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Dive Brief:
- Highlighting the risks inherent in multibillion-dollar construction projects, a federal court ruling has cast doubt on a new $4.3 billion contract for a liquefied natural gas facility in Brownsville, Texas.
- Houston-based energy firm NextDecade announced the $4.3 billion engineering, procurement and construction contract with Reston, Virginia-based Bechtel for Train 4 of its Rio Grande LNG project on August 5. In 2023, Bechtel began work on Phase 1 of the $12 billion project, which includes trains 1, 2 and 3.
- But a day after news of the Train 4 contract broke, the U.S. Court of Appeals for the District of Columbia Circuit overruled the Federal Energy Regulatory Commission. authorization for Rio Grandesaying the agency should have issued an additional environmental impact statement before approving construction.
Diving knowledge:
In a statement of August 6 after this sentence, NextDecade said yes “disappointed with the court’s decision and disagree with its findings.”
The firm said it was evaluating its options and that construction of trains 1, 2 and 3 was continuing. But he also said he would have to assess “the impact of the court’s decision on the timing of a positive final investment decision on Train 4”.
This final decision, which would give Bechtel the green light to proceed with the next train, was originally scheduled for the second half of 2024 and in its statement detailed the new $4.3 billion EPC contract with BechtelNextDecade said the validity of the deal price only extends until December 31 this year.
Now, however, the court ruling creates uncertainty about this schedule. A Bechtel spokesperson referred questions about the matter to NextDecade, which said it had no additional comment beyond its release.
The total cost of Phase 1 is projected at $18.4 billion, while NextDecade put a price tag of $6 billion to $6.2 billion on Train 4 alone, bringing total spending up to $24.6 billion.
The succession of start-stop announcements on the Rio Grande illustrates how the complexity, legal issues and regulatory unknowns of megaprojects can increase risk for contractors.
Other large construction companies have also recently faced problems with massive constructions.
Earlier this month, Venture Global LNG sued Kiewit in relation to their work Plant Calcasieu Pass in Cameron Parish, Louisiana. The suit alleged that the Omaha, Neb.-based contractor passed on confidential information about the design and construction of the $4.5 billion project to competitor Shell. Kiewit did not respond to Construction Dive’s request for comment on the matter.
Meanwhile, in another LNG project last month, the $11.6 billion Golden Pass Export Terminal in Port Arthur, Texas, general contractor Zachry Holdings filed for Chapter 11 bankruptcy and reached an agreement with project owners to exit the deal after construction ran $2.4 billion over budget.
And in his most recent conference, heavy civil contractor Tutor Periniwhich does not specialize in LNG facility projects, but tenders and builds large infrastructure works and has tunnels built for gas pipelinesnoted that legal disputes over previous jobs negatively affected its financial results.
While it had said in previous earnings calls that it hoped to put those types of megaproject charges behind it, executives said it still needed more time to fully overcome the impacts of those disputes.
“We had hoped that by the end of this year we would be out of these charges,” Tutor Perini President Gary Smalley said on the call. “A year from now, we think that will be behind us…so [we] we just appreciate your patience, please give us a little more time. We’re almost there, but not quite, obviously.
