On May 17, 2013, the U.S. Department of Energy (“DOE”) issued an order authorizing the Freeport LNG Terminal (“Freeport”) in Quintana Island, Texas to export liquefied natural gas (“LNG”) to nations with which the United States does not have a Free Trade Agreement (“non-FTA nations”), making it the second terminal in the lower-48 to secure such authorization. DOE Order No. 3282 (“Freeport Order”) conditionally grants Freeport’s application for long-term multi-contract authorization to export up to 1.4 billion cubic feet (“Bcf”) per day of LNG by vessel to non-FTA nations for Phase I of its export project. This order was highly anticipated in particular since DOE issued its only other Lower-48 non-FTA export authorization, to Cheniere for the Sabine Pass project, nearly 24 months ago in May 2011.
Overall, DOE’s Freeport Order is a net positive for the 19 pending applications at DOE seeking authorization to export LNG to non-FTA nations and likely for future applicants. The order demonstrates a firm understanding of the global gas market and, coupled with recent statements from DOE officials, appears to indicate a more accelerated pace for future orders. Importantly, DOE notes in the Freeport Order that significant LNG exports and the rapid reversal of the natural gas market are new phenomena that are very likely to change over time. Consequently, DOE intends to continue to monitor market developments that could tend to undermine the public interest in grants of successive applications for exports of domestically produced LNG to non-FTA nations.
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