FERC: Closure of LNG Import Plant Threatens New England’s Grid

An LNG import terminal that supplies New England customers faces closure in May, and the Federal Energy Regulatory Commission (FERC) says the move would compromise the stability of the northeastern U.S. energy grid.

Constellation Energy may close Boston’s Everett LNG import terminal at the end of May. The terminal supplies Mystic Generating Station, an electric generation facility owned by Constellation and the terminal’s primary customer. The terminal also supplies natural gas to utilities in the region, which helps to stabilize the heating supply during cold snaps.

The Mystic Generating Station has the highest generation capacity of any station in Massachusetts. Since 2018, Constellation has kept the power station open with a cost-of-service agreement with ISO New England, a non-profit organization responsible for grid reliability in the region. The cost-of-service agreement ends in May 2024.

ISO decided not to renew the cost-of-service agreement, citing that the organization’s primary concern is with electrical grid reliability and not the natural gas supply.

“ISO New England has no jurisdiction over fuel infrastructure and therefore is not able to retain the LNG facility,” said Mary Mannion, spokesperson for ISO-NE. The organization’s analysis was that the electrical grid could withstand a cold winter via supplies from other companies.

Constellation spokesperson Mark Rodgers said the company is attempting to keep the terminal open, but will have to find new customers for its natural gas.

“Constellation has been negotiating in good faith with purchasing counterparties over supply contracts that would support the facility’s continued commercial operation following the retirement of Mystic Generating Station on May 31, 2024—but time is of the essence,” Rodgers said.

The potential closing of the facility has raised concerns at the federal level.

“We remain concerned about the potential loss of the Everett Marine Terminal (Everett) in New England and the consequences that it might have for the reliability and affordability of the region’s energy supplies,” the FERC and the North American Electric Reliability Corp. (NERC) said in a joint statement in November.  

The plant has been in operation since 1971 and has a vaporization capacity of about 700 MMcf/d. Most of the gas imported to Everett is burned at the generating station—a 1,413 megawatt power plant—while the rest can be shipped via truck or pipeline to utilities for winter storage.

Two other LNG import terminals serve the region, according to ISO-New England, neither of which is operational on a regular basis. However, ISO released an analysis in the summer saying that the electrical system could manage the retirement of the Everett facility.

The assessment met criticism from other utility companies in the region and was referenced in the statement by the FERC and NERC.

“Although there was evidence that the retirement of Everett would be ‘manageable’ for the electric system, at least in the near-term, given anticipated new resource deployments and transmission development, minimal load growth, limited resource retirements and increased reliance on non-natural gas generators, the evidence indicates that, should those expectations not materialize as anticipated, ensuring reliability and affordability could become challenging in the face of a significant winter event,” they said in the statement. 

Companies are currently rushing to build LNG export facilities along the Gulf Coast to take advantage of high overseas demand. Northeastern states, however, have been unable to take advantage of the national gas glut. The region does not have access to a large portion of the natural gas developed in the nearby Marcellus Shale. Pipeline projects have faced intense opposition from environmental and local groups.

Imports are expensive because power companies have to compete on the global LNG market, in part because of U.S. shipping rules. LNG tankers off the Gulf Coast aren’t allowed to deliver to U.S. ports because of the Jones Act, a statute passed more than a century ago that restricts port-to-port traffic in the U.S. to ships built in the country and crewed by Americans.

U.S. natural gas production hit an all-time high in October 2023 and natural gas prices are currently considered cheap, with the Henry Hub price lingering at around $3/MMBtu on Jan. 10. European utilities, by contrast, routinely pay about $10/MMBtu.

In fourth-quarter 2023, the cost of New England natural gas was 31% higher for residents than elsewhere in the U.S., according to the U.S. Energy Information Administration. 

The Everett LNG facility last took a delivery in the first week of 2024 when a tanker carrying 2.7 Bcf from Trinidad offloaded, Reuters reported. A short arctic cold snap is forecast by the National Weather Service for much of the U.S. and New England for the upcoming weekend (Jan. 12 to Jan. 14).