Gulf of Mexico
Cheniere’s Sabine Pass terminal in Cameron Parish, Louisiana, spans over 1,000 acres of land on the state’s border with Texas. The facility, seen here on July 6, 2018, is in the midst of an expansion that will allow it to process over 3.5 billion cubic feet of natural gas a day. (Newsy/Kevin Clancy)

Leaks threaten safety — and success — of America's top natural gas exporter

A federal investigation at Cheniere’s flagship facility in Louisiana raises red flags for a surging industry.

This story was reported as part of a partnership between E&E News and the Center for Public Integrity. It was co-published by the Houston Chronicle.

In just three years, a 1,000-acre complex surrounded by Louisiana swampland has become the unlikely epicenter of America’s booming natural gas business.

Sabine Pass terminal is the crown jewel of Cheniere Energy, a Houston company that had a virtual monopoly on U.S. exports of liquefied natural gas, or LNG, until last spring. In November, Cheniere opened a second terminal — eclipsing competitors racing to construct their first sites. The company is in talks to close its third deal with China, worth an estimated $18 billion.

But cracks in Cheniere’s runaway success story have started to show.

Last year gashes up to six feet long opened up in a massive steel storage tank at Sabine Pass, releasing super-chilled LNG that quickly vaporized into a cloud of flammable gas. Federal regulators worried the tank might give way, spilling the remainder of the fuel and setting off an uncontrollable fire. It wasn’t an isolated event: Another tank was leaking gas in 14 different places. Both tanks remain out of service over a year later.

Investigators soon discovered that Cheniere grappled with problems affecting at least four of the five tanks at the terminal over the past decade. And officials at the Pipeline and Hazardous Materials Safety Administration, known as PHMSA, have found the company to be less than forthcoming in the ongoing investigation, noting Cheniere’s “reticence to share [its] sense of what might have gone wrong.”

The leaks are a red flag at a time of unprecedented expansion in the LNG industry, which promotes the fuel as not only safe but also a clean, more climate-friendly alternative to coal. The problem is that natural gas is made up mostly of methane, a greenhouse gas far more potent than carbon dioxide at warming the Earth’s atmosphere. Leaks erode the fuel’s climate advantage over coal.

Cheniere spokesman Eben Burnham-Snyder said workers and the public were never in danger, and last year’s leaks were about one hundredth of a percent of the facility’s permitted greenhouse gas emissions for the year. The tanks, he added, meet “all federal and state safety requirements.” But some other LNG export projects — including Cheniere’s newest terminal in Corpus Christi, Texas — have opted to use more expensive tank designs that offer greater protection against leaks and fires.

Sabine Pass was originally designed for imports. In 2012 Cheniere began converting the facility to handle exports instead, taking advantage of surging gas supplies from the shale drilling boom. The company upended the energy market when it began sending LNG overseas in 2016, quickly turning America into a top seller of the fossil fuel.

Over a dozen U.S. export projects are now in development, including a $10 billion project by ExxonMobil and Qatar Petroleum on the Texas side of Sabine Pass. Federal regulations, though, haven’t kept pace. They were written for simpler import and gas-storage facilities, not complex, multibillion-dollar export facilities. In April, the White House directed regulators to update LNG safety rules. But it’s unclear what that will look like — or whether any new design requirements would apply to projects already in the works.

The industry trade group Center for Liquefied Natural Gas said its members — which include Cheniere — support the effort to revamp current regulations. That “goes hand in hand with our industry’s focus on continuous improvement,” spokeswoman Daphne Magnuson wrote in a statement. “We see a bright future for U.S. LNG and significant benefits to the planet at large.”


Cheniere’s Sabine Pass and Corpus Christi LNG plants are two of just five U.S. terminals for export of the commodity, but more than a dozen other projects are proposed or currently under construction, most of them clustered along the Gulf Coast. (Claudine Hellmuth/E&E News)

‘A CONTINUING PUBLIC SAFETY THREAT’

On January 22, 2018, a Sabine Pass worker saw a pool of LNG vaporizing in the night air beside one of the storage tanks. Paint had peeled off the side and ice had formed at the top. The company mobilized, securing the area.

The biggest immediate risk was that the cloud of low-lying natural gas building around the tank could have drifted until it hit an ignition source — static electricity, for instance — and burst into flames. Two days later, Julie Halliday, a senior accident investigator with PHMSA, inspected the tank and found the outer wall had cracked in four places and was still leaking gas.

Investigators also found vapor escaping from more than a dozen points around the base of a second tank, suggesting damage there, too. On February 8, PHMSA ordered both tanks shut down. During a public hearing in Houston in March, Halliday said there would be no way to put out an entire tankful of LNG if it caught fire.

“Sabine has been unable to correct the long-standing safety concerns … and cannot identify the circumstances that allowed the LNG to escape containment in the first place,” PHMSA wrote in its uncharacteristically forceful order. “Continued operation of the affected tanks without corrective measures is or would be hazardous to life, property and the environment.”

Cheniere quickly went into damage control mode, fighting the order while playing down the risks to the roughly 500 people who work on-site. “We want to stress that there was and is no immediate danger to our community, workforce, or our facility from this incident, nor is there any impact on LNG production,” Burnham-Snyder, the spokesman, said at the time.

Cheniere has been tight-lipped even with investigators. But information has trickled out, suggesting deeper problems at the site. During the investigation, the company acknowledged that four of its five tanks had experienced a total of 28 temperature anomalies since 2009, increasing in frequency after the shift to exports in early 2016. Cold spots on LNG tanks can suggest leaks or insulation problems, and when the outer wall of a tank like those at Sabine Pass gets too cold, it can become brittle and crack.

In the summer of 2016 the company hired consultants to study the temperature problems but didn’t inform regulators or share the report with them until after the 2018 leaks. The Federal Energy Regulatory Commission, or FERC, requires LNG companies to disclose temperature deviations. Cheniere’s filings for that period read: “None to report.”

Asked about the discrepancy, the company’s spokesman did not address it but wrote, “Cheniere is committed to compliance and timely reporting.”

PHMSA’s investigation is ongoing; it has not fined Cheniere for the 2018 incident or its reporting failures. The agency has not provided the public with basic records about the leaks, citing an ongoing review of the company’s confidentiality concerns. Cheniere, in fact, threatened to sue PHMSA if it released additional information in response to public records requests.

A lawyer for the company sent a seven-page letter to the agency in August, warning that disclosure would cause “irreparable commercial and competitive harm to Cheniere” by revealing  its facility design. “Competition amongst LNG export projects to complete construction in the most efficient manner possible and to provide lowest prices to customers is vital to continued success,” the letter added. In October, a Cheniere attorney agreed to PHMSA’s request for an informal meeting to hash out how best to address the leaks, but only if the agency affirmed it would keep the company’s records confidential.

But even PHMSA’s patience has limits. In February of this year, the agency rejectedCheniere’s repair plan for one of the tanks, calling the proposal inadequate and saying it would amount to “a continuing public safety threat over the years and decades to come.” Burnham-Snyder said the company has since reached an agreement with the agency and is moving forward with repairs. It expects to have the tanks in service by the end of this year.

Ernie Megginson, an engineer who consulted on another project, Magnolia LNG, said he doesn’t understand Cheniere’s secrecy about the incident.

“There’s no reason a specific tank design or a drawing or a photo of the incident cannot be shared publicly,” he said. “For an issue of this magnitude, Cheniere, as a leader in this industry, should lead the way in safety and transparent reporting.”  

Read full Center for Public Integrity article . . .