I was thinking of is what's called Northwest Pipeline LLC.

[00:20:19] Speaker 03:
I'm going to give you the citation for the order that describes the intervening order.

[00:20:23] Speaker 03:
The citation is 171 FERC.

[00:20:25] Speaker 03:
Paragraph 61, 077.

[00:20:28] Speaker 03:
This was actually a third extension request, but at paragraph three of this request, we describe how in the second extension request, this project sponsor, Northwest, had sought a two-year extension.

[00:20:40] Speaker 03:
In a delegated order, our Office of Energy projects gave them a one-year extension rather than the two years they wanted.

[00:20:46] Speaker 03:
They wanted until April 11, 2021.

[00:20:47] Speaker 03:
We gave them until April 11, 2020.

[00:20:51] Speaker 03:
Of course, the bulk of this order, because I don't have the delegate order in front of me, discusses the

[00:20:55] Speaker 03:
current third extension.

[00:20:56] Speaker 03:
Interveners Council helpfully pointed me to a couple of earlier orders in which we actually denied an extension, including Questar Pipeline Co.

[00:21:07] Speaker 03:
citation of 65 FERC paragraph 61037 from 1993.

[00:21:15] Speaker 03:
Sorry, I'll slow down.

[00:21:18] Speaker 03:
And then Seneca Lake Storage 122 FERC

[00:21:23] Speaker 03:
paragraph 61212 from 2008.

[00:21:26] Speaker 00:
Maybe counsel, you might submit a letter just for the record.

[00:21:32] Speaker 00:
Okay, sure.

[00:21:34] Speaker 01:
I think that's a great idea.

[00:21:35] Speaker 01:
Thank you, Judge Rogers.

[00:21:36] Speaker 01:
Thank you.

[00:21:38] Speaker 01:
The case is submitted.