Shifting Gears for Freeport LNG’s Changing Natural Gas Market
Related People Steven C. Demby, Les Lo Baugh, Mark M. Oveson, Elizabeth D. Paulsen, Margaux Trammell
Related Practice Energy, Finance & Lending, Government Relations, Mergers & Acquisitions, Private Equity, Renewable Energy, Securities & Corporate Finance, Tax
Freeport LNG owns and operates one of the first liquefied natural gas (LNG) import terminals built in the United States in the last 25 years. For the last nine years, Brownstein has been the lead counsel in the structuring, strategy and development of the $1.2 billion receiving and regasification facility with commercial output capacity of more than 2.0 billion cubic feet of natural gas per day. One of many unique features of the terminal is a 7.5 billion cubic foot salt-dome cavern gas storage facility, currently under construction.
But when vast new reserves of U.S. natural gas were discovered, Freeport began to rethink its import/regasification model. Increased production forced domestic gas prices well below those being paid in the rest of the world, thus making the exportation of natural gas economically attractive. As a result, Freeport turned to Brownstein to assist in expanding the facility’s capabilities into natural gas liquefaction and exporting. In addition to financing the expansion, key to this successful transition would be getting regulatory approvals from numerous federal, state and local agencies.
Brownstein lawyers have handled directly or overseen all legal activity involved with the development of the Freeport facility from the first date the developer began to assess its viability to the present.
Brownstein helped secure approximately $1.2 billion for Phase I of the project, one of the largest such transactions in the history of the LNG industry. These efforts included $750 million in financing from the ConocoPhillips Company and a $453 million private placement note issuance. The financing structures and features are noteworthy, as they had not been used in the LNG industry previously.
Beyond relying on Brownstein’s considerable project finance expertise for the $2 billion Phase II expansion, the export nature of the project requires integrating other practice areas of the firm to work on behalf of our client. Lawyers in our energy, natural resources and government relations practices are now working in parallel with those in the finance arena. Specifically, the project requires approval and authorization from a number of regulatory bodies, including the U.S. Department of Energy (DOE), the Federal Energy Regulatory Commission (FERC), the Texas Commission on Environmental Quality, the Environmental Protection Agency, the U.S. Fish and Wildlife Service, and the U.S. Army Corps of Engineers among others.
The firm is working with the DOE in filing for Freeport’s crucial export licenses, and is assisting in the approval process with FERC. The new liquefaction facilities will be located within the footprint of the existing import terminal, and they will significantly incorporate facilities previously reviewed and approved by the FERC for siting and construction. Fully built-out, the expansion will also maintain the terminal’s ability to import LNG if domestic market conditions warrant it.
Brownstein continues to provide outside general corporate counsel to Freeport and its subsidiaries in all aspects of their businesses. The firm is proud of the vital role it is playing in helping Freeport LNG meet its objectives today and tomorrow.
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