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Cheniere (LNG) Seeks Pollution Rule Exemption From Government

Cheniere Energy, Inc. LNG recently asked the Biden-led U.S. administration to exempt it from the limits on the emission of cancer-causing pollutants, arguing that it could force the company to shut operations for an extended period and jeopardize the country's efforts to scale up liquefied natural gas (“LNG”) supplies to Europe, Reuters reported.

The request from the country’s top exporter of LNG poses a rather uneasy dilemma for President Joe Biden’s government as it tries to strike a balance between bringing down pollution from the fossil fuel industry and promising to assist European allies in cutting energy ties with Russia following its military action in Ukraine.

Cheniere’s LNG plant situated on the outskirts of the Gulf Coast city of Corpus Christi, TX, has already been given a pass by watchdogs in Texas for exceeding emission limits on other pollutants. The company’s appeal to exempt it from pollution guidelines reveals huge financial vulnerability for LNG and its shareholders at a time when it has been relishing augmented sales and a rising stock price.

In question is a rule under the U.S. Clean Air Act, called the National Emissions Standards for Hazardous Pollutants (NESHAP), which enforces curbs on the emission of known carcinogens like formaldehyde and benzene from stationary combustion turbines. In February, the Environmental Protection Agency (“EPA”) announced that starting in August, the rule would apply to two types of gas-fired turbines that had been left out of the regulation for almost two decades.

According to an EPA list, approximately 250 U.S. gas turbines will be subject to the rule. Moreover, the list revealed that Cheniere is the only LNG company that uses these types of turbines and whose facilities will be affected.

The Houston-based company, which accounts for about half of all LNG shipments from the United States, told the EPA that its export plants in Louisiana and Texas use a unique turbine design that cannot be easily equipped with pollution controls, per Reuters.

Cheniere asked the EPA to reverse its decision to subject gas-fired turbines to the NESHAP rule or exempt the specific design used by it, per documents.

LNG’s request, however, can carry some weight in the Biden administration as it is one of the few companies that advises the White House and EU-backed task force, developing a blueprint to wean EU nations off Russian gas.

Cheniere Energy Inc. is primarily engaged in businesses related to LNG through its two business segments: LNG terminal and LNG and natural gas marketing. The company, through its controlling interest in Cheniere Energy Partners L.P., owns and operates the Sabine Pass LNG terminal in Louisiana – North America’s first large-scale liquefied gas export facility.

Cheniere currently sports a Zacks Rank #1 (Strong Buy). Some other similar-ranked stocks from the energy space that warrant a look include Denbury DEN, Whiting Petroleum WLL and Marathon Petroleum MPC. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Denbury’s 2022 earnings is pegged at $7.96 per share, up 210.9% from the year-ago earnings of $2.56.

The Zacks Consensus Estimate for DEN’s 2022 earnings has been revised about 10.4% upward over the past 60 days from $7.21 per share to $7.96.

The Zacks Consensus Estimate for Whiting’s 2022 earnings is pegged at $25.31 per share, up 87.6% from the year-ago earnings of $13.49.

The Zacks Consensus Estimate for WLL’s 2022 earnings has been revised about 13.2% upward over the past 60 days from $22.36 per share to $25.31.

Marathon Petroleum beat the Zacks Consensus Estimate for earnings in all the trailing four quarters, the average being around 65%.

The Zacks Consensus Estimate for MPC’s 2022 earnings stands at $14.57 per share, up approximately 494.7% from the year-ago earnings of $2.45.

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