Palo Seco conversion approval ends plans for LNG terminal in San Juan.

Instead of the construction of a costly liquefied natural gas import facility, the conversion at Palo Seco Power Plant will now rely on a federally funded natural gas pipeline led by the U.S. Department of Energy and the U.S. Army Corps of Engineers, according to a resolution issued by the Puerto Rico Energy Bureau.

By THE STAR STAFF

In a major shift for Puerto Rico’s energy infrastructure strategy, the Puerto Rico Energy Bureau (PREB) has approved power plants operator Genera PR’s plan to convert the Palo Seco 3 and 4 generating units from heavy fuel oil (FO6) to natural gas — an action that effectively ends any future development of a large-scale liquefied natural gas (LNG) terminal in San Juan once contemplated in earlier energy plans.

Instead of constructing an expensive LNG import facility, the conversion will now rely on a federally funded natural gas pipeline led by the U.S. Department of Energy and the U.S. Army Corps of Engineers. The pipeline will deliver gas from the existing San Juan power complex directly to Palo Seco, eliminating the need for LNG trucking or new regasification infrastructure at either site, according to a resolution issued by the PREB.

The Integrated Resource Plan (IRP), the blueprint for energy development, drafted several years ago had included a proposed $472 million onshore LNG terminal in San Juan, along with a connecting pipeline to Palo Seco. The plan was ultimately rejected due to its high capital cost and the financial impact it would have had on ratepayers.

With the PREB approving the new fuel‑swap plan — and with federal agencies committing to build and fund the new pipeline — the long‑debated LNG terminal proposal will not move forward.

Genera PR emphasized that: Conversion costs will be covered by the Federal Emergency Management Agency, not ratepayers; major components needed for the project already exist at the Puerto Rico Electric Power Authority, further reducing cost; and that the pipeline will be built and paid for by federal agencies, not through utility rates.

The PREB concluded that with no local capital burden and with environmental benefits expected from switching to cleaner-burning natural gas, the proposal aligns with Puerto Rico’s energy policy and does not conflict with the IRP.

The Palo Seco units sit inside a federally designated sulfur dioxide (SO₂) non-attainment zone. Burning natural gas instead of heavy fuel oil is expected to significantly reduce emissions and support future compliance with air‑quality standards — an issue that has long pressured the island’s energy planners.

Additionally, Puerto Rico’s strained thermal generation fleet has forced the continued operation of units previously slated for retirement. The PREB reiterated that keeping Palo Seco Units 3 and 4 online, but converting them to natural gas, supports system reliability without contradicting either the current IRP or the forthcoming 2025 IRP update.

The PREB’s determination reshapes the future of fossil‑fuel infrastructure in Puerto Rico as large LNG import terminals are no longer part of the island’s near-term planning. A federal pipeline, proponents said, will fulfill the role those terminals were once expected to play, while the conversion allows existing generation to operate more cleanly and efficiently during the transition toward renewable energy sources.