20
LNG
INDUSTRY
APRIL
2016
Financial milestones.
Engineering, procurement and construction (EPC)
contracting strategies.
Regulatory authorities having jurisdiction.
There is no universal approach to the transition from
development into execution. Just because one project took a
certain execution strategy for their project, does not mean that it
will be the best approach for another project. Implementation
planning needs to be tailored and specific to each project. With
that said, implementation planning can still be discussed on a
generic basis, as most projects tend to follow a similar overall
framework – the common denominator being compliance with
the conditional authorisations. For discussion and illustrative
purposes, this article will generically discuss implementation
planning strategies for a US project assumed to be under FERC,
DOT PHMSA, USCG, and state and local jurisdiction.
While federal and state regulations clearly define the
process and the level of information required to request a
permit, there is little in the way of guidance to assist developers
transition from development into execution. Permits from FERC
often include over 100 conditions related to environmental,
safety, design, reliability, operability, and maintainability of a
proposed facility. While all projects typically have similar
construction sequencing, they do not share the same schedule
during the engineering and procurement phase. Therefore, many
of the FERC conditions are written generically and the timeframe
to satisfy each condition is typically:
Before any construction activity can commence.
Before the site preparation phase of construction.
Before the construction of the final design.
Before introducing any hazardous fluids into the facility.
Before commissioning.
Before operation or within a certain timeframe of going into
operation.
Final design development
The level of design submitted to FERC as part of an application
to permit a facility is typically conceptual in nature and might
only represent approximately 15 – 20% of the final design.
FERC recognises that the design will evolve once a permit has
been issued and, therefore, much of the information that a
developer submits to FERC prior to receiving a permit will need
to be re-submitted as part of a request (to FERC) to approve
commencement of construction. In short, while a developer
may have a permit in hand, there will be many more submittals
to FERC before the developer finally has full authorisation
to construct the project, including requests for construction,
variance requests, data request responses, and supplements to
previous filings.
Therefore, compliance with conditions in a FERC permit
presents potentially significant cost and schedule risks.
Submittals to satisfy conditions require an appropriate level of
supporting design information and need to be provided to FERC
to allow sufficient time for review. The schedule for
development of the design, submittal to FERC and the FERC
review needs to be carefully aligned with the project
construction plans. Additionally, during the permitting process,
applicants frequently make commitments to FERC to address
certain requirements during the final design phase. The permit
will likely require that these commitments are included in the
final design and must, therefore, be addressed by the project in a
request to construct. More often than not, the inclusion of these
commitments in the final design results in additional cost and
schedule impact. The solution to mitigating cost and schedule
risks is proper implementation planning.
Implementation planning
So what is implementation planning? A permit from FERC will
likely include a condition requiring that within approximately
60 days following acceptance of the permit, an implementation
plan must be provided that will describe how the applicant
will implement the construction procedures and mitigation
measures described in the application and supplements
identified in the Environmental Impact Statement (EIS), and
required by the permit. Generally, applicants file a document
with FERC that includes affirmative statements to each of the
conditions included in the permit. However, the condition
also requires that applicants file revisions to the plans as
schedules change. Implementation planning is much more
than just stating how the applicant will comply with each of the
conditions. CH·IV recommends that implementation planning is
considered as the entire process that transitions from permitting
to execution, in order to ensure that the transition is as efficient
as possible in terms of cost and schedule. Since FERC permits
are typically issued two months after a Final EIS (FEIS) or
Environmental Assessment (EA) is issued, if a developer wants
to start site preparation immediately after the permit is issued
and construction work shortly thereafter, then implementation
planning activities need to start well in advance of receipt of
the FERC order. To minimise cost and schedule risk, CH·IV has
advised many companies to start implementation planning
activities when the Draft EIS (DEIS) is issued by FERC, which
is typically three or more months before the FEIS is issued.
Projects with an EA should start implementation planning
activities at the issuance of the notice of schedule. Commencing
development of implementation plans at this stage in the
permitting process has helped applicants file requests for initial
site preparation and construction activities with FERC and
obtain approval within a short period of time following receipt
of the FERC permit. Delaying implementation planning to a
later stage of permitting, or even after a permit has been issued,
provides little (if any) opportunity to identify means to minimise
cost and schedule risk.
Figure 1.
Foundations and construction. Image from
Cove Point public monthly reports.
