The Department of Energy, Office of Fossil Energy (“DOE”) has issued its fourth order, its third in 2013, authorizing the export of liquefied natural gas (“LNG”) to nations with which the United States does not have a free-trade agreement (“FTA”). On September 11, 2013, the DOE conditionally granted Dominion Cove Point LNG, LP’s (“Dominion’s”) request for authorization to export LNG as an agent from its Cove Point LNG Terminal, located in Calvert County, Maryland.1 Dominion’s request had been pending for nearly two years, since October 3, 2011. On May 2, 2013, Dominion signed export agreements with subsidiaries of Sumitomo Corporation, a Japanese company, and GAIL (India) Limited, an Indian company. Neither Japan nor India is an FTA nation, making non-FTA authorization a necessity to fulfill these contracts. The order is available here.
Dominion requested a 25-year authorization period. The DOE, however, limited the authorization to 20 years, pointing out that Dominion’s contracts with Sumitomo and GAIL have a duration of twenty years with renewal options. The DOE also noted that the studies on which its public interest determination rely have a twenty year horizon. Likewise, despite the fact that Dominion had requested authorization to export up to 1 billion cubic feet of gas per day (“Bcf/D”), the DOE limited its authorization to 0.77 Bcf/D, observing that this total is consistent with the planned capacity of Dominion’s liquefaction facility. The DOE also ruled that this amount is not additive with the 1 Bcf/D of LNG it had previously authorized Dominion to export to FTA nations in 2011. Dominion may export 1 Bcf/D total, of which 0.77 Bcf/D may be exported to non-FTA countries.
As discussed in our May 21, 2013 post on the DOE’s order authorizing Freeport to export LNG to non-FTA countries, the DOE commissioned economic studies from NERA Economic Consulting and the Energy Information Administration, on which it based its conclusion that the United States will likely enjoy net economic benefits from LNG exports. The DOE relied on these same studies to support Dominion’s authorization, as well as additional studies provided by Dominion from Navigant Consulting, Inc. and ICF International.
Dominion plans to commence construction of the liquefaction facilities at its Cove Point Terminal in the first quarter of 2014, with an in-service date of 2017. The facility, which is currently configured for LNG imports, dates from the 1970s, but was inactive from 1980 until 2001. Since resuming operations, it has undergone several expansions and upgrades, most recently receiving authorization in 2009 from the Federal Energy Regulatory Commission (“FERC”) to expand its off-shore pier to accommodate larger vessels. Dominion still requires authorization from FERC to install the liquefaction facilities,2 a process that will include an environmental review. The DOE’s export authorization is conditioned on FERC approval.
1 Dominion Cove Point LNG, LP DOE/FE Order No. 3331, Order Conditionally Granting Long-Term Multi-Contract Authorization to Export Liquefied Natural Gas by Vessel from Cove Point LNG Terminal to Non-Free Trade Agreement Nations (Sep. 11, 2013).
2 FERC approval for the siting, construction and operation of the liquefaction facilities is pending in Docket No. CP13-113-000.