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Shares of LNG company NextDecade Corp. (NASDAQ:NEXT) have tanked nearly 50% after an appeals court issued an order vacating the company’s federal regulatory permit for its Rio Grande LNG export complex in Texas, highlighting the big risks energy companies have to contend with when dealing with multibillion-dollar projects.
The D.C. Circuit Court of Appeals ruled the Federal Energy Regulatory Commission (FERC) should have issued a supplemental environmental impact statement during its remand process, casting questions over NextDecade’s new $4.3 billion contract for a liquefied natural gas facility in Brownsville, Texas. Environmental groups led by the Sierra Club sued NextDecade to challenge FERC's approval of the planned project. NextDecade engages in the construction of LNG plants in the U.S.
The ruling came just a day after NextDecade announced the $4.3 billion engineering, procurement and construction contract with Bechtel for Train 4 of its Rio Grande LNG project on Aug. 5. Last year, Bechtel commenced work on Phase 1 of the project--valued at $12 billion--which includes Trains 1, 2 and 3. Rio Grande LNG's Phase 1 has signed customers that include Exxon Mobil (NYSE:XOM), Shell Plc (NYSE:SHEL) and TotalEnergies (NYSE:TTE), among others.
Last month, NextDecade signed a preliminary agreement with Saudi Aramco to supply 1.2M metric tons/year of LNG for 20 years from Train 4. The company says it’s assessing its options regarding the court ruling, adding it would need to evaluate “the impact of the court’s decision on the timing of a positive final investment decision on Train 4.’’ The company has confirmed that construction works on Trains 1, 2 and 3 are continuing.
NextDecade is, however, in good company. Earlier this month, Venture Global LNG sued Kiewit in connection with work on its Calcasieu Pass plant in Cameron Parish, Louisiana. The suit alleges that the Omaha, Nebraska-based contractor passed confidential information about the $4.5 billion project’s design and construction to competitor Shell. Meanwhile, lead contractor at the $11.6 billion Golden Pass export terminal in Port Arthur, Texas, Zachry Holdings has filed for Chapter 11 bankruptcy and agreed with the project’s owners to exit the deal after the project went $2.4 billion over the original budget.
That said, LNG companies are not always on the losing side with the law.
A few weeks ago, the federal judge in Louisiana put the Energy Department’s pause on natural gas export permits on hold, a setback for the Biden administration’s climate agenda. Judge James Cain, a Trump appointee, granted a request for a stay from 16 red states that had challenged the pause, arguing the pause was inimical to their economies.