According to the Galveston Wharves Board, the new LNG facility would fuel cruise ships coming in and out of the port.

A liquified natural gas (LNG) company is one step closer to building a facility on Pelican Island in Galveston.

Power LNG is seeking to lease 30 acres on Pelican Island to build a $250 million facility that will initially produce 400,000 gallons of liquified natural gas per day, primarily used to fuel cruise ships coming in and out of the region.

The Galveston Wharves Board — whose board members are appointed by the Galveston City Council — on Tuesday approved the basic terms that will be used to create a lease and development agreement with Power LNG Ventures, LLC.

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"I just consider this to be the first step and a vote of confidence in moving this project forward, but this is not in any way a final deal," board trustee Sheila Lidstone said during the meeting. "It's not a contract. It's not a lease. It's none of those things. It is a first step in moving this project forward."

Trustees said Power LNG wants to build a small-scale facility that will provide fuel to cruise ships. According to the Galveston Daily News, city leaders have also expressed interest in building the facility to attract more cargo ships, which increasingly rely on LNG.

The company anticipates that the plant will begin LNG production in December of 2028 and plans to design the facility to produce up to 800,000 gallons of LNG per day.

Galveston is home to many major cruise ships, including the Carnival Jubilee. The Carnival Tropicale will also sail from the city when it's completed in 2028, and Royal Caribbean's Icon of the Seas is planned to begin sailing from the port next year. Each ship is designed to consume an estimated 500,000 and 800,000 gallons of LNG per week, according to documents from the wharves board.

Power LNG is seeking a $300,000 preliminary lease that would start around September or October and last until December of 2028.

After that, the company would plan to lease Pelican Island for 30 years at a rate of $750,000 per year if LNG production remains at 400,000 gallons per day or less. If LNG production exceeds 400,000 gallons per day, the company will pay $1.2 million in rent per year.

The lease rate would increase annually by whichever rate is lower: 3% each year or the regional inflation rate, as measured by the U.S. Bureau of Labor Statistics.

The lease would include the option to renew twice for 10-year terms. The company would also pay additional fees to the Galveston Wharves Board for LNG produced at the facility.