Judge dismisses suit over suspended FG LA wetlands permit

A federal judge dismissed without prejudice a lawsuit challenging Kaohsiung City, Taiwan-based Formosa Plastics Group's subsidiary FG LA LLC's wetlands permit for its complex in St. James Parish, La., after the U.S. Army Corps of Engineers suspended the permit.

FG is continuing its work to move the project forward.

"In responding to the litigation," the Corps identified "issues" with a portion of its permit analysis "related to the Corps' alternatives analysis under the Clean Water Act," it said in its findings for the suspension.

The Army Corps is now reevaluating FG's permit while "certain activities related to the project in the parish" will continue "despite the temporary suspension and reevaluation," Janile Parks, director of community and government relations for FG, told Plastics News.

"Those activities, including FG's work on local water line relocation and improvements underway in St. James Parish, have resumed and are going well," Parks said. "Improvements near the project site and public water system lines … will reduce risks to the public, the land and the environment and will allow FG to stabilize the site, pending Corps reevaluation … a process which the Corps has indicated will focus on the prior alternatives analysis.

"FG continues to cooperate with the Corps throughout this process and sincerely hopes it's permit reevaluation will be handled in a thorough and expeditious manner so the permit analysis will be even stronger once the reevaluation is complete," Parks added.

In October, the S&P Global company Taiwan Ratings lowered Formosa Plastics' rating to reflect "the challenging macroeconomic conditions we believe the FP group will face in 2020 and possibly over the next few quarters," it said in a news release at the time.

Taiwan Ratings estimated in the report that the FG chemical complex would cost "more than $12 billion over two phases," an increase from FG's original estimate of $9 billion.

"This investment is to support the group's significant expansion, which is likely to improve its geographic diversity and cost structure," the report said. "However, this project and other expansions in Asia could keep FP group's free cash flow negative and therefore elevate its debt leverage for an extended period after 2022, if profitability does not grow materially."

Tom Sanzillo, director of finance at the Institute for Energy Economics and Financial Analysis, which is analyzing the finances of the project, said he was "surprised" Formosa was moving forward with the project since it is currently delayed by "regulatory process still actively reviewing the case."

"They are a solid company with a solid financial rating," Sanzillo said. "The company said they were seeing rising prices, and perhaps that being an issue, but that they'd make that decision later.

"The cost of construction is very important," he said. "The credit opinion expresses concern that the companies will be having to tie up greater amounts of cash and pairing their cash flow, which is suggestive of a concern for the company's slower growth and revenue. That's somewhat related to the pandemic and to the market conditions of oversupply in the plastics market."

Formosa's financial rating downgrade was a "red flag," Sanzillo said. "The regulatory questions that were raised in the [permit] suit make the flag a little deeper red."

"It doesn't look like the timing is right for this," he added.

"Twelve billion dollars is S&P's own estimation as they expect FPG's capex to increase from 2022 onward due to the significant economic impact of COVID-19 across all industries globally," KY Lin, CEO of FG, told Plastics News in an email. "The difficulty of evaluating construction costs is attributable to skyrocketing costs stemming from uncertainties related to the pandemic, which attributed to FG's deferral of major construction until the pandemic has subsided and/or vaccine has proven working.

"FG is monitoring all relevant factors closely and may adjust the total projected Sunshine Project cost when the uncertainties can be resolved accordingly in future," Lin added.

"I don't think [increased cost] is worth shrugging your shoulders at," said Anne Rolfes, an environmental activist with the Louisiana Bucket Brigade.

Last year, Rolfes and fellow activist Kate McIntosh were charged with "terrorizing" after they left containers of plastic pellets, or nurdles, collected from waterways and a note explaining what was in the containers on the front porches of the homes of plastics industry lobbyists in the state, including some who worked in favor of the FG complex.

Louisiana state prosecutors announced in December that they would not pursue charges against the two women.

"[The charges] were so ludicrous that they were never even accepted," Rolfes said. "They looked at statutes to downgrade it to something else, but they couldn't even find anything, it was that harmless."

Now that FG's wetlands permits are back before the Army Corps, she said, "we have a big job to do now to make sure that this time, the Corps really does its job and understands all the problems."

The Center for Biological Diversity, plaintiff in the now-dismissed suit over the wetlands permit, requested a public comment period and public hearing by the Army Corps for the reevaluation of the permit.

"We think it's the right decision, that's why we sued," Julie Teel Simmonds, senior attorney at the center, told Plastics News. "The public is kind of shut out of the process at the moment."

The Army Corps acknowledged the request but has not yet made a decision, Simmonds said.

"It'd be great to have this be a more transparent process, but whatever is happening is out of public view," she said. "It could be a modification, a reinstatement or a revocation of the permit, so it's not clear right now which direction it is heading."