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NextDecade's (NEXT) Rio Grande LNG Project Faces Legal Setback

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NextDecade Corporation (NEXT - Free Report) has recently faced a major blow against its Rio Grande LNG plant in Texas, which is currently under construction. A U.S. Court of Appeals has revoked the permit that was issued by the Federal Energy Regulatory Commission (“FERC”) for the Rio Grande LNG export project. NextDecade’s share price fell sharply following the announcement. 

A case was filed by the Sierra Club, the City of Port Isabel, the Carrizo/Comecrudo Tribe of Texas, and Vecinos para el Bienestar de la Comunidad Costera against FERC, in the D.C. Circuit Court. The Sierra Club, along with the others, argued that FERC has failed to properly assess the environmental impact of the project as per the requirements of the National Environmental Policy Act and the Natural Gas Act. The court stated that a supplemental environmental impact statement (EIS) should have been issued by FERC during the remand process.

The City Port of Isabel had expressed its satisfaction as the court sided with its argument, acknowledging that the construction of these LNG facilities had adverse impacts on the communities. Furthermore, it also mentioned that FERC had issued the permit despite knowing of the ill effects of these projects.

NEXT has expressed its disappointment regarding the court’s decision. The company is currently reviewing the court’s ruling and assessing all its options. Just a day before the court’s judgement, NextDecade had awarded an engineering, procurement and construction contract worth $4.3 billion to Bechtel Energy Inc. for Train 4 of the LNG facility.

The construction work for Phase 1 of the Rio Grande LNG facility continues. The LNG project has been under construction for several years now and the construction of Phase 1, which involves three liquefaction trains, is expected to be completed by early 2029. The company is concerned regarding the impact of the court’s ruling on the timing of the Final Investment Decision (FID) for Train 4 of Rio Grande LNG project. Prior to the nullification of the permit, NEXT was targeting a positive for FID for Train 4 in the second half of 2024.

NextDecade anticipates the cost of construction of Train 4 and its associated infrastructure at the LNG facility to be between $6 billion and $6.2 billion. The estimated cost is consistent with the per-train cost for the three trains involved in Phase 1 of the LNG project.

Earlier in 2024, ADNOC acquired an 11.7% stakein Phase 1 of the Rio Grande LNG project and signed a 20-year offtake agreement for LNG from Train 4. Additionally, Saudi Aramco entered into a non-binding agreement with NextDecade for a 20-year LNG offtake deal, agreeing to purchase 1.2 million tons per annum of LNG from Train 4 on a free-on-board basis.

Zacks Rank and Other Key Picks

Currently, NEXT carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks in the energy sector are SM Energy (SM - Free Report) , TechnipFMC plc (FTI - Free Report) and Northern Oil and Gas, Inc. (NOG - Free Report) . SM Energy presently sports a Zacks Rank #1 (Strong Buy), while TechnipFMC and Northern Oil and Gas carry a Zacks Rank #2 each. You can see the complete list of today’s Zacks #1 Rank stocks here.

SM Energy is an upstream energy firm operating in the prolific Midland Basin and the South Texas regions. For 2024, the company expects its production to increase from the prior-year reported figure, signaling a bright production outlook.

TechnipFMC is a leading manufacturer and supplier of products, services and fully integrated technology solutions for the energy industry. The company’s total backlog witnessed a record high of $13.9 million in the second quarter of 2024, indicating a year-over-year increase of 4.51%. This growing backlog ensures strong revenue growth for the company in the future.

Northern Oil and Gas is an independent upstream company involved in the acquisition, exploration and production of oil and natural gas assets. Its operations are concentrated in three leading basins of the United States, namely the Williston, Permian and the Appalachian Basin. The company has recently acquired additional assets in the Uinta Basin that are driving growth by expanding its asset base and increasing its production. 

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