June 8th

The Incident

At 11:28 a.m. central time on June 8th, 2022, the Freeport LNG facility experienced a boiling liquid, expanding vapor explosion that resulted in the release of LNG, leading to the formation and ignition of a natural gas vapor cloud, and subsequent fire at the facility. There were no injuries, and at no time did the incident pose a threat to the surrounding community.

In accordance with Freeport LNG’s safety design parameters, the LNG vapor cloud dispersion and ignition thereof were at all times contained within the fence line of the liquefaction facility, lasting approximately 10 seconds. The fire and associated smoke visible thereafter were from the burning of materials in and around the location where the incident occurred, such as piping insulation and cabling. With the assistance of local area emergency response personnel, the resultant fire was extinguished approximately 40 minutes after the initial incident.

While the burning of those materials resulted in carbon monoxide, nitrous oxide, particulate matter, sulfur dioxide and volatile organic compound emissions, these were of limited quantity due to the short duration of the fire and not at levels that posed a risk to Freeport LNG personnel or the surrounding community. There was no release of any other chemicals or substances from the plant during the event. Water used to suppress the subsequent fire was captured on site, and was tested and confirmed free of any harmful contaminants before being released or removed for proper disposal.

The incident occurred in pipe racks that support the transfer of LNG from the facility’s LNG storage tank area to the terminal’s dock facilities located on the intracoastal (i.e., north) side of Freeport LNG’s dock basin. None of the liquefaction trains, LNG storage tanks, dock facilities, or LNG process areas were impacted.

Why did this happen?

The safety and security of our workforce and surrounding community are Freeport LNG’s top priorities. Freeport LNG believes that transparency around the causes of this incident, and the remedial actions taken to ensure an incident of this nature never occurs again, is critical to maintaining public trust.

In coordination with local, state and federal officials, Freeport LNG retained a highly qualified incident investigation company, IFO Group, in order to identify the causes underlying the June 8th incident.

IFO Group’s Root Cause Failure Analysis (RCFA) report was independently conducted over the course of almost five months. IFO Group investigated the incident, collected and analyzed physical specimens from the incident, interviewed witnesses, reviewed process and design data, and ultimately developed the RCFA report, identifying specific causes that led or contributed to the June 8th incident.

IFO Group’s findings of direct, root and contribution causes were as follows:

Direct Cause

• Isolation of a piping segment containing cryogenic LNG without proper overpressure protection, which LNG then warmed and expanded due to exposure to ambient conditions, resulting in a boiling liquid, expanding vapor explosion, and the rupturing of the piping segment.

Root Causes

• Pressure safety valve (PSV) testing procedure and car seal program deficiencies;
• Failure to repurpose temperature indicator alarms used for cool down operations during commissioning on LNG piping that could warn operators of increasing temperatures in LNG piping during operations; and

• Operating procedures that allowed operator discretion to close valves that could allow LNG to be isolated in a piping segment.

Contributing Causes

• Failure of 2016 Hazard and Operability study to evaluate the potential for a blocked-in LNG piping segment with inadequate overpressure protection;
• Failure to utilize management of change process for revisions to tank management operating procedures;
• Failure to accurately and timely diagnose sudden pipe movement as being due to piping stresses from the overpressuring of an adjacent piping segment; and
• Operator fatigue as a result of significant overtime needs.

Addressing the Causes of the Incident

IFO Group proposed recommendations to resolve each of the root and contributing causes, and Freeport LNG is implementing each of those recommendations. Specifically, Freeport LNG has made significant enhancements to its PSV testing processes and car seal program, implemented procedural changes to avoid operating scenarios that could allow blocked-in LNG in piping segments, and revised its control system logic to alert control room operators to valve positions or temperature readings that indicate possible isolation of LNG in any piping segments. For example, as part of the PSV testing standard, all PSVs at the facility have been functionally tested and their car seal alignment verified. Freeport LNG is also updating its training program to address causes of the incident, as well as identification and diagnosis of abnormal operating conditions in the facility.

To supplement IFO’s report, Freeport LNG also engaged another independent consultant to perform a full review of its LNG storage and transfer operating procedures, its control systems maintenance and inspection procedures, and its personnel qualifications and training programs. As a result of this independent, multi-month review, Freeport LNG is implementing various recommended improvements in these areas. Additionally, Freeport LNG has undertaken a significant hiring effort to increase LNG plant employee staffing by over 30%, in order to reduce the amount of overtime, as well as create new functional departments within the organization that are focused on improved training, operational excellence, quality assurance, and business performance. Freeport LNG is also executing an extensive company-wide process safety management initiative to apply and reinforce process safety concepts into daily work processes across the organization.

Additionally, to prepare for its return to operations, Freeport LNG conducted refresher training with board operators, as well as held training on recognizing and reacting to abnormal operating conditions so that conditions similar to those observed leading up to the June 8th incident can be timely identified and properly assessed. Freeport LNG also conducted a briefing with local first responders on the June 8th incident covering lessons learned and the return to service plan for the facility to ensure that upon the recommencement of operations, everyone was ready. To further ensure a safe return to operations, a Hazard and Operability (HAZOP) Study was conducted for portions of the facility and recommendations identified and implemented, and a thorough Pre-Startup Safety Review (PSSR) was performed for the LNG transfer unit with action items identified and addressed to confirm the safety and integrity of the units.

Restoration of the Facility and Return to Service

Freeport LNG and the Pipeline and Hazardous Materials Safety Administration (PHMSA) entered into a Consent Agreement in August related to the June 8 incident that set the standards for the restoration and return to service of the facility. We expect our second dock return to service in late May and third LNG storage to return to service this summer, enabling us to reach full production levels for the facility.

Freeport engaged Kiewit Energy Group Inc. (Kiewit) to perform the engineering, procurement, and reconstruction activities necessary to implement Freeport LNG’s recovery effort. Kiewit has significant LNG facility experience including both greenfield and brownfield developments and large and small/mid-scale LNG projects. Kiewit has been involved in LNG projects from start to finish, including front-end engineering design, detailed engineering, procurement, construction and commissioning.

Initial operations, which resumed in February 2023, consist of three liquefaction trains, two LNG storage tanks and one LNG loading dock, enabling delivery of approximately 2 BCF per day of LNG, enough to support our long-term customer agreements. We expect our second dock and third LNG storage to return to service in May, enabling us to reach full production levels for the facility.

Freeport LNG is committed to emerging from the June 8th incident with an unmatched focus on safety, operational integrity and operational excellence.

We strive to be a model employer. We believe employees should work under safe, healthy, respectful and fair conditions. We implement strategies that encourage and leverage the unique contributions of employees with diverse backgrounds, while also giving them opportunities to learn and grow. We believe this builds a collaborative culture that upholds the principles that define us as a company and drive our actions.

Freeport LNG believes that a well-trained workforce provided with the necessary tools and support, sets us up for success. Through a combination of work assignments, on-the-job experiences, and focused training and education, employees acquire the necessary skills and competencies to take on increasing levels of responsibility and job complexity.

We fund employees’ post-secondary educational goals up through the Master’s Degree level, as well as external professional certifications and continuing education requirements to support those certifications. We encourage attendance at professional conferences and targeted technical training.

Internally, employees adhere to a strict training schedule that helps to achieve safe, reliable and efficient operations that comply with regulatory requirements and industry best-practices. This training is conducted through hands-on, classroom and online coursework covering a wide variety of topics.

In response to the June 8 incident, we launched several key additional employee trainings that included:

• Delivering Process Safety Management training for 95%+ of workforce
• Kick off of Learning Management System implementation
• A reformatted Basic Operator Training to increase depth of understanding and efficiency

Trainings

Building a Skilled Workforce

Freeport LNG employs highly qualified individuals and is continually investing in the development of their skill sets.

All employees undergo regular training in areas within and outside their job role based on their defined training plan. Through a combination of work assignments, on-the-job training, training simulation, professional development, and focused continuing education, employees perform their work competently and safely. They continue to acquire the necessary skills and competencies to take on increasing levels of responsibility and job complexity. As noted above, following the June 8^th incident we are significantly increasing Process Safety Management training, among others, to further reinforce a safe work environment.

Talent Attraction and Retention

We value the diverse strengths of our employees who each bring their unique skills and experience to our team. As part of the Freeport LNG team, employees work side by side with top performers in the LNG industry.

Freeport LNG is unique in terms of our location. With headquarters located in Houston, the global energy capital, and the Terminal facilities located on the Gulf Coast in Brazoria County, an epicenter of industrial, petrochemical, and natural gas-related activity, hiring local talent is a convenience we don’t take for granted.

We believe that when employees are fairly compensated, work in a safe environment, and are provided excellent benefits for them and their families, they have peace of mind.

We dedicate ourselves to developing our employees and preparing them for the next level of opportunity. When we must look outside of our workforce for talent, we offer referral bonuses to employees for referring highly qualified candidates.

As the demand for LNG talent in the United States has increased with recent new entrants into the market, Freeport LNG’s employees are natural targets of our competitors given their notable specialized LNG industry experience. While we have seen some employees leaving Freeport LNG for other opportunities, resulting in a slight year-over-year increase of our historically low turnover rate, we have had significant success in retaining the vast majority of our workforce.

Lifestyle and Benefits

To support our employees and their families, we provide a highly competitive compensation and benefits package. When employees know that their loved ones are cared for, they incur less stress and perform better.

We encourage our employees and their families to live an active and healthy lifestyle. Incentives include a reimbursement for memberships to fitness centers and classes, annual health assessments, and online educational resources related to health and nutrition.

Wellness Initiatives

In 2022, we implemented an inaugural wellness program. The program was comprised of an overall point system to award people for participating in wellness events that included a company hosted wellness fair, physical wellness events, and mental and financial wellness webinars hosted with Houston Methodist Hospital, Fidelity and HSA Bank.

Physical fitness aspects of the wellness program included a summer fitness camp, a step challenge, onsite chair massages, and corporate 5K races.

We look forward to building on the success of this program in the years to come.

Talent Management

Employee Engagement

Employee engagement is a key tenet of our organization. We conduct a monthly safety and communications meeting at both our Terminal and Headquarters locations that are open to all employees. Our CEO issues quarterly updates to all employees, and we maintain a well-updated website. We also conduct regular lunch and learns around IT, cybersecurity, and other topics and make significant additional employee investments in safety awards, employee accomplishments, training, etc.

In 2022, we launched a companywide employee survey. The response rate for the survey was 87%, which was far higher than the survey provider average. We analyzed the results, created and delivered on communications to employees and completed several post-survey action plans. We will continue to address feedback from these survey results, working to incorporate employee sentiment into the success our business going forward.

We also continued our FLNG 101 speaker series which are sessions held companywide to educate our employees on a variety of company topics and internal initiatives.

We look forward to continuing all of our employee engagement activities in 2023 and beyond, bolstering our commitment to involving and educating our employees on key organizational events, initiatives and milestones.