By Valerie Volcovici and Nichola Groom
WASHINGTON (Reuters) -The U.S. Environmental Protection Agency (EPA) said on Tuesday it has denied a request from leading liquefied natural gas (LNG) exporter Cheniere Energy (NYSE:LNG) Inc to exempt turbines at its two U.S. Gulf Coast terminals from a hazardous pollution rule.
The rejection raises questions about whether the Texas-based company will have to reduce exports of the supercooled fuel to install new pollution control equipment at its facilities at a time that Europe is depending on increased shipments of LNG from the United States to offset cuts from Russia.
Europe is facing its worst-ever gas supply crisis, with energy prices soaring and German importers discussing possible rationing in the European Union's biggest economy after Russia reduced gas flows westward. Moscow has cited a pipeline fault for the halt, but Europe sees it as apparent retribution for Western sanctions imposed on Russia for its invasion of Ukraine.
"Though EPA is denying Cheniere's request for a special subcategory to comply with the turbines rule, the Agency will continue to work with them and with other companies as needed to assure they meet Clean Air Act obligations," EPA spokesperson Tim Carroll said in an email.
Owners and operators of gas turbines had a Sept. 5 deadline to comply with the National Emission Standards for Hazardous Air Pollutants (NESHAP), which the administration of President Joe Biden put into effect after an 18-year stay.
The rule imposes curbs on emissions of known carcinogens like formaldehyde and benzene from stationary combustion turbines, like those used by LNG facilities.
Cheniere had asked the Biden administration to exempt a specific kind of turbine that it installed at its LNG terminals from the NESHAP limits, arguing they would reduce shipments from the top U.S. exporter for an extended period and endanger the country's efforts to ramp up supplies to Europe.
Cheniere was the only company to request such an exemption, according to the EPA. The company claimed the model of turbine it uses at its Texas and Louisiana facilities is the best technology for withstanding the types of storms that often strike the Gulf Coast, but that the equipment is also exceptionally hard to retrofit, and that engineering and installation of pollution controls could take years.
Cheniere spokesperson Eben Burnham-Snyder said that while the company "strongly disagrees" with the EPA's decision, "we will work with our state and federal regulators to develop solutions that ensure compliance."
He said the decision may result in "unwarranted expenditures" but added that coming into full compliance will not result in a material financial or operational impact and will not affect its ability to supply LNG to customers and countries around the world.
Gas-powered turbines emit formaldehyde and other dangerous pollutants through a chemical transformation that occurs when methane, the main ingredient in natural gas, is superheated.
Around 250 U.S. gas turbines are subject to the new rule, according to an EPA list, nearly a quarter of them Cheniere's.
The Houston-based company accounts for around 50% of U.S. shipments of LNG abroad.
Ilan Levin, associate director of the Environmental Integrity Project, said the decision by EPA to deny Cheniere's request was not a surprise because it had warned the company that it needed to meet the standard for years.
Reuters reported last month that the EPA had questioned Cheniere's selection of gas turbines without adding pollution controls in 2011 and again in 2013.
"We applaud the EPA for enforcing the law and making sure the people living near these plants in the coastal bend and southeast Texas/southwest Louisiana get the same clean air protections as everybody else," he said.
Cheniere shares closed 2.3% lower at $158.58 on Tuesday.